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In an apparent move to tackle vote-buying and control the amount of money in circulation, the Central Bank of Nigeria (CBN) yesterday announced a redesign of the currency in the variation of N200, N500 and N1,000.
But, according to report by ThisDay, beyond the reasons adduced are the far-reaching implications of the effects of the dramatic move that took the business community and the entire nation by surprise.
For once, those who have starched huge cash ahead of the 2023 elections for vote-buying and prosecution of their campaigns would be forced to bring those cash out and many of them would be forced to explain how they came about the monies to security operatives. The Economic and Financial Crimes Commission, EFCC, has already signalled its intention to move against currency hoarders who maybe forced to bring out their huge stash of cash into the banks.
CBN Governor, Mr. Godwin Emefiele, who disclosed the resolve by the apex bank to redesign the banknotes at a media briefing in Abuja, said the redesigning of the notes would affect the N200, N500, and N1, 000 denominations.
This was just as the Executive Chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa, applauded the move by the CBN, describing it as “a well-considered and timely response” to the challenge of currency management, which had negatively impacted the country’s monetary policy and security imperatives.
Emefiele, who pointed out that the change was sequel to the approval of President Muhammadu Buhari, said circulation of the new banknotes would commence on December 15, 2022. He said 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.
Emefiele said 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.
Although, to maintain healthy currency regime, central banks are required to redesign, produce, and circulate new local legal tender every five to eight years, 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. Also, on September 30, 2009, the redesigned N50, N10 and N5 banknotes were converted to polymer substrate following the successful performance of the N20 (polymer) banknote. Finally, the CBN, as part of its contribution towards the celebration of the 50th anniversary of Nigeria’s Independence and 100 years of its existence as a nation, had issued the N50 Commemorative polymer banknote on September 29, 2010; and the N100 Commemorative banknote on December 19, 2014.
As a result, he said all banks currently holding the existing denominations of the currency might begin returning the notes to the CBN immediately, adding that the newly designed currency would be released to the banks on a first come, first served basis.
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.
The CBN governor also said that for the purpose of the transition from existing to new notes, bank charges for cash deposits had been suspended with immediate effect. He added that no bank customer should bear any charges for cash returned/paid into their accounts.
Emefiele emphasised that in the meantime, the present notes remained legal tender and should not be rejected as a means of exchange for the purchase of goods and services. He reassured the public that the CBN would continue to monitor both the financial system, in particular, and the economy, in general, and always act in good faith for the achievement of the bank’s objectives and the betterment of the country.
Further providing the rationale for the apex bank’s decision, Emefiele said there had been concerns about the management of the current series of banknotes as well as currency in circulation, particularly those outside the banking system in the country. He said currency management remained a key function of the CBN, as enshrined in Section 2 (b) of the CBN Act 2007.
He stressed that the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy were some of the hallmarks of a great central bank.
Emefiele pointed out that in recent times, currency management had faced several daunting challenges that had continued to grow in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country. He said recent developments in photographic technology and advancements in printing devices had also made counterfeiting relatively easier, stressing that in recent years, the CBN has recorded significantly higher rates of counterfeiting, especially at the denominations of N500 and N1, 000 banknotes.
Emefiele explained, “On the basis of these trends, problems, and facts, and in line with Sections 19, Subsections a and b of the CBN Act 2007, the Management of the CBN sought and obtained the approval of President Muhammadu Buhari to redesign, produce, and circulate new series of banknotes at N200, N500, and N1,000 levels.”
He added, “So first of all, what we want to do is mop up the N3.2 trillion back into the CBN so we can take control of the money supply. Again, this would help to rein inflation and it would have a positive impact on inflation.”
On the concerns for people in rural areas following the currency redesign, Emefiele said, “It would impact on the people in the rural areas, particularly those who do not have bank accounts and that is the reason I said in a session on Tuesday on the anniversary of our eNaira, that we would be introducing a number of tokens where people in the rural areas who don’t have a bank account should be able to conduct banking services without having a bank account.
“However, if you are carrying cash, you can go to the nearest bank branch near you, they will take your cash and open an account for you for the purpose of returning the old naira into the banks’ vaults and then collecting the new naira.”
“But you all must agree that the trend of lots of money in circulation out of the bank vaults is unacceptable, you can imagine, doubling the size of naira in circulation from N1.46 trillion in 2015 to N3.23 trillion in September 2022 is unacceptable and it takes the control of money supply out of the hands of the central bank.”
EFCC Hails CBN, Moves to Clampdown On Currency Hoarders
Reacting to the CBN decision to change banknotes, Bawa, in a statement yesterday said, “The EFCC, the CBN and some other regulators in the financial sector have worked closely in the recent past to determine how best to stabilise the country’s monetary policy environment.
