Planned Naira redesign: CBN has my backing – Buhari

By Ukpono Ukpong, and Motolani Oseni

President Muhammadu Buhari yesterday said that the decision of the Central Bank of Nigeria (CBN) to launch new designs and replace high value Naira notes had his support and is convinced that the nation will gain a lot by doing so.

Speaking in a Hausa radio interview which is scheduled to be aired Wednesday Morning on Tambari TV on Nilesat, President Buhari said 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.

He said he did not consider the period of three months for the change to the new notes as being short.

”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.”

In the interview, the President also addressed issues of food security and national security, among others.

Meanwhile, in a swift response to the claims by the Minister of Finance, Budget and National Planning, Zainab Ahmad, that her ministry was not carried along in the ongoing process of redesigning three series of the Naira, the Central Bank of Nigeria (CBN), over the weekend explained various political, security and economic benefits of the policy to the country and her citizens.

This is even as the apex bank insisted that it followed the law and due process to carry out the exercise, noting that the move has been 12 years due.

The Daily Times had since last week reported that Nigeria’s apex Bank Governor, Godwin Emefiele, announced that the bank would release re-designed 100, N200, 500, and 1,000 notes by December 15, 2022, a development which has been generating mixed reactions across the country.

However, while speaking during a special press briefing in Abuja at the weekend, Emefiele gave reasons for the move, which he said was targeted at controlling currency in circulation as well as curbing counterfeit currency and ransom payments to kidnappers and terrorists.

According to him, the integrity of a local legal tender, the efficiency of its supply, and its efficacy in the conduct of monetary policy are some of the hallmarks of a great central bank.

He 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.

“More specifically, as at the end of September 2022, available data at the CBN indicate that N2.73trillion out of the N3.23trillion currency in circulation was outside the vaults of commercial banks across the country, and supposedly held by members of the public. Evidently, currency in circulation has more than doubled since 2015, rising from N1.46trillion in December 2015 to N3.23trillion as of September 2022. I must say that this is a very worrisome trend that cannot continue to be allowed.”

Speaking further on the benefits of the policy, he noted that it would help curb ransom payment, and due to the prevailing level of the security situation in the country, the CBN is convinced that the incident of terrorism and kidnapping will be minimised as access to a large volume of money outside the banking used as a source of funds for ransom payment will begin to dry up.

Identifying more reasons that necessitated the re-designing of naira notes, Emefiele said: “The challenges included: significant hoarding of banknotes by members of the public; worsening shortage of clean and fit banknotes with an attendant negative perception of the CBN and increased risk to financial stability; and increasing ease and risk of counterfeiting evidenced by several security reports.

“Indeed, recent developments 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”, he added.

The CBN governor further said that the re-designing of the currency would help to drive a cashless economy and it would be complemented by the increased minting of the e-Naira.

In a speech later released to the press, it was noted that the new series of banknotes would be for only N100, N200, N500, and N1, 000 levels.

In an effort to clear of the money being hoarded by Nigerians as soon as possible, he said that existing notes would seize to be regarded as legal tenders by January 31, 2023.

Emefiele further urged Nigerians to proceed to their banks to deposit their naira notes, saying that the deposit fee would be waived for transactions below N150, 000.

Consequently, a statement signed by the CBN Spokesman Mr Osita Nwanisobi, expressed surprise at the minister’s claim, stressing that the CBN remains a very thorough institution.

Nwanisobi said 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 Muhammadu Buhari in writing to redesign, produce, release and circulate new series of N200, N500, and N1,000 banknotes.

The spokesman explained that currency management in the country had faced several escalating challenges which threatened the integrity of the currency, the CBN, and the country.

Nwanisobi added 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.

But industries experts and economists are, however, divided over the change of currency notes being planned by the apex bank.

For instance, Professor of Capital Market and Chairman Chartered Institute of Bankers of Nigeria, Abuja Branch, Prof Uche Uwaleke, said the decision to replace some naira denominations with new ones would be positive for the economy in the medium- to long-term.

He said, “First, 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.

He said despite the huge cost involved in changing currency notes, it was time to sanitise the system, especially as the electioneering activities had kicked off.

