Controversy has continued to trail the decision of the Central Bank of Nigeria (CBN) to redesign some denominations of the country’s currency. Scores of proponent and opposing opinions that range from issues of huge cost of printing new notes and destroying old notes, wrong timing, shortness of deadline, fall in GDP and output, to other lopsided effects compared to the expected benefits have become recent subjects of discourse. Claims by Mrs. Zainab Ahmed, Minister of Finance, Budget and National Planning, the previous Friday, that her ministry was not carried along by the Central Bank of Nigeria, in the ongoing process of redesigning three series of the naira took an early lead on the issues. While entertaining a question raised by Senator Opeyemi Bamidele (APC Ekiti Central) during 2023 budget defense of her ministry on the grave consequences of the naira redesign if CBN goes ahead to implement it; the Finance Minister, said the finance ministry was not consulted on the planned Naira redesigning and cannot comment on its merits or otherwise.
“However, as a Nigerian privileged to be at the top of Nigeria’s fiscal management, the policy as rolled out at this time, portends serious consequences on the value of Naira to other foreign currencies. “I will however appeal to this committee to invite the CBN Governor for required explanations as regards merits of the planned policy and rightness, or otherwise of its implementation now,” she said But CBN fired back instantaneously insisting that the bank followed the due process to implement the 12-year belated exercise. CBN tweeted on Saturday, “The CBN urges Nigerians to support the currency redesign project, which is in the overall interest of every citizen of the country. “CBN had tarried for too long considering that it had to wait 20 years to carry out a redesign, whereas the standard practice globally was for central banks to redesign, produce and circulate new local legal tender every five to eight years. “President Muhammadu Buhari approves the redesign, production, and circulation of new series of N200, N500, and N1,000 banknotes.” Without much ado, news of the President’s backing of the replacement of the concerned naira notes hit the news stand. In a statement by his media aide Garba Shehu, the President said he is “convinced that the nation will gain a lot by doing so”.
“Speaking in a Hausa radio interview with the famous journalist Halilu Ahmed Getso, and Kamaluddeen Sani Shawai to be aired Wednesday Morning on Tambari TV on Nilesat, President Buhari said reasons given to him by the CBN convinced him that the economy stood to benefit from the reduction in inflation, currency counterfeiting and the excess cash in circulation,” Mr. Shehu said on Sunday. “He said he did not consider the period of three months for the change to the new notes as being short. “People with illicit money buried under the soil will have a challenge with this but not workers, businesses.” According to a statement later issued by CBN, the spokesman of the bank, Mr. Osita Nwanisobi, said 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, Muhammadu Buhari (in writing to redesign, produce, release and circulate new series of N200, N500, and N1,000 banknotes. This development did not go down with some Nigerians as they expressed fears that such a disagreement between the Ministry of Finance and Monetary authorities over the redesigning of the Naira could reduce the country’s currency value and pose significant dangers to the economy. Finance experts were divided over this issue.
While Mr. Boniface Okezie the National Coordinator, Progressive Shareholders Association of Nigeria, took sides with Mrs. Ahmed’s stance, Mr. Kingsley Moghalu, former Deputy Governor of the Central Bank of Nigeria in a series of tweets he posted on his Twitter account on Friday, backed the CBN, noting that the decision is its statutory duty which does not need any external approval except that of Nigeria’s president. He said, “They were affirming their statutory responsibility as the sole institution responsible for the issuance and management of the legal tender currency of Nigeria which is the naira. Note the emphasis on sole institutions, that responsibility is not shared with anyone else. So the CBN is doing its job in saying they have come to a judgment that the time has come to redesign the naira notes and there are a number of reasons behind that which I’m sure we will discuss. “The Ministry of Finance does not supervise the CBN. It is part of the offices that supervise the economy. The Ministry of Finance, the Central Bank of Nigeria, National Planning, the Ministry of Trade, Industry, and Investment. These are all parts of the government but the Central Bank of Nigeria, as the central bank of most civilised nations is or should be independent of any external influence.
