Mixed reactions have continue to trailed recent decision of the Central Bank of Nigeria (CBN) to redesign the 200, 500 and 1,000 Naira notes as well as the sentiment expressed by the Minister of Finance, Budget and National Planning, Zainab Ahmed on the matter, a great number of analysts believe that the initiative would be positive for the economy.
However, President Muhammadu Buhari explained that the decision of the CBN to redesign the banknotes had his support, saying he was convinced that the nation would gain a lot by doing so.
According to the president, reasons given to him by the CBN convinced him that the economy stood to benefit from reduction in inflation, currency counterfeiting and the excess cash in circulation.
The CBN had also urged Nigerians to support the currency redesign project which it stressed is in the overall interest and that of the economy at large.
Part of the functions of the central bank is currency issuance and distribution within the country.
Central banks are required to redesign, produce and circulate new local legal tender every five to eight years, but the naira has not been redesigned in the last 20 years.
On February 28, 2007, as part of economic reforms, N20 was issued for the first time in polymer substrate, while the N50, N10 and N5 banknotes; as well as N1 and 50 kobo coins were reissued in new designs, and the N2 coin was introduced.
According to the central bank, the development was also aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports, and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.
The central bank further insisted that it followed the law and due process to carry out the redesigning exercise, which is 12 years due.
CBN Director in charge of Corporate Communication, Mr. Osita Nwanisobi said the CBN management, in line with provisions of section 2(b), section 18(a), and section 19(a)(b) of the CBN Act 2007, duly sought and obtained the approval of President Muhammadu Buhari in writing to redesign, produce, release and circulate new series of N200, N500, and N1,000 banknotes.
Meanwhile, Osita Nwanisobi pointed out that currency management in the country had faced several escalating challenges which threatened the integrity of the naira, the CBN, and the country in general, adding that every top-rate central bank was committed to safeguarding the integrity of the local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy.
On the timing of the redesign project, Nwanisobi explained that the CBN had even 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.
While assuring Nigerians that the currency redesign exercise was purely a central banking exercise and not targeted at any group, the CBN spokesman expressed optimism that the effort will, among other goals, deepen Nigeria’s push to entrench a cashless economy in the face of increased minting of the eNaira.
CBN Governor, Mr. Godwin Emefiele explained that there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation were outside the vaults of the commercial banks.
He said as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable.
Emefiele also urged bank customers to begin paying into their bank accounts the existing currency notes to enable them to withdraw the new banknotes once circulation begins mid-December 2022. He said all banks were expected to keep open their currency processing centres from Monday to Saturday so as to accommodate all cash that would be returned by their customers.