The Governor, the Central Bank of Nigeria, Godwin Emefiele, announced on Wednesday that the bank would release re-designed naira notes by December 15, 2022.
Emefiele made this announcement during a special press briefing in Abuja yesterday where he gave reasons for the move.
According to the CBN governor, this was targeted at controlling currency in circulation as well as curb counterfeit currency and ransom payment to kidnappers and terrorists.
He noted, “Indeed, the integrity of a local legal tender, the efficiency of its supply and its efficacy in the conduct of monetary policy are some of the hallmarks of a great central bank. “In recent times, however, currency management has faced several daunting challenges that have continued to grow in scale and tsophistication with attendant and unintended consequences for the integrity of both the CBN and the country.
“More specifically, as at the end of September 2022, available data at the CBN indicate that N2.73tn out of the N3.23tn currency in circulation was outside the vaults of commercial banks across the country, and supposedly held by members of the public. Evidently, currency in circulation has more than doubled since 2015, rising from N1.46tn in December 2015 to N3.23tn as at September 2022. I must say that this is a very worrisome trend that cannot continue to be allowed.”
On how it would help curb ransom payment, he said, “Also, in view of the prevailing level of security situation in the country, the CBN is convinced that the incident of terrorism and kidnapping will be minimised as access to large volume of money outside the banking used as source of funds for ransom payment will begin to dry up.”
He further identified more reasons that necessitated the re-designing of naira notes.
According to the apex bank governor, the challenges included: significant hoarding of banknotes by members of the public; worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability; and increasing ease and risk of counterfeiting evidenced by several security reports.
He added, “Indeed, recent developments in photographic technology and advancements in printing devices have made counterfeiting relatively easier. In recent years, the CBN has recorded significantly higher rates of counterfeiting especially at the higher denominations of N500 and N1,000 banknotes.”
The CBN governor further said that the re-designing of the currency would help to drive cashless economy and it would be complemented by the increased minting of the e-Naira.
While according to global best practices, it is expected that central banks redesign, produce and circulate new local legal tender every five to eight years, the apex bank governor said that the naira had not been redesigned in the last 20 years.
In a speech later released to the press, it was noted that the new series of banknotes would be for only N100, N200, N500, and N1, 000 levels.
In an effort to clear of the money being hoarded by Nigerians as soon as possible, he said that existing notes would seize to be regarded as legal tenders by January 31, 2023.
Emefiele further urged Nigerians to proceed to their banks to deposit their naira notes, saying that deposit fee would be waived for transactions below N150, 000.
He also directed all commercial banks to keep open their currency processing centres from Monday to Saturday so as to accommodate all cash that would be returned by their customers.
History of naira notes’ changes
Many adult Nigerians still remember several changes of naira notes in the last 30 years.
In 1973, the Federal Government decided to change from metric to decimal. This resulted in the change of the major unit of currency from pounds to naira and kobo.
On February 11, 1977, the then central bank introduced the N20 note, which was then the highest denomination.
It had the portrait of the late Head of State, General Murtala Ramat Muhammed, who was then seen as a national hero due to several reforms he was driving and his unfortunate assassination.
On July 2, 1979, the government introduced N1, N5 and N10, with engravings at the back of the notes reflecting various cultural aspects of the country, according to the CBN.
The country changed the colours of all banknotes in April 1984 except N50 kobo. The reason given at that time is similar today: To curb currency trafficking common at the time.
This was followed by the coining of N50k and N1.
The new government of Olusegun Obasanjo later decided to introduce N100, N200, N500 and N1000 banknotes in December 1999, November 2000, April 2001 and October 2005 respectively.
In February, 2007, N20 was printed for the first time in polymer substrate, while the N50, N10 and N5 remained in banknotes. Also, N1 and 50 kobo coins were reissued in new designs, and N2 coin was introduced.
The coins did not gain wider currency at that time due to inflation and people’s penchant for banknotes. Many complained that the coins were too heavy.
On September 30, 2009, the then CBN converted N50, N10 and N5 into polymer substrate.
In September 2010, the CBN issued the N50 polymer banknote. In December 19, 2004, it issued N100 commemorative banknote
Economists are divided over the change of currency notes being planned by the apex bank.
A professor of Capital Market and Chairman Chartered Institute of Bankers of Nigeria, Abuja Branch, Prof Uche Uwaleke, 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.
“I expect that the Financial Intelligence Unit will be on the watch-out for huge deposits as a way of monitoring illegitimate transactions.
He said despite the huge cost involved in changing currency notes, it was time to sanitise the system, especially as the electioneering activities had kicked off.
“However, I think the deadline of Jan 31 2023 is short in view of the number of naira denominations involved, from 100 to 1000. The CBN may consider extending it with time,” he said.
The Chief Executive Officer at Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said it was difficult to see any compelling value proposition of the currency redesign idea.
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 percent,” he said.
He noted that the exercise had no monetary policy significance, stressing that “it will come with huge logistics costs, and avoidable dislocations to small businesses, most of whom are in the informal sector.”
He further said there were more urgent issues demanding the attention of the CBN, particularly those around the foreign exchange.
“We have issues with liquidity in the foreign exchange market, the depreciating currency, the recent Moody’s downgrade of Nigeria, soaring inflation and many more.
The CBN should save the citizens and the economy the trauma of this currency redesign. It is a distraction we can do without.”