So, this is the context in which you will have to see what is going on. “The central bank fulfilled the requirements of it, which under the Act is that you cannot change the currency of the country without approval from the President. They sort the approval and they got it. And so I think they were well within their rights,” he said. On his part, Mr. Okezie said redesigning the Naira has no bearing on the economy, adding that this will not reduce inflation. “The redesigning will not be free and it will not even be done in Nigeria, rather it will be done outside. Will it bring down inflation? Will the Naira compete with the dollar, pound sterling or any other currency in the world? For me, it is a wasteful exercise in futility.” The National Coordinator, Progressive Shareholders Association of Nigeria recommended that the CBN shores up the Naira so that it can add value. Mr. Okezie said,” I align myself with the Ministry of Finance, there is no need for that and if they said they were not consulted, then they were not because the redesigning has to be approved by the executive council and knowing that Emefiele is not a member of the executive council but just a CBN regulator.
The President cannot just issue a letter without the National Assembly approving it and so it is very unfortunate at the way this country is being run. There is no cohesion at all with the Finance Ministry and the monetary authorities and since they are divided, this portends danger for the economy”, Okezie said. Speaking in same vein, Jonathan Aremu a Professor of Economics, wondered why the Finance Minister was not carried along, noting that it was evidence of the gap between the fiscal and monetary policy authorities in the country. Aremu said, “Changing of currency notes is not an essential monetary policy tool. So many people may read this intention as political geometry. I am yet to be convinced regarding the basis for this. The former Deputy Governor of CBN also defended the decision of the apex bank, describing it as necessary. Moghalu, in same series of tweet, itemised the benefits of apex bank’s project. He said, “I fully support the CBN redesign of the Naira. If 80 percent 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.
“The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go to the parallel forex market to buy hard currency, putting further downward pressure on the value of the naira as too much naira will be chasing too few dollars. “I doubt it will solve inflation because there also are other major reasons for inflation such as the forex crisis, which this new move could exacerbate, as well the impact of the security crisis on food price inflation. “But overall it is a necessary step. I just think the time window for its implementation is rather short. This will put a lot of operational pressure on commercial banks and the financial system in general. “A 90-day window would have been better, but one can understand the need to avoid interfering with the elections.” CBN Governor, Godwin Emefiele, had the previous Friday announced the plan to redesign 100, 200, 500 and 1,000 notes, saying it would go into circulation in December. The plan is to redesign N100, N200, N500, and N1000 and start disbursing by December.
Emefiele said the old notes are expected to be out of circulation by January 31, 2023. Explaining the bank’s decision to redesign some naira notes, Mr. Emefiele stressed that while global best practices dictate that the process should be done every five to eight years, the naira had not been redesigned in the last 20 years. He said that other reasons for the change included the hoarding of notes by Nigerians, the growing risk of counterfeiting, and the shortage of clean and fit banknotes, adding that the new currency will begin circulation from Thursday, December 15, 2022. Obviously, the decision has attracted mixed reactions from Nigerians, especially the finance experts. Ayo Teriba, Chief Executive Officer of the Economic Associates, challenged the timing and relevance of the new CBN policy when the general elections are only two months away. He countered the exercise. “Proposing a sudden withdrawal of notes for replacement with redesigned notes is of no benefit to the country, but will come at huge costs. Fixing the deadline two to three weeks ahead of Christmas/ New Year festivities, two months ahead of a general election, is as disruptive as it is insensitive.” “It is sheer waste of the nation’s time and resources to be re-designing the N100 (equivalent to $20 cents) to N1000 (equivalent to $2) as these are ripe for replacement with naira coins to make room for the immediate introduction of N2000 (equivalent to $4) to N10,000 (equivalent to $40) denominations of Naira notes that will be more in line with the value of currency note circulating in other climes,” he added.
Dr. Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise, said it was difficult to see any compelling value proposition of the currency redesign idea. Dr. Yusuf said the cost of such an action would be outrageous and disproportionate compared to the expected benefits advanced by the CBN. “At a time when the government is grappling with high fiscal deficit, debt crisis, severe revenue crisis and underfunding of many government projects and programmes, it is most inappropriate to embark on such a profligate exercise. Currency as a percentage of money supply is less than seven per cent,” he stated. Prof. Uche Uwaleke, a renowned financial Economist, Professor of Capital Market and Chairman, Chartered Institute of Bankers of Nigeria, Abuja branch, said the decision to replace some naira denominations with new ones would be positive for the economy in the medium to long-term. He said, “First, although the measure does not amount to demonetisation of big currency notes often carried out by central banks to curb black money and corruption, it will go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in. “If it leads to large deposits in banks, it means the banks will have more money to lend, which may reduce interest rates. “I also think it may have the effect of reducing speculative attacks on the naira in the parallel market.
