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Nigerians concerned about naira redesign

The announcement by the Central Bank of Nigeria that the N200, N500 and N1000 notes will be redesigned has been greeted with mixed reactions from Nigerians.

While some commend the decision by the Apex bank, others are of the opinion that it was coming at the wrong time.

On Wednesday, the Governor of the CBN, Godwin Emefiele, explained that the decision to redesign the notes was due to the large amounts of money outside the banking system, which is about 80% of the total money in circulation.

According to him, as at September 2022, N2.73tn out of the N3.23t in circulation was outside the vaults of commercial banks.    

“These (currency management) challenges primarily include significant hoarding of banknotes by members of the public, with statistics showing that over 80% of currency in circulation are outside the vaults of commercial banks; 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.”

Emefiele also explained that the currencies were over due for change and that the ideal was for bank notes to be changed every 8 years.

History of the Naira note

Information from the CBN website revealed that the naira has metamorphosed over the years from when the first bank note came into existence in Nigeria.

According to the CBN the first bank note (which was in pound) was introduced in 1962, this was then changed in 1968 following the misuse of the currency during the civil war.

In 1973 the Naira and kobo was born and the major unit of currency which used to be pound and shillings ceased to exist

As the economy continued to grow, the N20 was released on 11th February 1977.

On 2nd July, 1979, new currency banknotes N1, N5 and N10 were introduced.

In a bid to address currency trafficking, in April 1984, the colours of all the banknotes in circulation were changed except the 50 Kobo.

In 1991, the 50K and N1 were both coined.

In response to the expansion in economic activities and to facilitate an efficient payments system, the N100, N200, N500 and N1000 banknotes were introduced in December 1999, November 2000, April 2001 and October 2005 respectively.

The use of polymer notes started in 2007with N20, while the N50, N10 and N5 banknotes; as well as N1 and 50K coins were reissued in new designs, and the N2 coin was introduced.

On 30th September, 2009 the redesigned N50, N10 and N5 banknotes were converted to polymer substrate.

On 29th September, 2010, the CBN, as part of its contribution towards the celebration of the nation’s 50th anniversary of Nigeria’s Independence issued the N50 Commemorative polymer banknote and for the 100 years of its existence as a nation(19th December, 2014), the Apex bank issued the N100 Commemorative banknote.

Reactions

And now 22 years after the N200 was introduced the CBN has announced it was redesigning the note alongside the N500 and N1000 notes.

How do Nigerians feel about this? Radio Nigeria spoke with some residents of the FCT who were pessimistic about the redesigned naira notes.

Grace Okafor said ‘’most politicians don’t have trust on our currency and our leaders change their Naira to Dollars, which will only affect the poor people’’

For Temilayo Aduni ‘’the government should improve the quality of the naira, so it can be of value because the naira does not have value’’

Abubakar Adamu said ‘’we can see that this changing of our currency is not for the good of the masses’’

Joel Musa said ‘’the currency change will bring about inflation to the economy and bringing hardship as a result of the weak naira.

However, experts who spoke with Radio Nigeria share divergent views on the matter.

Though they acknowledged the move by the CBN as part of a broader effort to contain spending during next year’s election as they alleged politicians were hoarding cash ahead of the elections, they also opined the time might be off.

A professor of capital market at Nasarawa State University, Lafia, Prof. Uche Uwaleke said the move would have positive impact on the economy in the medium to long term.

Prof. Uwaleke, said it would go a long way to remove a lot of naira note in circulation outside the bank as asserted by the CBN, which would mean more deposits for the banks.

He however said the timeframe given by the Apex bank was too short.

“I think the deadline is short in view of the number of naira denominations involved, from N200 to N1,000. CBN may consider extending the time.’ ’

For Mr. Adakole ijogi a political Economist, the timing of CBN was not right owing to the fact that it would be during the festive period which he said would put more pressure on businesses as well as the 2023 general election.

‘’In the case on timeline, it is too short there will be disruptions in the economy, there will be pressure on business people on usual exchange of goods n services. Besides we are going into the festive seasons, political season in Feb, I think the timing is a little bit off’’.

He also opined that the focus should have been on how to tackle inflation, improve on electronic transactions and increase the value of the naira.

‘’the CBN recently published a figure saying from January to July 2022 e-payment platform had over N205tn. Let me tell you we are doing well with e-payment in Nigeria but when it comes to monies outside the banking sector, the CBN alleged it’s over N2tn, if there was the need to change the currency it should have been after inflation has been tackled, increase production and shore up reserves.

‘’If u go to some places, the N5, N10, N20 have no value at all, I thought the emphasis should have been to create value again by restoring the value of the currency rather than redesigning the currency’’, he noted

On the authenticity of the naira and counterfeiting which were part of the reasons given for the decision to redesign the naira,  a Financial Analyst, Mr. Adefolarin Olamilekan aligned with the CBN and said it would be of great benefit for the country.

‘’if you look at the security issue especially ransom taking by kidnappers, public figure stealing and the hoarding of money in various homes which have negate the use of banking system is also a great benefit from the new design naira’’

One of the fears about the proposed notes is its impact on inflation; Adefolarin affirmed it would create an inbuilt inflation.

‘’Already we are suffering from cost push inflation and what is going to happen is that we will have inbuilt inflation and certain individual will begin to take advantage of this opportunity and begin to exploit Nigerians’’

Also, the Civil Society Legislative Advocacy Centre, CISLAC in a statement on Thursday said the plan to redesign the naira notes is not an economic priority for the country at the moment considering the current economic challenges.

The Executive Director of CISLAC, Auwal Musa maintained that the CBN ought to have given more attention to setting the economy on the path of revival.

“Firstly, the CBN’s decision to redesign and reissue new 200, 500 and 1000 notes is not an economic priority and barely a solution to addressing Nigeria’s poor monetary policy challenges and growing economic woes.

“Especially at a time when the country is grappling with huge fiscal deficits, a free fall of the naira, soaring inflation rates, multiple forex rates and rising borrowing costs. The reasons for this decision seem no different from those given for the forex demand management strategy which resulted in a non-satisfactory conclusion as the artificially low exchange rate failed to be as reflective of the market as possible to improve supply, but this time it only threatens damning economic consequences for Nigerians.

“The public perception that this decision holds no value proposition for the economy, reiterates the tendency of the CBN to be distracted from fulfilling priority statutory obligations.

In spite of these misgivings on the redesigning of N200, N500 and N1000 naira notes, the EFCC has thrown its weight behind the CBN.

In a statement on Wednesday, the Anti-corruption agency has warned that it will unleash the full wrath of the law on any individual or financial institution that try to thwart the successful retrieval of the old notes.

Writing by Annabel Nwachukwu; Editing by Tina Oyinsan