Yesterday, the new naira notes, under the currency redesigning regime, came into circulation in accordance with the promise of the Central Bank of Nigeria (CBN). President Muhammadu Buhari had unveiled the new N1,000, N500 and N200 notes some weeks ago and thumped his chest, saying that the currency was counterfeit-proof. Governor of the CBN, Godwin Emefiele, on his part, said the new naira notes would help the much-vaunted cashless economy dream, wherein Nigerians would be required to do less of physical cash transactions.
The journey to the introduction of the new banknotes started on October 26, 2022, when Emefiele stunned Nigerians with the sudden announcement that the apex bank planned to redesign three naira notes. While explaining that the CBN, in deciding to redesign the naira, was exercising its power to so do, from time to time, he said the decision to change the banknotes was informed by concerns over currency management. He also stated that about 80 per cent of the banknotes were outside the banks, meaning that Nigerians had warehoused them at home or private vaults and, therefore, there was need to bring them back to where they should be – the banking system.
Emefiele had urged Nigerians to deposit old naira notes in their possession in the banks, latest, January 31, 2023, when they would cease to be legal tender, while stating that the newly redesigned notes would be in circulation from December 15, 2022. For successful transition from the old banknotes to the new ones, the CBN had instructed commercial banks to extend their work days to Saturday. The apex bank also suspended the daily cash deposit limit of N500,000 for individuals and N3 million for companies as well as the surcharge relating to deposit exceeding the stipulated limit.
Apart from the official reasons for the redesigning of the three banknotes, other justifications have also been adduced for this. Some say that, owing to cash payment for ransom to kidnappers, kidnapping has persisted, since such transactions are outside the banking system and, therefore, the redesigning of the naira would reduce physical currency in Nigerians’ possession and, therefore, frustrate demand for cash ransom by kidnappers. Also, it is believed that the policy would bring about control of currency in circulation as well as lower inflation. Some people also believe that the redesigning of the naira, at the time it is coming, is aimed at frustrating politicians’ plan to buy votes with the cash they have kept in their personal vaults, with the general election holding in February and March next year.
Whatever other reasons therein, President Buhari, who had earlier thrown his weight behind the CBN in redesigning the naira at a time when the Minister of Finance, Budget and National Planning, Zainab Ahmed, vehemently opposed the idea publicly, had also explained why he gave a nod for the change of currency design. According to the President, he supported the policy as the new banknotes, having been fortified with security features, would be difficult to counterfeit. He also said that the redesigning of the naira would help CBN’s monetary policy aims.
There is no doubt that the CBN, like other countries’ national banks, is empowered by law to redesign the naira periodically. Currency redesign is done for a set objective, which could be made public or kept secret. One obvious fact is that it would stop or reduce counterfeiting. Apart from being a national embarrassment, currency forgery reduces the value of the currency and constitutes economic sabotage. Therefore, the CBN is right to redesign the naira, within the ambit of the law, whether it is to catch thieves or to stop counterfeiting.
This is not the first time Nigeria is redesigning its banknotes, even though the motive may be different. In 1984, during the military government of General Muhammadu Buhari, the naira was redesigned. The main reason at that time was the government’s belief that politicians, whose reign in government was truncated four months earlier by the military, had amassed money at home and, therefore, should be exposed. Nigerians were required then to deposit their old notes at the banks within two weeks, in exchange for new ones.
There seems to be a correlation between what happened in 1984, when the naira was redesigned under the government of Buhari as a military Head of State and now that he is a civilian President. The redesigning of the currency in 1984 was punitive as it was aimed at catching perceived thieves who had allegedly stored raw cash at home. There was, therefore, little consideration for the adverse effect of a short transition period. This had brought about hardship, in relation to the exchange of old notes for new ones, as Nigerians queued in commercial banks endlessly to get the new banknotes. Although this time Nigerians have three months and five days to return their old notes to the banks or the money would be worthless, the cash withdrawal limit of N200,000 weekly for individuals and N500,000 weekly for corporate organisations has also, indirectly, made the naira redesigning a punitive measure. With the withdrawal limit policy, Nigerians would have less cash at hand, in a primarily cash-driven economy.
Inasmuch as there is nothing wrong aiming at having a cashless society, there is everything wrong trying to implement such when all the necessary enablers are either not in place or malfunctioning. Has the CBN considered that market women in the rural and urban areas who sell vegetables, foodstuff or “akara” do cash transactions daily? How many of these women have point of sale (POS) machines with which their customers could pay for wares, in a cashless arrangement? How many housewives who patronise these market women have automated teller machine (ATM) cards? Even when the market women have POS and their customers also have ATM cards, how effective is the technology of cashless transactions in the face of weak telecommunication network?
We are living witnesses to the problems of cashless transactions in the country. Those who use bank mobile apps experience difficulties. Online bank transfers are made and they misfire. While the money is taken from the sender’s bank account, it would not go to the receiver’s bank account. When this happens, which is often, the sender is required to go to his bank and resolve the matter. It usually takes the banks many hours or days to get this sorted out. Also, there are rampant cases of POSs experiencing “network problems” and, therefore, either do not work or malfunction. POS takes money from the owner’s bank account and does not send same to the receiver. POS owners already have a disclaimer when this happens. The liability is on the ATM card owner, as the onus is on him or her to resolve the matter with his or her bank.
With these difficulties, it is not feasible for a sudden transition to cashless transaction regime as the CBN wants it, anchored on naira redesigning. The pegging of a low withdrawal limit (N200,000 weekly) is, therefore, unworkable when the technology required for cashless transactions is not effective. I agree with the Senate that the withdrawal limit should be adjusted, in the face of the current reality. This is not to say that one is opposed to the effort to reduce physical currency in circulation. Not at all! Effort should be made to perfect the technology behind cashless transactions to avoid hiccups and frustrations.
The amassing of cash by some Nigerians in private vaults is usually a product of corruption in the banking system. Bank officials carry large sums of money to privileged Nigerians’ homes on request. With the new policy, what is the guarantee that officials at commercial banks would not only compromise but also circumvent the limited cash withdrawal policy and take huge sums of money to privileged Nigerians, in special arrangements? The major problem in the country is that policies are only implemented for the poor, while the rich are unwittingly exempted.
Naira redesigning and limited cash holding aimed at stopping vote-buying during elections is just addressing the symptom, while the ailment is not attended to. As vote-for-cash is corruption, effort should be devoted to educating Nigerians to the effect that they should not sell their votes, no matter the temptation. Using a policy that would reduce the cash needed to perpetuate vote-buying as a means of stopping the malfeasance is only a preventive measure. The solution is to make Nigerians have the moral obligation to resist the temptation, no matter the amount of money involved.
The redesigning of the naira is good. Cashless Nigeria dream is equally good. However, the right thing should be done.