The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele announced recently that plans had been concluded and approval gotten from President Mohammadu Buhari to redesign the higher denomination of the Nigerian currencies of N200, N500 and N1000.  This is an apparently well-guarded plan according to analysts. DAVID AGBA reports.

There is a saying that uneasy lies the head that wears the crown. The apex bank has over the years been battling with challenges of managing the micro and macro-economic sides of the Nigerian economy.

Policies and strategies

This can be seen through the several policies, strategies and programmes churned out to salvage the situation like the Anchor Borrower Programme for farmers among others.

Although Emefiele’s current move involves essentially, only a change in colours of the Naira notes, it has implications for the people and the economy.

GSM in Nigeria

This currency redesign is coming just when the CBN itself marked the first anniversary of introduction of the e-Naira which is meant to further enhance its cashless policy and bring more Nigerians especially low-income earners into the banking net.

With virtually every adult Nigerian now owning a GSM handset plus increasing internet penetration as well as the P.O.S revolution, many more Nigerians are now embracing banking operations particularly in respect to transfer and withdrawal of money.

Currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2 (b) of the CBN Act 2007.

Speaking during the briefing to herald the new policy, Governor Emefiele said, “Indeed, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank.”

The lower denominations of N10, N20, N50 and N100 are to remain intact.

The new currency notes will start rolling out from December 15 and Nigerians have between that time and January 31, 2023 to change their current notes as they would cease to become legal tender from February, 2023.

Of importance is the fact that the CBN’s move was not sniffed by journalists and so not leaked; nor was it foreseen by the many so-called ‘seers’ whose ‘predictions’ know no bounds.

Soludo’s undoing

Emefiele might have learnt from one of his predecessor’s ‘mistakes’ in keeping a sealed lips about the plan before now. Former CBN governor, Dr. Charles Soludo (now governor of Anambra state) had come up with the drastic plan to re-denominate (revalue) the Naira. But no sooner did he unveil the bold step to the public than it was shut down by the ruling government for lack of presidential approval. Dr. Soludo might have been working in the belief that the CBN is an independent institution charged principally with directing the country’s monetary policies in the nation’s best interest.

Cash carrying era

The first implication of this Naira currency redesign is that many users may be back to the era of carrying cash about, at least during the transition as everyone has to physically take his/her cash to the banks for the new ones. Simultaneously, it would help the CBN mop up excess liquidity as all those that are keeping cash in their houses for one reason or other, for one future purpose or other would be forced to bring them out for exchange.

According to the apex bank, some 80 per cent of monies circulating in Nigeria are outside the banks.

Currency counterfeiting  

Another issue associated with currencies is counterfeiting. The CBN confirms that it has recorded high rates of counterfeiting of naira notes especially for N500 and N1000 denominations. When these higher denomination notes were introduced some years ago, some argued that they would benefit mostly the rich and elites who deal with huge sums of money because it would make it easier for them to carry millions of naira in cash. Incidences of counterfeiting are rampant during high spending times like Sallah, Christmas, end of year/new year festivities as well as during political campaigns/general elections. Billions of naira is billed to be spent on activities related to the presidential, governorship, national assembly and state houses of assembly elections in February/March 2023. Some of the activities have commenced.

Photography technology

Thus, it is envisaged that there would be much, much money in circulation in December, January and February. Experts say advances in photography technology and printing devices have made counterfeiting of currencies relatively easier. However, this can be curtailed through high-end security marks.

Bad notes in circulation

Dirty, worn, torn naira notes of all denominations are now also increasingly in circulation. They are also becoming more difficult to spend as even some fuel stations reject them. So, this currency change provides an opportunity to have neater, better naira notes nationwide from January 31.

Caution on fiscal, monetary authorities interface

Amid concerns over the position of the Finance Minister, Mrs Zainab Ahmed, on the decision of the CBN to embark on the redesigning of Naira notes, President Muhammadu Buhari promptly threw his weight behind the policy, saying the that the CBN has his support on the project.

Ahmed, had declared that the CBN did not carry her ministry along in the new Naira note plan, warning that the new notes could have dire consequences on the value of the Naira.

Buhari’s take

But Buhari in a statement by his Senior Special Assistant on Media and Publicity, Mallam Garba Shehu, said he is convinced the nation will gain a lot by doing so.

Speaking in a Hausa radio interview with Halilu Ahmed Getso and Kamaluddeen Sani Shawai, Buhari said reasons given by the CBN convinced him that the economy stands to benefit from a reduction in inflation, currency counterfeiting and the excess cash in circulation.

He said he did not consider the period of three months for the change to the new notes as being short.

According to him, “people with illicit money buried under the soil will have a challenge with this, but, workers, businesses with legitimate incomes will face no difficulties at all.”

Further insight from CBN

The CBN, reacting to the position of the Finance Minister, said it was surprised by the minister’s outburst and that due process was followed in arriving at the Naira redesign project, including obtaining the approval of President Muhammadu Buhari.

Also, the apex bank doused concerns about the cost of printing the new notes, saying they will come at no outrageous cost, printed in the country and within the budget of the apex bank.

According to a statement from the CBN’s spokesman, Mr Osita Nwanisobi, the apex bank stressed that the CBN remains a very thorough institution that follows due process in its policy actions.

According to Nwanisobi, the management of the CBN,  in line with provisions of  Section 2(b), Section 18(a), and Section 19(a)(b)  of the CBN Act 2007,  had duly sought  and obtained the approval of the President, Major General Muhammadu Buhari  (retd.) in writing to redesign, produce, release and circulate new series of N200, N500, and N1,000  banknotes.

Why Naira redesign is necessary — Moghalu

Commenting on the issue, a former Deputy Governor of the CBN, Kingsley Moghalu, said that the decision of the CBN to redesign the naira notes is a ‘necessary step’ for the good of the economy.

Moghalu stated his support for the decision in a series of tweets on his Twitter account.

“I fully support the Central Bank’s redesign of the Naira,” he said. “If 80% of banknotes in circulation are outside the banks, that’s troubling. The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender to get new ones or else it becomes illegal tender after January 31 2023.

“This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation.

Experts call for harmony

Meanwhile, economists and financial experts have harped on the need for harmony between the fiscal and monetary policy authorities while maintaining the independence of the CBN.

Vice-Chairman, Highcap Securities, David Adonri, said that, while it is important for both the CBN and the Finance Ministry to synergise on policy-making in order to achieve a better outcome, the independence of the CBN as obtained in other economies does not require the permission of even the president to undertake a project such as the redesigning of the Naira.

He said: “The economy is managed by the government through macro-economic policies (fiscal and monetary policies); while the Federal Ministry of Finance (FMoF)  is the fiscal authority, CBN is the monetary authority. They are expected to work harmoniously in policy formulation and implementation. Any discord between these authorities is detrimental to economic management. “