The decision by the Central Bank of Nigeria (CBN) to redesign some new naira notes is not an economic priority and will not solve the nation’s monetary policy challenges. There are so many things to focus on at the moment and not redesigning of naira notes. This will affect the economy and cause inflation in the nation.
I disagree with the CBN governor on the two main factors raised by him on why the naira notes are to be redesigned. Nigeria’s inflation is beyond monetary policy and it is structural in nature. Money supply is a simple economic term. If there is too much money chasing a few goods, there will be inflation. But the problem of Nigeria’s inflation is not a monetary problem, it is structural. Changing the money or reducing the money supply will not change anything because we have a large population and a very weak production capacity. Industries have been closing down and no electricity. The price of diesel that you use as an alternative for your industry has skyrocketed to almost N1000 per litre. How can you produce? The argument that the policy will disrupt the hoarding of naira by criminals such as bandits, kidnappers, and terrorists; who told you the criminals are keeping their money in naira? This criminality you see — this banditry, armed robbery, kidnapping, Boko Haram is an organised international crime. Do you think ordinary Fulani illiterates can kidnap, organise ransom and get away with it? There is a better brain behind them. That is why the value of the naira continues to fall. People buy dollars not necessarily to import but as a store of value and as a means to keep the proceeds of criminality. Who is keeping naira? Government is beating a dead horse.
Introducing this new policy, there will be control of supply of money. This means that consumption will reduce. If consumption declines, production will reduce and employment will reduce as a result of laying off. This means you are mortgaging effective demand for autonomous consumption. That is a catastrophe and will lead to criminality. Those who advised the president and the CBN governor to take such action were being mischievous considering that the nation is at a transition point. In the short run, the policy will have a negative impact on rural entrepreneurs and business people who have been involved in a cash-based economy. It will also affect politicians, who may be stockpiling cash to distribute to supporters.
This is a welcome development. It will help the economy. The people that will be affected are all those crooks, corrupt and dubious politicians and other elites stocking monies in their house stores, empty water tanks and soakaways, will have no choice but to go and deposit those cash in the banks or else they will lose it all when the deadline for the old naira deposit passes.
The decision by the Central Bank to redesign certain currency, particularly the higher denominations susceptible to hoarding by dubious and thieving politicians to use for vote buying in the forthcoming elections should be welcomed news to all well-meaning Nigerians. Often Nigerians complain that institutions fail to do their jobs to foster credibility in the government and yet when the CBN did just that but there doesn’t seem to be a lot of enthusiasm among the people. That’s strange. Any Nigerian who has nothing to hide should welcome this policy. And I must add that the Finance Minister’s claim of ignorance about the policy is simply ridiculous. There’s a difference between not being informed about the policy and not agreeing to it, and it appears what we have here is the latter. The question therefore is why didn’t she approve of the policy?
It’s a welcome development and a big leap to the fight against politicians expensive spending during and outside election periods. It will also work against many criminals and politicians who degrade our currency by hoarding them. Another issue is the timeliness. Naira is poised to suffer more in the coming weeks if they don’t get their acts together. The result is ordinary Nigerian bears more pain.
The non-harmonious working of this government shows ineptitude at the highest level. I do not agree that it is right to just wake up one day and decide to change the naira notes. I believe anything that has to do with the national economy ought to be debated exhaustively before doing it. It is also coming at a wrong time when there is no money in the government coffers. It cost a lot of money to print naira notes. Who funds it? If it has not been printed I think it should be on hold for now.
This is a welcome development and such measures should be taken more frequently. When central banks do this, they try to pull in monies people are hiding; illegal money, corruption money, kidnapping money. Nigeria has managed to become a hub for these kinds of illegalities. There are many people sitting on billions in naira, and even in dollars. The CBN should also see how it can pull in the dollars.
This is a good move by CBN governor. Naira redesign will not undermine our economy; it will only help in strengthening the naira both at the official and parallel markets. I know it will bring doom and gloom to illegal hoarders of naira currency. There is never a good time for policies of this type because the country needs to get it done and move ahead for our economy be get better. I must say that the disagreement between the Minister of Finance and CBN governor over the matter is not surprising and also occurs in developed countries. It is just that the way it has played out in public is rather unfortunate. The basic functions of the CBN cannot be carried out without the Ministry of Finance, which is in charge of the national budget and if for any reason the CBN works without the required alignment with the fiscal authority and other Ministries, Departments and Agencies, it would only amount to winning economic battle while losing economic warfare. Thus, the CBN is not expected to make policy decisions that affect the economy without input from the Ministry of Finance.
I think the decision to replace some naira denominations with new ones will be positive for the economy in the medium to long term. 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. Despite the huge cost involved in changing currency notes, I think it’s time to sanitise the system, especially now that electioneering activities have kicked off. However, I think the deadline of January 31, 2023 is short in view of the number of naira denominations involved from N200 to N1,000. The CBN may consider extending it with time.
I think it is just a legacy for the central bank governor. Countries change or update their currencies all the time and it is just refreshing mainly to fight counterfeiting and to incorporate new tech or security features in notes. Minus the administrative hiccups and stress, it is just another exercise.
The decision will be positive for the economy in the medium to long term. The measure would go a long way to ensure that the naira in circulation outside the banking system are brought into the banking system. The measure would also provide enough liquidity for banks, and more money for the banks to lend. It does not amount to demonetisation of big currency notes often carried out by central banks to curb black money and corruption. Perhaps more importantly, with increased currency in circulation now in the vault of banks, I expect to see improvement in monetary policy transmission.
Redesigning the naira is not the most important problem facing the economy in a time like this where there is double-digit inflation, insecurity, dwindling reserves and pains on Nigeria. The only thing the government is thinking is how to redesign the currency and giving a deadline of December. Why the urgency if not to loot money for election? Who else spends naira aside Nigerians? And what value is redesigning of naira bringing at this point, and we may even go to borrow dollars to print the naira. Is the cost budgeted for in 2022 budget? This is sheer wickedness.
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