Naira notes redesign plan runs into ditch
CBN, Ministry Of Finance trade tackles *Nigerians charge National Assembly to halt the wasteful venture
Emeka Okoroanyanwu and Babajide Okeowo
The plan by the Central Bank of Nigeria (CBN) to redesign the Nigerian currency notes of N200, N500 and N1000 has taken off on an acrimonious note as the apex bank and the Federal Ministry of Finance, Budget and National Planning are currently at loggerheads over the project.
Minister of Finance, Zainab Ahmed fired the first salvo last week Friday while appearing before the Senate Committee on Finance to defend the 2023 Budget. She told the committee that the Ministry as the fiscal authority was not carried along nor consulted on the plans to redesign N200, N500 and N1000 naira notes with effect from December 15, 2022.
She said she received information on the new policy just as every other Nigerian, saying that her ministry was not part of the process leading to the formulation and announcement of the policy.
Hear her; “We were not consulted, it was an announcement that we heard, it was said that part of the reason advocated was that it was one of the ways to mop up liquidity to manage inflation. But there are consequences that we are also looking at, what will the consequences be, there will be some benefits, but there will be some challenges.
“And I don’t know whether the monetary authorities have actually looked very closely as to where the consequences are and how they can be mitigated. So, I still advise that you have that discussion with the monetary authorities,” she noted.
She said it was her opinion, as a Nigerian, not as a fiscal authority, reiterating that as the finance ministry and fiscal authority, they were unaware of the policy.
But the CBN in a quick official reply to the Finance Minister’s disclaimer said currency management in the country had faced several escalating challenges which threatened its integrity, the CBN, and the country.
CBN spokesman, Osita Nwanisobi in a statement on Saturday reminded the minister that “every top-rate central bank was committed to safeguarding the integrity of the local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy.”
On the timing of the redesign project, Nwanisobi explained that the CBN had “tarried for too long considering that it had to wait 20 years to carry out a redesign, whereas the standard practice globally was for central banks to redesign, produce and circulate new local legal tender every five to eight years.”
He urged all Nigerians to support the currency redesign project, stressing that “it was in the overall interest of Nigerians.”
Nwanisobi said: “Some persons were hoarding significant sums of banknotes outside the vaults of commercial banks. This trend should not be encouraged by anyone who means well for the country”.
The CBN spokesman assured Nigerians that the currency redesign exercise was purely a central banking exercise and not targeted at any group.
Nwanisobi expressed optimism that the effort will, among other goals, deepen Nigeria’s push to entrench a cashless economy in the face of increased minting of the eNaira.
He said the policy would help to curb the incidents of terrorism and kidnapping due to access of persons to the large volume of money outside the banking system used as a source of funds for ransom payments.
He urged Nigerians to support the Naira redesign project, as it is for the greater good of the economy, insisting that the CBN in redesigning three series of the naira, followed the law and due process to carry out the exercise, which is 12 years due.
He said the CBN remains a very thorough institution that follows due process in its policy actions, adding “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.
Also reacting to the Minister’s outburst at the National Assembly, Dr Boniface Chizea Chief Executive Officer (CEO) of BIC Consultancy Services and one time contributor to CBN’s Quality Assurance FSS 2020 project said “the CBN has the sole authority to issue legal tender currency in Nigeria. The Bank alone is able to determine the quantum of currency to release as to align with other critical objectives particularly macroeconomic stability”.
According to Chizea, the CBN designs the face of the currency, saying “this is one reason why the mint which prints currency is a department supervised by the Central Bank. I speak authoritatively here”
The CBN, he said, does not report to the Minister of Finance even if one should have expected that she should have been taken on board. He said; “remember that when you ventilate such policies there will be so many reasons to convince one not to go ahead.”
He stated that the rate of exchange will fall as the country is now witnessing because the race to convert illegally held Naira has now commenced with the announcement. The challenge confronting the CBN, he said, will now be how to determine measures to counter the slide.
Emefiele who had disclosed in an earlier press briefing that he obtained the approval of President Mohammed Buhari in writing and also backed by the CBN Act, said he does not need the approval of anyone else.
He said: “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” Emefiele had disclosed while addressing the press conference announcing the plan.
