As the dust raised by the plan of the Central Bank of Nigeria, CBN, to redesign the local currency begins to settle into the reality of managing the already concluded matter, implementation has come to the front burner.
Also the aggregation of contending positions on the issue appears to show that the change was more desirable than the consequences of retaining the current state of the local currency.
Already the dust raised by the contrary position of the Finance Minister, Mrs Zainab Ahmed, on the CBN’s decision making process on the matter has died as quickly as it emerged following the position of President Muhammadu Buhari in favour of the apex bank, while other experts also backed the CBN.
Having put that behind, the CBN appears set to implement the Naira change as banks begin compliance with its directive to get ready for a smooth transition to the new currency note.
Last weekend all the commercial banks opened shops for customers, a development which may have helped some depositors to begin the process of aligning their cash holdings with the expected withdrawal of old Naira notes in the weeks ahead.
Some banks are already reporting rising cash deposits though it was not yet clear the sources of those deposits.
There is also no sign of rush or banking hall surge as would have expected if the experience of 39 years ago when the last Naira change happened, was anything to go by.
Bank officials told Vanguard MoneyDigest that such surge may not happen given the new banking environment which is now heavy on cashless transaction. They expect more transactions to be happening on electronic channels as the process of implementing the currency redesign gathers momentum in the weeks ahead.
The bankers told Vanguard MoneyDigest that they do not expect much challenge with the fears that criminals would besiege the banking halls with large volume of cash they had kept away due to the nature of the source of the money.
According to them their job is simply to take all the monies and put proper record behind the transactions in readiness for full disclosures whenever it is required of them.
Buhari, in a statement by his Senior Special Assistant on Media and Publicity, Mallam Garba Shehu, had said he is convinced the nation will gain a lot by redesigning the currency.
Speaking in a Hausa radio interview with Halilu Ahmed Getso and Kamaluddeen Sani Shawai, Buhari said reasons given by the CBN convinced him that the economy stands to benefit from a reduction in inflation, currency counterfeiting and the excess cash in circulation.
He said he did not consider the period of three months for the change to the new notes as being short.
According to him, “people with illicit money buried under the soil will have a challenge with this, but, workers, businesses with legitimate incomes will face no difficulties at all.”
But the Bank Customers Association of Nigeria, BCAN, feels the time frame for withdrawing the old notes was too short. They have, therefore, appealed to the CBN to extend the deadline for returning of the old notes.
Speaking to Vanguard MoneyDigest last week, the President of BCAN, Dr. Uju Ogubunka said: “Redesigning Naira, from time to time, and as the need arises, is the responsibility and within the powers of the CBN.
“The reasons adduced by CBN are genuine and are supported by facts we all know. So, we in BCAN have no problem with the intention/plan of CBN. All we demand is that the exercise should be carried out at little or no inconvenience to the banking public and the generality of Nigerians. BCAN members will cooperate.
“However, timeframe for the exercise should be scrutinized to ensure it is adequate.
“All those who will render services in the implementation should consider it a serious national assignment and thus be very, very dutiful.
“CBN should try to foresee likely challenges that may arise and create response options. There is hardly any doubt that it will be successful.”
Further insight from CBN
The CBN, reacting to the position of the Finance Minister, had said that due process was followed in arriving at the Naira redesign project, including obtaining the approval of President Muhammadu Buhari.
Also, the apex bank doused concerns about the cost of printing the new notes, saying they will come at no outrageous cost, printed in the country and within the budget of the apex bank.
According to a statement from the CBN’s spokesman, Mr Osita Nwanisobi, the apex bank stressed that the CBN remains a very thorough institution that follows due process in its policy actions.
According to Nwanisobi, 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, Major General Muhammadu Buhari (retd.) in writing to redesign, produce, release and circulate new series of N200, N500, and N1,000 banknotes.
However, urging Nigerians to support the currency redesign project, he said it is in the overall interest of Nigerians, and that some persons were hoarding significant sums of banknotes outside the vaults of commercial banks. This trend, he said, should not be encouraged by anyone who means well for the country.
Meanwhile, economists and financial experts have indicated that if managed properly, the currency redesign is a good policy to pursue.
David Adonri, Vice-Chairman, Highcap Securities, while affirming the independence of the CBN in taking the currency change decision, also supported the reasons given by the apex bank in taking the decision.
He stated: “In this particular instance, the reasons for changing of currency by CBN are justifiable but there is no reason for not carrying the Finance Ministry along for them to be prepared for the change. Where the monetary authority is independent, which we clamour for, the Central Bank does not even require permission from the President to undertake any monetary action.
“Independence of a central bank is essential so that monetary policy will not be influenced by political expediency.”
Why Naira redesign is necessary — Moghalu
Commenting on the issue, a former Deputy Governor of the CBN, Kingsley Moghalu, said that the decision of the CBN to redesign the naira notes is a ‘necessary step’ for the good of the economy.
Moghalu explained that the CBN is trying to gain control over the money supply in the economy.
“I fully support the Central Bank’s redesign of the Naira,” he said. “If 80% 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 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.”
Prof Uche Uwaleke of Nasarawa State University argued that “the decision to replace some naira denominations with new ones will be positive for the economy in the medium to long term. 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. Despite the huge cost involved in changing currency notes, I think it’s time to sanitise the system especially now that electioneering activities have 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.”