Naira redesign: Is Nigeria ready for cashless economy?

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There have been mixed actions to the announcement by the Central Bank of Nigeria (CBN) to introduce redesigned N200, N500, and N1000, BENJAMIN UMUTEME looks at what Nigerians have been saying.

Since the announcement by the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, late October about plans to redesign the three highest denominations of the naira, there have been arguments from Nigerians about the policy.

In the announcement, the CBN govenor had said that the move was aimed at controlling the currency in circulation, curb counterfeiting ransom payment to kidnappers and terrorists.

Emefiele said the action was to protect the integrity of the naira, the efficiency of its supply, and it’s efficacy in the conduct of monetary policy.

He, however, noted that in recent times, the integrity of the naira has been questioned especially by the actions of Nigerians.

“More specifically, as at the end of September 2022, available data at the CBN indicate that N2.73 trillion out of the N3.23 trillion 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 N1.46tn in December 2015 to N3.23tn as at September 2022. I must say that this is a very worrisome trend that cannot continue to be allowed.

“Also, in view of the prevailing level of security situation in the country, the CBN is convinced that the incident of terrorism and kidnapping will be minimised as access to large volume of money outside the banking used as source of funds for ransom payment will begin to dry up.

“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.”

One thing is obvious; the redesigned currency is part of efforts by the regulator to drive a cashless economy.

The argument by many against the implementation of the policy by the apex bank has been that the timing was wrong, however, others say, there was no perfect time to implement any policy.

According to those against the new policy, the huge amount that would be used to fund the project could have been plunged into other sectors that needed urgent government intervention.

Considering that the global best practice is for CBN globally to redesign currency every 8-10 years the policy may be overdue. The last time, the naira was redesigned was 20 years ago.

‘N2.7trn outside bank vaults unhealthy for economy’

When the CBN Governor said N2.73 trillion out of the N3.23 trillion in circulation was outside bank vault, not many understood the import of the statement.

For Enobong Tom, “3.23 trillion and 2.73 trillion outside banking sector is bad news for any sound economic planning. Mopping up the naira in circulation through redesigning, though coming with pains and tight control over banks withdrawals, will deal a mortal blow to kidnapping ransom payments. Meaningful developments can only be achieved in a secure environment.”

Similarly, Gbenga Ojewoye said, “One of the reason why the finance minister was trying to undermined the process, however, all the money printed during the Mungo Park and Richard Landers era that is now visible in the circulation should be rejected as well.

“Our past and present leaders are the reason why the nation is not moving forward, a lot of notes printed over 20 years ago are now in circulation. Majority of them steal in Nigeria to build in another country, while they abandoned their own country undeveloped.

“Some of them will be distributing the money now. We have economic crises simply because money in circulation is more than the money that pass through the bank.”

‘…Way to go’

The launch of the eNaira and now the Naira redesign is part of a larger picture: a cashless Nigeria economy. Speaking on the redesign of the Naira, Awunuzyl Asogya, a situation where there will be less use of cash is the way to go.

According to him, “Cashless economy is the way out. If the deposit old billions and allow to withdraw billions in cash, they will still store the new naira notes to decay. That’s same old way.”

On his part Umar Salisu said, “Our banks are the only ones to help and save our economy by maintaining the banking policy on deposition and cashing from the customers. Let every Nigerians have an account, so that, the using of cash will largely reduce.

“Two days ago I went to the fura da nono seller buying only N200 own and said he didn’t have a N500 change. To my surprise, the guy was with POS. I gave him my debit card and he cashed his N200. He was very appreciative.”

In the same vein, Augustine Chidi, has this to say, “After depositing these bales of cash, the government must restrict and come up with a law defining the limit of cash an individual or co-operate body can withdraw from the bank. This cashless policy is the way to go. It will help checkmate these criminals hoarding cash.”

Circumventing the process

Some Nigerians believe that those who have stashed millions and billions in their houses will find ways to circumvent the process.

Chibuzor Anyanwu said: “What the EFCC fail to understand is that those disgruntled politicians or thief who have stashed stolen money may decide to share the money in bids among their stewards and loyalist to help them go make deposit in badges and in different bank branch without been notice….any deposit that the money is more than 10 yrs old the year of printing and above 2 million should be interrogated.

While Dauda Garuba opined, “Which the way Nigeria? I really think we will be better off if we cancel N200, N500 and N1000 bills and make N100 the highest bill. Let’s all go electronic and leave those who are unable to join us to carry N100 bills in bags and bullion vans.

“We needn’t clamp down on BDCs. As legitimately registered businesses, all we need do is to regulate their operations and insist that they document transactions by customers and request for means of identification from them so that regular checks can be conducted on their operations.

“Where transactions are suspected, the relevant authorities would be in a position to invite such customers to explain the source of their foreign currencies. By the sheer mistake we’ve made with the ongoing clamp down, the BDC guys have gone underground and the Naira is up for free fall.”

Beyond naira redesign

While opinions are divided on the n aira redesign as a panacea to its competitiveness, Rachael Mart-Adun, maintained that lack of productivity was fuelling the demand for the greenback thereby putting pressures on the country’s scarce foreign exchange.

“Until we begin to look inwards by producing and consuming our products the demand for dollar will keep increasing…. Aside the cash being returned to the banks more naira notes are being converted to dollars daily hence the high exchange rate…

“The Politicians are keeping the BDCs in business by always providing dollars for them. CBN stopped selling dollars to BDCs over a year ago but they keep getting to sell by other rogue means. For those calling for the unification of exchange; this is beyond CBN as they don’t have enough fx to sell through the banks so the demand will always outweigh the supply from the Apex bank hence driving the scarcity that fuels the hike in exchange rate,” she said.

For Abdulaziz Imran Abdulatif, the continuous slide in the value of the naira was unfortunate but not surprising.

He said that “Beyond those trying to circumvent the central bank’s currency redesign project by offloading naira cash for hard currency in the black market, which is putting negative immediate pressure on the value of the naira, the trend has been longstanding and fuelled by negative fundamentals.

“The most immediate damage is that it stokes inflation, high prices reduce the purchasing power of citizens and is making more millions of Nigerians poor.

“The fundamentals, an unproductive, oil revenue reliant import economy, cannot be reversed easily or in the short term because the central bank’s forex policy is statist, reflecting the preferences of President Buhari’s government. This is limiting forex supply into the economy through foreign investment.

“On top of this is the massive theft of crude oil that is denying the government of forex revenues. The next chapter of the story of the Naira, and Nigeria’s economy more broadly, will have to be written from May 2023 when a new government should come into office after the elections in February 2023.

“The philosophical outlook of that government, whether it’s a market-driven economy or a statist stance, or something in between, and the government’s competence in managing its philosophical bent to the benefit of Nigerians, will determine whether investor confidence can return to the Nigerian economy and so improve forex supply.

“It will also determine whenever the Nigerian economy can become truly productive and export a diversified base of value added goods, which really is the long term solution to the naira’s woes. The incoming government will also need a very competent and experienced economic management team. We haven’t had that in recent years,” he added.

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