•N1,000, N500, N200 to wear new look
•Apex bank plans N3.23tr cash mop up in 100 days
NAIRA notes are to get new features from December 15, the Central Bank of Nigeria (CBN) said yesterday.
The CBN Governor, Godwin Emefiele, told reporters that N1000, N500 and N200 denominations will wear new looks as part of measures to mop excess cash from circulation and tackle inflation.
Emefiele, who addressed a news conference in Abuja, said the apex bank will start issuing the redesigned notes from December 15 and that existing bills will cease to be legal tenders by January 31, 2023.
According to him, President Muhammadu Buhari has approved the redesign, production and circulation of new banknotes.
He said: “The CBN has finalised arrangements for the new currency to begin circulation from December 15, 2022. The new and existing currency shall remain legal tenders and circulate together until January 31, 2023 when the existing currencies shall seize to be legal tender.”
Emefiele said the bank also plans to mop up the N3.23 trillion from outside the banking system back into bank vaults in 100 days.
The CBN boss said: “As at September 2022, we had N3.23 trillion in circulation out of that, N2.73 trillion is outside the vault of the bank. So, first of all, what we want to do is to mop all this N3.23 trillion back into the CBN and take control of money supply and we will begin to see how this will rein in inflation no doubt this will have positive impact on inflation.
“On timeline for mopping up, I will say today (yesterday) is December 26, so, we have about six to seven days to the end of October till January 31, 2023, that is almost about 100 days to mop up the old currency out of circulation back to the vault.”
Going forward, the CBN has ordered all Deposit Money Banks (DMB) currently holding the existing denominations of the currency to “begin returning these notes back to the CBN effective immediately”.
“The newly designed currency will be released to the banks on first-come-first-serve basis”, he said.
Emefiele urged bank customers “to begin paying into their bank accounts the existing currency to enable them withdraw the new banknotes once circulation begins in mid-December 2022”.
He said the commercial banks have been told “to open, their currency processing centers from Monday to Saturday so as to accommodate all cash that will be returned by their customers”.
For as long as the transition from the old to new notes would last, Emefiele announced the suspension of charges for cash deposits.
He said: “Bank charges 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.”
Emefiele, however, clarified that what we have right now is if you pay N150,000 into your account, you do not incur charges. But, if you pay more than N150,000 you will pay the charges, which means it does not limit you from paying in whether its N10 million or N1 billion into your account.
He went on to say that “the only thing is that it says you will pay for cash processing. So, what we’ve done by this is to say even if you want to pay N1 billion or N10 billion into your account you are not going to be charged any money.
“The present notes remain legal tender and should not be rejected as a means of exchange for purchase of goods and services.”
On the motive behind the redesigning of the naira notes, Emefiele said the step will significantly curb hoarding of banknotes by members of the public.
Tendering vital statistics, Emefiele noted that more than 80 per cent of the cash in circulation are outside the vaults of commercial banks.
Besides, he said the rising shortage of clean banknotes with attendant negative perception of the CBN and increased risk to financial stability, informed the new measures.
“He said: “The increasing ease and risk of counterfeiting evidenced by several security reports. Development 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.
“Available data at the CBN indicate that N2.73 trillion out of the N3.23 trillion currency in circulation was outside the vault of commercial banks across the country and supposedly held by members of the public.
“The currency in circulation has more than doubled since 2015 rising from N1.46 trillion in December 2015 to N3.23 trillion as at September 2022. I must say that this is a worrisome trend that cannot continue to be allowed.”
Pointing out that the steps being taken are in tandem with global best practice, he said central banks have the mandate to redesign, produce and circulate new local legal tender every 5–8 years.
The Federal Reserve of the United States (U.S.) redesigned the $100 bill on April 21, 2010, but because of printing problems, the currency did not enter circulation until October 8, 2013.
In the United Kingdom, plans are afoot to introduce new notes bearing the image of the king after the demise of Queen Elizabeth ll.
In the case of Nigeria, Emefiele said “our existing series of bank note, the Naira has not been redesigned in the last 20 years”.
Acknowledging the challenges facing the naira, the CBN governor said: “The CBN remains relatively determined to achieve the objective of its mandate as enshrined in section 2(b) of the CBN act of 2007 to ensure a strong and effective legal tender, it is therefore no longer tenable to continue with business as usual especially given its continually evolving circumstances that could impeach the optimum performance of our naira.”
He added: “The redesign of the currency will help deepen our drive to ensure cashless economy and will be complimented by the minting of our eNaira, these will further reign in the currency outside the banking system into the banking system thereby making monitory policy more efficacious.
“The CBN is convinced that the incident of terrorism and kidnaping will be minimised as access to the large volume of money outside the banking system used as source of funds for ransom events will begin to dry up”.
Asked if the decision will impact the value of the naira, Emefiele said: “I do not want to just easily admit that it will happen but we suspect that this will happen and that it will positively impact on the value of the naira.”
Experts laud measures
THE Centre Bank of Nigeria (CBN) was yesterday applauded over its plan to redesign some banknotes.
A former Executive Director at Keystone Bank, Richard Obire, described as germane the apex bank’s explanation that new naira bills will reduce currency counterfeiting.
Obire also noted that the measure will enable the CBN to take proper account of the volume of money in circulation in an election year.
He said: “The CBN wants to sterilize cash with people who have earned money illegally and may find it difficult to approach the banks to deposit their funds.
“The apex bank wants to fully control money supply and check rising inflation. It is also an opportunity to entrench cash-less economy.”
Other analysts argue that the CBN has a job to ensure that banknotes are secure, gain acceptability and confidence of the people as a legal tender.
He said the move by the apex bank will make the notes harder to copy, and that the designs could appear better and cheaper with reduced number of colours in the proposed bills.
Professor Uche Uwaleke of Nasarawa State University, said: “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. It may have the effect of reducing speculative attacks on the naira in the parallel market.”
According to him, the Financial Intelligence Unit (FIU) should keep surveillance for huge deposits as a way of monitoring illegal transactions.
Uwaleke argued: “Despite the huge cost involved in changing currency notes, I think it’s time to sanitize the system especially now that electioneering activities have kicked off.
“However, the January 31, 2023 deadline is short in view of the number of naira denominations involved, from N100 to N1000. The CBN may consider extending it with time.”
The Managing Director/Chief Executive Officer (CEO), SD&D Capital Management Limited, Mr. Gbolade Idakolo, told The Nation: “The reasons given for redesigning the naira notes regarding efforts to trace ransom payments or curb counterfeiting may be germane but it’s attendant cost could further increase inflationary pressures on the economy. This decision will not positively lift the economy.”