• Sunday, December 10, 2023
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How not to implement policies – Lessons from the naira redesign debacle

There was much relief in the air for Nigerians following the announcement by the Central Bank of Nigeria (CBN) in March 2023 that the older design of the Naira notes remained valid as legal tender till the end of the year.

The CBN had finally bowed following the Supreme Court’s judgment of 3 March 2023, amidst mounted pressure from the public and other stakeholders.

It all started when, in October 2022, CBN, the country’s apex financial regulator, had initially announced that the ₦200, ₦500 and ₦1,000 notes would be redesigned, and consequently, the old notes would cease to be legal tender after 31 December 2022. Certain cash withdrawal limits were also imposed.

One major flaw of the policy was the assumption that a nationwide cash mop-up could be achieved quickly, without anticipating the hardships it would cause for the economy

The CBN hoped that this move would curb counterfeiting and encourage the adoption of digital payment alternatives by going cashless.

Unfortunately, the implementation of the policy instead bred severe scarcity of the redesigned new Naira notes, astronomic failures in digital transactions, slowdown of business activities and sometimes, violent reactions from the public.

What went wrong with the Naira Redesign Policy?

The implementation of the Naira redesign policy was harrowing for Nigerians, with the Centre for the Promotion of Private Enterprise estimating an economic loss of around ₦20 trillion ($43.4 billion) due to the CBN’s cash mop.

Accessing the new but scarce Naira notes was a herculean task, and relying on electronic payment options wasn’t any better, with occasional downtimes, unresolved duplicate transactions and frequent reversals of completed transactions.

One major flaw of the policy was the assumption that a nationwide cash mop-up could be achieved quickly, without anticipating the hardships it would cause for the economy.

While a cashless economy has many benefits, the hammer approach taken in this case proved counter-intuitive. The electronic banking infrastructure that could have cushioned the cash scarcity failed when it mattered most.

The scarcity of new Naira notes caused financial strains, with many forced to purchase legal tender from cash merchants at exorbitant fees. These difficulties undermined the livelihoods of individuals, wreaked havoc on businesses, and decreased confidence in the banking system.

Nigerians have witnessed more successful cashless policies in the past…

Previous successful cashless policies in Nigeria were characterized by steady infusion rather than sudden implementation. For instance, in 2012, a pilot cashless policy was first implemented in Lagos State on 1 January 2012 and later extended to six other federating units of the country on 1 June 2012; in contrast to the current administration’s nationwide implementation.

The objective of the 2012 policy was to reduce cash dependence and encourage electronic payment adoption, by charging processing fees for withdrawals above a free cumulative limit. Unlike the Naira Redesign Policy that occasioned cash scarcity, the 2012 policy ensured cash remained in circulation.

Some best practice recommendations for policy formulation and implementation

The Naira Redesign Policy revealed fundamental gaps in policy formulation and implementation by regulators. There are various evidence-based best practices for policy development which are applicable in a wide range of contexts.

At the core is “stakeholder engagement” – that is, policies should be formulated with input from key stakeholders. Unfortunately, it was reported that the Minister of Finance, Budget and National Planning, as well as the financial institutions, were not properly consulted during the formulation of the policy.

This could explain why banks were not adequately prepared for the increased wave of digital transactions.

Evaluation is another important best practice recommendation for policymakers. It entails assessing the potential impact of a policy on the economy.

Cost-benefit analysis is one such assessment to be done, which helps to make informed decisions by identifying and evaluating the potential costs against the potential benefits of a particular policy in determining whether a policy is worth implementing.

While it is expected that the CBN must have conducted a cost-benefit analysis, the results of the policy suggest otherwise. Policies should be based on substantial data and evidence, rather than assumptions or subjective decisions.

Read also: BusinessDay Policy intervention series, June 2023

Furthermore, policies should be rigorously and closely monitored to assess their effectiveness and to identify areas for improvement – or even to determine when to pull the plug.

This involves setting clear metrics for success and regularly reviewing progress. In this instance, the CBN did not react swiftly even after public disapproval, ensuing economic hardships and the judgment of the Supreme Court.

It took about 75 days for the CBN to reverse the policy, but much of the damage had already been done.


The key lesson here is “measure twice, cut once.” The ‘sudden’ implementation of the Naira Redesign Policy, without adequate stakeholder engagement, cost-benefit analysis, evaluation and monitoring, resulted in severe economic losses and hardships for Nigerians.

Policymakers must adopt best practice recommendations to ensure that policies are effective, evidence-based, and well-implemented.

Policies are critical tools for promoting growth and stability, and their successful implementation is essential for the long-term development of any country.

Fabusiwa and Adeoye are both legal practitioners in Nigeria with similar interests in policy formulation and nation-building.