On the contrary, the Chief Executive Officer at Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said it was difficult to see any compelling value proposition of the currency redesign idea.

Yusuf said the cost of such an action would be outrageous and disproportionate compared to the expected benefits advanced by the CBN.

“At a time when the government is grappling with high fiscal deficit, debt crisis, severe revenue crisis and underfunding of many government projects and programmes, it is most inappropriate to embark on such a profligate exercise. Currency as a percentage of the money supply is less than seven percent,” he said.

He noted that the exercise had no monetary policy significance, stressing that “it will come with huge logistics costs, and avoidable dislocations to small businesses, most of whom are in the informal sector.”

He further said there were more urgent issues demanding the attention of the CBN, particularly those around the foreign exchange.

“We have issues with liquidity in the foreign exchange market, the depreciating currency, the recent Moody’s downgrade of Nigeria, soaring inflation and many more.

The CBN should save the citizens and the economy from the trauma of this currency redesign. It is a distraction we can do without.”

Meanwhile, the Human Rights Writers Association of Nigeria (HURIWA) has called on President Muhammadu Buhari-led Federal Government to sack Godwin Emefiele over the move to redesign some naira notes.

The group outburst was contained in a statement issued on Saturday by the group’s National Coordinator, Comrade Emmanuel Onwubiko, describing the planned redesign of the banknotes as a money-guzzling gambit that will tumble the value of the naira and further destabilise the economy.

The group consequently called on the National Assembly to move for the impeachment of the apex bank governor as President Muhammadu Buhari has refused to sack him and put an end to Nigeria’s fiscal woes, adding that Emefiele has again proved his incompetence through the sham plan best described as motion without movement.

Reacting to the CBN response to the minister through Osita Nwanisob, HURIWA said, “Nigeria is indeed troubled with a so-disorganized Federal Government to the extent that the Finance Minister now openly disagrees with the CBN governor over the country’s cardinal fiscal policies! No doubt, this portends danger to the nation’s economy and financial management.

“The discordance and embarrassing public spat between Ahmad and Emefiele demonstrate the lack of national planning and inter-agency and inter-ministerial collaboration of top echelons of the regime of President Muhammadu Buhari.

Similarly, in a statement by the Law & Society Magazine, Law Teacher and Legal Practitioner, Dr G.A. Onuoha said redesigning the naira will not positively impact the economy. The statement titled: “The Proposed Introduction of New naira Notes Not an Antidote to the Inflationary Spiral in Nigeria”, disagreed with the CBN Governor.

“To start with, the colour or size of any currency notes does not, in any way affect or improve the value of the currency in circulation. At best, it gives a cosmetic effect on the appearance of the currency notes but in no way improves or adds to the monetary or economic value of the new brand of the same currency.

“In monetary terms, the value of any currency appreciates when there is a sufficient or surplus quantity or amount of goods and services available in the economy such as to grow the economy by creating jobs for the teaming youth and graduate population in the country. Even the not-so-educated section of such society shares in the resultant economic prosperity of a growing or booming economy”, he said.

Also, the Executive Director, Technical of Anchor Insurance Limited, Mr Adebisi Ikuomola, said that he doesn’t see the development having any tangible effect on the economy or strengthening the naira.

“The CBN said that the move is geared towards reducing the volume of naira in circulation, however, I don’t see how that can positively affect the economy or strengthen the naira. The naira is weak in the foreign exchange market and this policy may not turn that around,” Ikuomola said.

In the same vein, analyst and Vice Executive Chairman, HighCap Securities Limited, said: “ I am yet to know CBN’s justification for this action. Several speculations are floating around but the shocking move appears to be an attempt to ascertain the volume of those notes in circulation and probably deal a blow to those dealing illegally in them.

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“If my speculation is wrong, merely redesigning a currency is not likely to change its value. The inflation ravaging the Naira now which is diminishing its value is a result of scarcity of forex, goods, and over the creation of the currency by CBN.”

The cost of redesigning and printing the new notes will be another dent in CBN’s balance sheet which will also deplete the country’s forex reserve. The exercise may just be a costly motion without movement and a futile rescue mission.”