When the Central Bank of Nigeria (CBN) introduced the Naira redesign policy in October, 2022, it informed the public that it was meant to check abuse of naira, contain inflation and account for the volume of naira notes in circulation.
Among other gains Emefiele said step take would also help deepen the drive to entrench a cashless economy in the country.
Mr. Godwin Emefiele, the CBN Governor, who announced plans of the apex bank to redesign the N200, N500 and N1,000 denominations said that the process was in line with the apex bank’s key function of national currency management.
Emefiele said that out of the N3.2 trillion the apex put in circulation between 2015 and October 2022, only N500 billion was within the banking system, with N2.7 trillion permanently outside the banks.
According to him, maintaining the integrity of a legal tender and the efficiency of its supply are some of the functions of a great central bank.
“In recent times, currency management has faced several challenges that have continued to escalate in scale and sophistication, with unintended consequences for both the CBN and the country.
“On the basis of these, and in line with the provision of CBN Act, the management of the CBN has sought and obtained the approval of President Muhammadu Buhari to redesign, produce, release and circulate new series of banknotes at N200, N500 and N1,000,” he said.
“The standard practice globally is for central banks to redesign, produce and circulate new local legal tender every five to eight years,” he said, adding that in the case of naira, the last attempt at such was 20 years ago.
However, the policy soon ran into troubled waters, as the CBN, after mopping up existing banknotes, was not able to make adequate supply of the redesigned banknotes to deposit money banks even after placing restrictions on withdrawal limits.
This created a scenario where bank customers were stranded, with no access to cash, while inadequate Internet infrastructure in commercial banks also made it frustrating for them to execute online banking transactions.
Some state governors who kicked against the policy due to the untoward hardship it inflicted on Nigerians, approached the Supreme Court to intervene on the issue.
The governors accused Emefiele of misinforming the president about the negative implications of the policy.
On March 4, the Supreme Court passed a judgment invalidating the Naira redesign policy on the grounds that it was not done with due consultation and in line with constitutional provisions.
The apex court, thus ordered that the old Naira notes should continue to be used side by side with the new Naira notes until Dec. 31.
Financial experts have expressed diverse views about the initiative. While some have commended it, saying that it would contribute to stabilising the Naira, others condemned its timing.
An ex-banker, Dr Tope Fasua, said the measure would have significant effect on the economy, adding that it was essentially about “black money.’
“When central banks do this, they try to pull in monies people are hiding; illegal money, corruption money, kidnapping money. Nigeria has managed to become a hub for these kinds of illegalities.
“I will even suggest that the CBN does this more often, maybe every 10 years. You will see a scenario where the banks are awash with liquidity.
“There are many people sitting on billions in naira, and even in dollars. The CBN should also see how it can pull in the dollars,” he said.
However, other financial experts say the challenges facing the economy as enumerated by the Emefiele cannot be tackled by mere redesign.
One of them is Mr. Okechukwu Unegbu, the past president of Chattered Institute of Bankers of Nigeria (CIBN), who said redesigning the naira was not the most important problem facing the economy.
Unegbu, said the apex bank should have tasked itself with ensuring the availability of lower naira denominations, like N50, N100 and N200.
Unegbu argued that embarking of a cashless economy can only be successful in a literate society with the right infrastructure.
“There is no problem with the cashless policy but because of the state of the economy and the level of illiteracy, the CBN should have started implementation in phases.
“Cashless policy should start from urban and commercial centres like Lagos, Abuja, Port Harcourt and Kano before moving to the rural communities.
“You cannot make such a blanket decision in the Nigerian system because of the way we are. The shortage of cash is worse in rural communities, where some people have never even sighted the new notes,” Unegbu said.
According to Mr. Muktar Muhammed, the prospects of the policy having a positive impact on the nation’s economy had been blighted by its poor implementation.
“It is a good policy but poorly implemented because we did not take into consideration the Nigeria factor.
“It was not driven entirely by economic considerations. We had to contend with political consideration as it relates to vote-buying and we had the security consideration,’’ he said.
Muhammed said that the policy had done some damage to the informal sector, although he believes that in the long run, the sector will find it beneficial.
“Some of the small businesses have started to open bank accounts because they realised that it is the only way they can do business.
“It has also helped in stabilising the exchange rate, from between N800 to N900 to the dollar to around N750 to the dollar.
“That is still not good enough, but it is better considering where we are coming from,’’ the investment banker said.
Dr Isa AbdulMumin, the Acting Director, Corporate Communications, CBN, says it was making efforts to ensure that enough naira notes were injected into the economy to ameliorate the hardship associated with lack of cash.
AbdulMumin said that the CBN also directed all deposit money banks to open for operation on Saturdays and Sundays to meet their customers’ cash demand.
The apex bank said it has sufficient new naira notes to meet and financial needs of the citizenry.
The Central Bank of Nigeria (CBN) has dismissed speculations over the inadequacy of the newly redesigned naira notes in the banks, saying there is sufficient quantity in circulation.
“I can assure everyone that the new notes will circulate. So, as transactions take place, you are going to be having the new ones.
“As people are giving out the old notes, they’ll be receiving the new notes”, said Mr. Abiola Omotoso, the Controller of Ekiti State branch of the bank.
Stakeholders say they are hopeful that the apex bank will take advantage of the Dec. 31 window given by the Supreme Court to perfect the Naira redesign policy implementation including directing banks to expand their internet infrastructure.