Kudos, knocks greet announcement
However, the outburst from the Minister of Finance has since triggered a chain of reactions online with many expressing worries over the lack of cohesion between critical stakeholders in the country’s economy.
They opined that the lack of cohesion may truncate the success of the project with many lambasting the finance minister for not knowing her place.
Lagos Chamber of Commerce and Industry in kicking against Central Bank of Nigeria’s proposed redesigning of 100, 200 and 500 Naira notes said “proposing a sudden withdrawal of notes for replacement with redesigned notes is of no economic benefit to the country,” saying it would come at a huge costs.
According to LCCI “replacing old currency notes with new ones is a routine exercise that central banks do not necessarily make noise about. Old notes are gradually replaced with new ones once they return to the banking system.
Redesigning the N100 to N1000 notes, which should not be a priority now, it said, is a waste of the nation’s time and resources.
“Fixing the deadline two to three weeks ahead of Christmas/New Year festivities, two months ahead of the general election, is disruptive and insensitive, adding that the Organised Private Sector (OPS) is already enduring a lot of disruptions ranging from local forex supply, exchange rate, and interest rate shocks,” LCCI said.
Many experts have also described the move as a “Very Big Distraction’ and a profligate exercise
Chief Executive Officer, of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, described the planned move by the apex bank as embarking on a profligate exercise and a distraction.
He said: “It is difficult to see any compelling value proposition of this currency redesign idea. The cost of such an action would be outrageous and disproportionate compared to the expected benefits advanced by CBN.
At a time when the government is grappling with a high fiscal deficit, debt crisis, severe revenue crisis and underfunding of many government projects and programmes, it is most inappropriate to embark on such a profligate exercise.
Currency as a percentage of the money supply is less than seven per cent. The exercise, therefore, has no monetary policy significance. Besides, it will come with huge logistics costs and avoidable dislocations to small businesses, most of which are in the informal sector.
“This is one intervention we can do without. There are more urgent issues demanding the attention of CBN. We have issues with liquidity in the foreign exchange market, the depreciating currency the recent Moody’s downgrade of Nigeria, soaring inflation and many more.
“The CBN should save the citizens and the economy the trauma of this currency redesign. It is a distraction we can do without” he said.
Similarly, Executive Director, Technical, Anchor Insurance Limited, Mr. Adebisi Ikuomola, said that he doesn’t see the development having any tangible effect on the economy or strengthening the naira.
He said: “The CBN said that the move is geared towards reducing the volume of naira in circulation, however, I don’t see how that can positively affect the economy or strengthen the naira. The naira is weak in the foreign exchange market and this policy may not turn that around.
“However, this development could cause panic among Nigerians as many of them will be scampering to the banks to change their old notes. Consequently, the banking halls that have seen some level of calm in terms of customer congestion could see a beehive of crowds in the coming days.”
Needed, Necessary Step- Moghalu, Nigerians
Meanwhile, former Deputy Governor of the CBN, Kingsley Moghalu, explained why he is in support of the bank’s recent decision to redesign naira notes. In a series of tweets, Mr Moghalu said the CBN is trying to gain control over the money supply in the economy.
He noted that while the move may not stem inflation, it is a “necessary step.”
“I fully support the Central Bank’s redesign of the Naira,” he said. “If 80% of banknotes in circulation are outside the banks, that’s troubling. The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender to get new ones or else it becomes illegal tender after January 31 2023.
“This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation.
“The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go the parallel forex market to buy hard currency, putting further downward pressure on the value of the Naira as too much Naira will be chasing too few dollars.
“I doubt it will solve inflation because there also are other major reasons for inflation such as the forex crisis, which this new move could exacerbate, as well the impact of the security crisis on food price inflation.
“But overall, it is a necessary step.
“I just think the time window for its implementation is rather short. This will put a lot of operational pressure on commercial banks and the financial system in general. A 90-day window would have been better, but one can understand the need to avoid interfering with the elections.”
Others are also lauding the CBN for the initiative. One such is frontline editor, Abdulaziz Abdulaziz. He explained that there is wisdom in the plans of the CBN. He however called on the apex bank to be more proactive in executing the plan.
“I initially sneered at the breaking news of CBN reissuing new naira notes, but reading the CBN governor’s speech I can see the wisdom in the quick currency mop-up. It could come with some pains but it will surely aid in stripping terrorists and criminals of slush funds.
