It is important for the Central Bank of Nigeria (CBN) to redesign the country’s currency to tackle the challenge of huge volume of cash that is outside the banking sector, Dr Boniface Chizea, an economist and Managing Consultant, BIC Consultancy Services Ltd, has stated.
The Governor of the CBN, Dr Godwin Emefiele, on Wednesday announced that Nigeria would redesign N1,000, N500 and N200 notes and they would be introduced into circulation on December 15, 2022.
Emefiele who spoke at a press briefing in Abuja to announce the new notes, said the existing notes and the new notes will be used until January 31.
The Governor of the apex bank rxpained that the move is to mopped the huge volume of the country;s currency which are outside the banking sector and address the challenge of counterfeit notes that have looded the country.
He noted that only 85% of the country’s currency is within the banking sector, which is having adverse impact on the economy.
Dr Chizea argued having 85% of the country’s currency without the banking sector has hampering CBN’s monetary policies ineffective.
“Monetary policis can only reach monies that are within the system. That is the basic problem. The Central Bank will be bringing out monetary policies but these policies would not go far enough because there are too much money outside the banking policies”: he argued.
‘”As you all may be aware, currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2 (b) of the CBN Act 2007. Indeed, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank,” Dr Emefiele said.
“In recent times, however, currency management has faced several daunting challenges that have continued to grow in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country. These challenges primarily include:
*Significant hoarding of banknotes by members of the public, with statistics showing that over 80 percent of currency in circulation is outside the vaults of commercial banks;
*Worsening shortage of clean and fit banknotes with the attendant negative perception of the CBN and increased risk to financial stability;
*Increasing ease and risk of counterfeiting evidenced by several security reports.”
Speaking further, he said, “Indeed, recent development in photographic technology and advancements in printing devices have made counterfeiting relatively easier. In recent years, the CBN has recorded significantly higher rates of counterfeiting especially at the higher denominations of N500 and N1,000 banknotes.
“Although global best practice is for central banks to redesign, produce and circulate new local legal tender every 5–8 years, the Naira has not been redesigned in the last 20 years.
“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 N100, N200, N500, and N1,000 levels.
“In line with this approval, we have finalized arrangements for the new currency to begin circulation from December 15, 2022. The new and existing currencies shall remain legal tender and circulate together until January 31, 2023, when the existing currencies shall seize to be legal tender.
“Accordingly, all Deposit Money Banks currently holding the existing denominations of the currency may begin returning these notes back to the CBN effective immediately. The newly designed currency will be released to the banks in the order of First-come-First-serve basis.
“Customers of banks are enjoined to begin paying into their bank accounts the existing currency to enable them to withdraw the new banknotes once circulation begins in mid-December 2022. All banks are therefore expected to keep open, their currency processing centers from Monday to Saturday so as to accommodate all cash that will be returned by their customers.
“For the purpose of this transition from existing to new notes, bank charges for cash deposits are hereby suspended with immediate effect. Therefore, DMBs are to note that no bank customer shall bear any charges for cash returned/paid into their accounts.
“Members of the public are to please note that the present notes remain legal tender and should not be rejected as a means of exchange for the purchase of goods and services.
“We would like to use this opportunity to reassure the general 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.”