Redesigning of naira: Matters arising

THE latest policy decision of redesigning the naira by the Central Bank of Nigeria (CBN) has attracted divergent  opinions for and against its. The fact that many like the Minister of Finance, Budget and National Planning, Zainab Ahmad,  never saw the announcement coming, adds to the shock about it.  The Minister commented  on the policy while answering questions during the 2023 budget defense session at the National Assembly last Friday, saying she was not aware of the policy but heard it from the media.

   ACCORDING to her, “we were not consulted at the Ministry of Finance by CBN on the planned naira redesigning and cannot comment on it as regards 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 value of naira to other foreign currencies.”

BUT a former deputy governor of the CBN, Kingsley Moghalu commended  the proposed redesigning of the naira, noting that a situation where  80 per cent of banknotes in circulation are outside the banks is worrisome..

   ACCORDING to Moghalu, “the CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender them to get new ones  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.”

   HE, HOWEVER, expressed doubt that the step would solve inflation, “because there also are other major reasons for inflation such as the forex crisis, which this new move can exacerbate, as well as the impact of the security crisis on food price inflation.”

    ACCORDING to Prof, Moghalu, the step is also  necessary for national security even as the window of time for implementation is too short.

    THE short time given for the coming of the redesigned notes will put a lot of operational pressure on commercial banks and the financial system in general. Giving at least  90-day window would  have been better, but one can understand the need to avoid interfering with the elections.

    THE CBN Governor, Godwin Emefiele, had at a press briefing penultimate Wednesday, said that the apex bank would redesign the country’s currency, which will affect the highest denominations: 200, 500, 1000 notes.

HE SAID that the action was taken in order to take control of the currency in circulation as the bulk  notes were outside bank vaults which does not augur well.

   HE SAID  that  the redesigned notes will be released for public use on December 15, 2022, and that the old notes and the new notes would circulate together until January 31, 2023, when the old ones would  cease to be legal tender, among other things.

   THE CBN Governor further explained that the global best practice is for the CBN to redesign, produce and circulate new local legal tenders every five to eight years, and the naira has not been redesigned in the last 20 years, adding that as at the end of September2022, available statistics show that over 85% of monies in circulation were outside the vaults of commercial banks, meaning that N2.73 trillion out of the N3.23 trillion in circulation exists outside the hold of commercial banks.

    AS THE populace, particularly experts continue to interrogate the rightness and wrongness of the decision, National Light’s major concern is on its implementation – what should be on ground early while it is being implemented and what social action it  could  trigger, among others.

    SINCE redesigning the naira involves getting the new notes through banks, the first issue in this is that the money must pass through the banks and the banks’ staff must check the money which will be very stressful to both the banks’ officials and customers. The questions that come to mind at this juncture are:  Is it realistic to completely swap these currencies within the  six weeks that CBN has allowed (December 15, 2022 to January 31, 2023 given that almost all commercial, banks have massively cut the number of their branches and staff?   Will this not put a lot of operational pressure on commercial banks and the financial system in general? In a place like South East Nigeria where banks have reduced man hour and don’t work on Mondays, how are they going to do it? Are banks going to work overnight? Where will people turn over the money? If the period given for the exercise eventually ends, what will happen to people’s money? Will people’s money cease to be legal tender, would it not lead to restiveness?

     AGAIN, as elections are going to come early next year, if this is a way of making politicians not to have a lot of cash to do the oddious money politics they would do, what does it do to the economy? We agree that the exercise may reduce money politics  but is it still not a wrong move to check a bad trend with an odd move as it will stifle the economy while some people will likely lose their cash? If people use the cash at their hands to buy hard currencies, will it make the naira stronger?

     ONE can imagine the fate of the naira in the near future considering the fact that just two days after the announcement of the policy ,the  value of naira to a US dollar rose  from N740 to N788 to a US dollar due to  rush to  exchange  naira notes for foreign currencies, particularly dollar. Currently, naira is trading for over N800 to one dollar.

     FOR the entire society, apart from the obvious hardship the exercise will cause  the  populace,  will it not be a field day for robbers to rob people as they ‘carry’ their cash about from homes and business locations to banks for the new notes? Could some disgruntled bank officials not actually connive with criminals to rob people?  What security measures are in place to ensure that people move to deposit their cash safely both within and outside the banks?

   HOWEVER, since President Muhammadu Buhari has said that the CBN’s move has his authorisation, it is obviously, law. Therefor, in order to avoid ‘had I known’ and  avoid the stress of waiting  for long hours to be attended to during the rush periods, we urge individuals and organisations currently holding the existing denominations of naira to  begin depositing them  into their bank accounts  to enable them withdraw the new banknotes once circulation begins in mid-December 2022, while we expect all banks to keep open, their currency processing centers from Mondays to Saturday as directed by the CBN, so as to accommodate all cash that will be returned by their customers.

    WE URGE the CBN to begin now to sensitise the people to  deposit money in the bank, while banks must increase their bulk room staff even if engaging staff on ad-hoc basis and ensure adequate security.

    AS THIS is both election and yuletide season, we call on people to begin early to make bulk purchases with the money at hand to reduce the stress and risk of going to deposit the existing denominations or coming out with the new denominations in order to make purchases at rush hours.

    ABOVE all, government should ensure that this exercise will not affect the ease of doing business or create confusion during the elections or even cause social disharmony ahead of the elections.