It may not be Uhuru yet as there could be a rush to melt the money into the real sector, which needs to be seriously monitored in the next two months if the CBN action is to make a significant impact.
Similarly, Justice Equity Azu lauded the CBN for the initiative while expressing confidence that it will force criminal elements that have stockpiled cash to bring them out. He also opined that the move will check the menace of vote buying as the country heads into the General Elections in 2023.
“If it is done sincerely, it will force all the criminals who have stockpiled money to bring them out, it will as well check vote buying because monies would have been put back into the bank and withdrawal limits placed,” he wrote.
According to Ayobami “the plan to redesign N200, N500 and N1000 notes is generally aimed at fighting vote buying, even though N2.7tn of the N3.3tn notes in circulation being outside of bank vaults is insane.
However, with the CBN Governor being openly partisan, have they tackled vote buying or monopolized it” he asked.
Rex Eze urges the apex bank to “please let there be a good or solid arrangement for the supply or availability of the new notes whenever the change will take effect, otherwise it will impose serious hardship on the citizens”.
Other commentators on the rumpus between the CBN and Finance Ministry noted that the development was sad.
Those who commented on facebook said what it means was that there was no liaison between the Ministry Of Finance and the CBN. “I thought these ministries and government agencies work in harmony. No wonder things are upside down” said Muphtah O Oluwatoyin on Facebook.
“In this APC Buhari government, everybody is acting on his own. No alliance, no consultation with other bodies, and that is why snakes and monkeys continued to swallow billions at random.
Perhaps this lady might have been storing several stolen billions inside GP Tank beside her house in Abuja” Udochukwu Korie lamented.
Okiemute Florence also said “You see how confused these people are? There is no synergy whatsoever! How can CBN come up with such a strategy when you lot are not aware?
Chris Ohotu also added “Buhari and his government are the most uncoordinated ever in the history of Nigeria, very soon now, even the Minister Of Information will come out and say another thing” he said.
Chukwuemeka Ihe added that there was no need to consult the Minister as it would be akin to usurping the functions of the CBN Governor.
“It is the good policy they don’t need to consult you it is a monetary policy that is the function of the CBN, it looks like this woman does not even know her job. Her job is fiscal policy nothing more. When you employ staff because of where they come from, this is the result” he chided the finance minister.
According to Folorunso Olowogoke, “The minister’s comment seems unguided. CBN does not need to carry the ministry along in the matter. Monetary policy is exclusive of the Central Bank while the Finance Ministry is in charge of Fiscal policy. The minister doesn’t discuss Fiscal policies with CBN”.
A former Senator, Shehu Sani also questioned the rationale behind the plan while raising alarms that President Buhari also changed the naira in his first time as President in 1984, a move that sparked confusion.
The former senator who represented Kaduna Central in the eighth Senate said Buhari’s reason for redesigning the country’s currency was because of the economic instability the country was experiencing.
The former senator took to his Twitter page to make the disclosure. Sani wrote: “He Changed the National currency in 1984; He is changing the National currency in 2022…and for the same reason.”
According to Miracle Onyeka, he questioned the value of redesigning Nigeria’s currency at a time like this.
“Of what value is the redesignation of the notes to our economy? How would this solve the economic problems ravaging this country? Is this a strategy to corner some taxpayers’ money? He asked rhetorically.
Similarly, Chelsea Ebony charges the National Assembly to stop Emefiele and the CBN from carrying out this policy which she described as nonsensical.
“The National Assembly need to stop this nonsense this man is doing; this is pure nonsense. This will cost Nigeria billions of Naira to redesign and reprint, after that what will be the value of the notes? Will one dollar equal the new N200 naira note? It’s obvious that this government, the CBN lacks ideas” she vented
Many Nigerians also disclosed that redesigning the naira notes will not in any way curb rising inflation that has brought Nigerians to their knees or make our currency perform better against other currencies. They also opined that it is another wasteful jamboree.
“Not important and necessary for now. Will that reduce inflation? Or make our Naira stronger against other currencies? I think it’s just a scam and another way of wasting public funds, unjustifiable” Aliyu Adamu Ashigaruwa wrote on Facebook.