The EFCC chairman called on operators in the Nigerian financial services sector, especially deposit money banks and bureau de change operators, to work within the guidelines provided by the CBN to ensure seamless withdrawal of the old currency.
He warned that EFCC would monitor the process to ensure that unscrupulous players and currency speculators and their cohorts among the BDCs do not undermine the exercise. He also charged banks to be alive to their reporting obligations and not assist unscrupulous customers in laundering suspected proceeds of crimes through their system.
The EFCC boss further pointed out that the objectives, which the CBN sought to achieve with the redesign and reissue of the higher denomination Naira notes, were in tandem with the objectives of the Money Laundering Prevention Prohibition Act 2022, which criminalises the conduct of cash transactions above a certain threshold.
According to Section 2 (1) of the Money Laundering Act 2022, “No person or body corporate shall, except in a transaction through a financial institution, make or accept cash payment of a sum exceeding— (a) N5, 000,000 or its equivalent, in the case of an individual; or (b) N10, 000,000 or its equivalent, in the case of a body corporate.”
Optimistic that the new currency measure would further boost Nigerians’ embrace of banking culture and encourage the acceptance of cashless transactions, the EFCC chairman recalled that the commission had recently taken operational action against currency hoarders in major commercial cities of Nigeria.
Bawa said, “It is, therefore, pertinent to issue this stern warning to bureau de change operators to be wary of currency hoarders who would attempt to seize this opportunity to offload the currencies they had illegally stashed away.”
Noting that currency hoarders readily made their hoard available to criminal enterprise, the EFCC boss stated that the commission will spare no effort to bring to book any financial services operator which ran afoul of extant laws and regulations.
Analysts Urge Financial Intelligence Unit to Monitor Illegitimate Transactions
Commenting on the currency change by the central bank, in an interview with THISDAY, Chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja Branch, Professor Uche Uwaleke, said the decision to replace some naira denominations with new ones would positively impact the economy in the medium to long term.
Uwaleke said though the measure did not amount to de-monetisation of the big currency notes, often carried out by central banks to curb black money and corruption, it would, nonetheless, “go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in.”
He added, “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 January 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.”
In his contribution, Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, said redesigning of the currency was typically carried out as a security measure against counterfeit notes and to get a grip on currency in circulation.
Shelleng said while this exercise might be beneficial in terms of the measure earlier mentioned, it would also come at a huge cost due to consultancy, design, and printing fees.
On his part, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said, “If CBN plans to redesign the naira, they shouldn’t have made it common knowledge until fully done and implemented, then, they would give a period of time for everybody to bank the old design or use the same.
“The benefit of changing the design is that monies starched out in homes and containers will start coming out and heading to the banks. There will be so much money for credit facilities and funding of projects and other attendant benefits.
“The danger of announcing it far before implementation is that individuals stocking this Naira cash will start buying foreign currency to stock instead of depositing the monies in the banks. This may spike the exchange rate to an uncontrollable level.”
Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, stated, “The reasons given for redesigning the naira notes regarding efforts to trace ransom payments or curb counterfeiting may be germane, but its attendant cost could further increase inflationary pressures on the economy.”
Furthermore, Head, Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi, said the CBN action would reduce the amount of money supply in the economy, adding, “Some people that have been keeping money in the house before would bring it to the bank.
Also, people who have corrupt money or people who leave money beyond the period would actually be eroded and that would actually reduce money supply, at least, to an extent.”
Another analyst, who pleaded anonymity, told THISDAY, “I think the policy will have an impact on deposit mobilisation, as most Nigerians turn in their raw cash into the banks.
“It will also induce the adoption of e-payment platforms, as more people will be left with no choice but to adopt digital platforms in a bid not to be caught with old notes. But it’s also important the CBN manages this process well.”
In a related development, the CBN yesterday continued its sensitisation on how to utilise eNaira at the University of Lagos, in collaboration with Global Info Swift Consulting Limited, where it on-boarded a good number of students as well as lecturers on the eNaira platform.
The bank revealed that it was working with entities, like payment service providers, Remita and IMTOs, to fast-track international transactions.
Speaking at the event, Director, Information Technology Department, CBN/Co-ordinator Technical Working Committee eNaira Secretariat, Hajiya Rakiya Mohammed, noted that the apex bank targeted students due to the fact that they were more in tune with technology.
Mohammed, who was represented by the IT Officer at CBN, Dr. Khalipha Nuhu, said the apex bank had been engaging a number of organisations, groups, institutions, and students. She said part of the objectives of the eNaira was to bring everyone on board.
Mohammed said, “We are currently working with different entities, like payment service providers, Remita IMTOs, and as it is now, we are currently in the stage where we are trying to integrate with IMTOs. Through your eNaira wallet, you can do international remittances and payments, but it is not like forex trading, where you do bureau de change activities.”