There are indications that the planned reintroduction and redesigning of the naira, Nigeria’s national currency, was allegedly aimed at checking the excesses of politicians as the general election approaches.
The Central Bank of Nigeria had on October 26, 2022 announced that it would redesign and reintroduce the national currency, the Naira, in December this year.
The announcement must have come to many people by surprise. But the truth remains that the monetary tool is one of the measures by the apex bank to fight corruption, money laundering and related crimes all of which are obstacles to effective implementation of the monetary policy in Nigeria.
In its simplest term, the move is aimed at reducing the currency in circulation which was estimated to be about N12.73 trillion and in the hands of corrupt politicians, illiterate, big-time businessmen and women, especially traders most of whom do not bank their funds as well as those involved in money laundering and currency round tripping using the alternative foreign exchange window popularly called black market
“It is common knowledge that many politicians in Nigeria may have perfected plans of rigging next year’s election through vote buying and they have gone some steps further by stock-pilling the Naira in their houses, offices and other hidden places waiting for the day of election.
“Even senior civil servants and top military officers do the same. Recent incidents in the country give credence to this statement.
“Hence, these set of people will definitely not find the CBN action palatable,” an Abuja-based economic analyst told BusinessDay.
He further wondered, “For instance, how would you pay in N2-3 billion Naira cash into the bank in three months (November 2022 to January, 2023) without breaching the Money laundering Act and attracting the attention of anti-corruption agencies especially the Economic and Financial Crimes Commission (EFCC)?
“On the other hand, the high rate of foreign exchange which at the parallel market traded (N745/$1) on 27th October, 2022 has made it possible for many people to have huge local currency at their disposal to the detriment of the economy.”
Announcing the decision on Wednesday, Governor of the Central Bank of Nigeria, Godwin Emefiele said the action was to stop the hoarding of the local currency.
He said by January 2023 the current denominations of the Naira namely; N100, N200, N500, and N1000 would cease to be legal tender in the country.
He further stated that the decision has already been ratified by the President and Commander-in-Chief of the Armed Forces, Muhammadu Buhari.
But this is not the first time Buhari is approving such action by the apex bank. In January 1984, a young Major General Muhammadu Buhari was the Head of State of the Federal Republic of Nigeria. On 31 December 1983, a group of senior military officers toppled the civilian government led by President Shehu Shagari and they invited Buhari who was the General Officer Commanding the 3rd Armoured Division of the Nigerian Army with operational headquarters in Jos, Plateau State to take over the reins of governance and he had announced a series of measures to cleanse the country of corrupt practices.
One of such measures was the promulgation of a military decree empowering the Central Bank of Nigeria to redesign the national currency- the Naira. Many Nigerians and foreigners became victims of that decision as they lost huge sums of money in the process due mainly to their inability to meet the deadline.
According to Emefiele, CBN’s efforts in managing the currency 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 are outside the vaults of commercial banks; worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability, and increasing ease and risk of counterfeiting evidenced by several security reports.
Furthermore, recent developments in photographic technology and advancements in printing devices have made counterfeiting relatively easier. In recent years, he said, 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 finalised 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,” he explained.
Bank customers were enjoined to begin paying into their bank accounts the existing currency to enable them 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.
However, “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 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,” Emefiele said.
Indeed, the change in the design of the national currency is an anti-corruption measure and will contribute substantially to stopping politicians from using large sums of money they are planning to deploy in the forthcoming general election to influence and compromise voters.
“Federal Government should be commended for taking this far-reaching, comprehensive, and bold initiative to revamp the national currency and stem trafficking and hoarding of the national currency,” an analyst said on condition of anonymity.
A vocal and popular Lagos Senior Advocate of Nigeria (SAN) on Saturday said that the Finance Ministry was merely manifesting ignorance by saying it was not carried along by the CBN, since it did not have the brief Emefiele had from the President.
Reacting to the claims by the Minister of Finance, Budget and National Planning, Zainab Ahmad that her ministry was not carried along in the proposed change of notes, the CBN insisted it followed the law and due process to carry out the planned redesign of new Naira notes, which it said is 12 years overdue.
Osita Nwanisobi, CBN spokesperson, said in Abuja weekend that the apex bank was surprised at the minister’s claim, insisting that the CBN remains a very thorough institution that follows due process in its policy actions.
Nwanisobi maintained that 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 President Muhammadu Buhari in writing to redesign, produce, release and circulate new series of N200, N500, and N1,000 banknotes.
He urged Nigerians to support the currency redesign project, saying that it was in the overall interest of Nigerians.
He confirmed that some persons were hoarding significant sums of banknotes outside the vaults of commercial banks.