Abuja, Nigeria – The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has explained that the proposed redesign of some naira notes would improve the value of the currency and rein in inflation. The naira redesign is simply a change in the currency’s appearance and security features. The redesign would have no impact on the face value of the naira.
The apex bank said the policy would enable it to retake control of the excess money outside the banking system, thereby increasing the value of the currency and containing inflation.
Emefiele said, “The issue is that, as you have heard, as of September 2022, we had N3.23 trillion naira in circulation; out of that, N2.73 trillion is outside the vaults of the banks. So, first of all, we want to mop all the N3.23 trillion back into the CBN so we can retake control of the money supply and see how this will help rein in inflation. No doubt we believe it has a positive impact on inflation.”
Responding to the question of whether the decision to redesign the new notes will impact the value of the naira, the governor said, “well, I do not want just easily to admit that that will happen, but we suspect that this will happen and that it will positively impact the value of the naira because we don’t want to do any speculation.”
Godwin Emefiele gave Nigerians 100 days to return the old money to the bank. If nothing changes, the old naira will not be an acceptable legal tender by February 1, 2023.
He added that the “timeline for moping up: I will say today is the 26th, so we have 6 or 7 days to the end of October, till January 31, 2023, which is almost 100days. I think that is adequate to mop up the currency in circulation back to the vaults of the CBN.”
On Wednesday CBN Governor Emefiele during a special press briefing in Abuja disclosed that N200, N500, and N1,000 notes have been redesigned and issues will be effective from December 15, 2022.
The apex bank, Emefiele stated, had secured the approval of President Muhammadu Buhari to roll out new notes to replace the existing currency in circulation.
“In line with the provisions of Sections 2(b), Section 18(a) and Section 19, Sub section(a) and (b) (2007), the management of the CBN has sought and obtained the approval of President Muhammadu Buhari to redesign, produce, release and circulate new series of banknotes at N200, N500 and N1,00 levels,” he said.
“In line with this approval, we have finalised arrangements for the new currency to begin circulation from December 15, 2022 after its launch by President Buhari.
“The new and existing currencies shall remain legal tender and circulate together until January 31, 2023 when the existing currencies shall cease to be a legal tender.”
Once the new notes are designed Nigerians are expected to take old notes to banks for the new notes.
The CBN Governor is also concerned about how Nigerian currency is being stored currently.
According to him, the bulk of the nation’s currency notes was outside bank vaults and the CBN would not allow the situation to continue.
Emefiele added, “To be more specific, as of the end of September 2022, available data at the CBN indicates that N2.7 trillion out of the N3.3 trillion currency in circulation was outside the vault 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 N1.46 trillion in December 2015 to N3.2 trillion as of September 2022. I must say that this is a worrisome trend that must not be continued to be allowed.”
According to him, the initiative by the CBN will help address some of the nation’s security threats, especially kidnapping and terrorism.
He believes that terrorists and kidnappers capitalise on the large excess of money to carry out their nefarious activities.
His remarks read:
“We have called this gathering to inform relevant stakeholders and the general public of persisting concerns we are facing with the management of our current series of banknotes, and currency in circulation, particularly those outside the banking system in Nigeria.
“As you all may be aware, currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2 (b) of the CBN Act 2007. Indeed, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank.
In recent times, however, currency management 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; Increasing ease and risk of counterfeiting evidenced by several security reports.
“Indeed, recent 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.
“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 N200, N500, and N1,000 levels.
“In line with this approval, we have finalized 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.
“Customers of banks are 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.
“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.”
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