The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele issued a statement concerning a policy to redesign the naira notes. These redesigned notes were introduced on the 15th of December 2022. He said this policy was a result of the inability of banks to control the circulation of the Naira note. He claimed that this issue portrayed incompetence on the side of the banking sector. Also, he said it was the causative factor to a consistent decrease in the value of the Naira.
Mr. Emeliefe mentioned several reasons for the adoption of this policy. One of them is the mass hoarding of banknotes by members of the public. Another is an increase in the shortage of standard and clean banknotes. This has heightened the increase in the production of counterfeit currencies in the country.
This new policy was revolted against by some top personalities in the country. One of them is the Minister of Finance, Budget and National Planning, Zainab Ahmed. She said that she and the ministry were not aware of any plan by the CBN to redesign new banknotes. Furthermore, the Minister complained about the ill timing of the policy. However, the President gave his support for the plan.
Many people consider this move by the CBN to be political. However, the institution and others are seeing it from an economical point of view. But the CBN has said that the redesign only applies to three denotations. These include the 200, 500, and 1000 naira notes respectively. The old notes in circulation must be submitted to the banks on or before the 31st of January, 2023. After this date, they will be treated as expired currency.
Political Implications of Redesigning the Naira Notes
As the 2023 general elections are around the corner, this new policy of the CBN seems to be politically motivated. On the other hand, certain financial and political analysts have had their say. They believe that this move would disrupt the use of cash to buy votes. Bank statistics reveal that over 80% of the nation’s currency is in private vaults. This is mostly by corrupt politicians who have been involved in different crimes. As such, they wouldn’t be able to defend the source of such huge funds if brought to the bank.
This group applauds the CBN for this strong plan at such a strategic season before the general elections. If successful, the policy is likely to guarantee a bribery-free election by 2023. Voters, staff of the electoral body, and election observers would not receive bribes to tamper with the electoral process.
Economic Implication of The New Naira Note
The banking sector has reportedly lost control of over 80% of the money in circulation. This policy will help them regain it. Mr. Emefiele said that, as of September 2022, the CBN had released 3.23 trillion Naira. He claimed that 2.73 trillion Naira is said to be outside the bank vault. This development is a negative one for the banking sector as it weakens her monetary policy. If the sector regains this control, it will go a long way to curb the inflation rate which is currently over 20%.
Between the launching of the new notes and the expiry of the old ones, there will be so much money in circulation. This is because those who hoard money will have to spend them on making purchases. Others may resort to exchanging theirs for foreign currency. When this happens, the Naira is likely to fall the most. However, with time, the CBN will take back control of the money in circulation. This will make the economy smile again.
Some persons have also expressed concerns about the cost of printing this new currency. Their argument is based on what it cost them to print the ones produced in 2020. Questions have been asked if this is a good time for this, considering the various crises surrounding the nation’s economy. Some of these crises include a huge amount of debt, poor revenue, underfunded government projects, etc.
One of the major concerns regarding this policy is the rise in market prices of commodities. It is even more serious because the festive period is around the corner. People are worrying and pleading for adjustments to the policy. They are also begging that the government adopt other measures to achieve the same goal. This would be better than totally clearing the old currency within such a short period.
Conclusion
There is a need to grow and stabilize the nation’s economy. The even distribution of money, properly monitored by our Central Bank, would play a significant role in achieving this. A policy is to make the life of the people better, not worsen it. There is a need for the CBN to take into consideration the plea of the average Nigerian for this innovation. Nigerians have over the years developed a thick skin to weather difficult circumstances. We can endure one more bitter pill to make our currency more valuable.
Emmanuel Otori has over 9 years of experience working with 100 start-ups and SMEs across Nigeria. He has worked on the Growth and Employment (GEM) Project of the World Bank, GiZ, and Consulted for businesses at the Abuja Enterprise Agency, Novustack, Splitspot, and NITDA. He is the Chief Executive Officer at Abuja Data School.
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