By Emma Ujah, Abuja Bureau Chief
Currency redesign is generally aimed at achieving specific objectives such as improving security of banknotes, mitigating counterfeiting, preserving the collective national heritage, controlling currency in circulation and reducing the overall cost of currency management.
When the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, announced the decision of the apex bank to redesign the Naira, on October 26, 2022, he left no one in doubt that one key objective of the exercise was to enable the CBN take control of the currency in circulation.
He said that the exercise would affect the three highest denominations of the nation’s currency: N200, N500, N1000 notes.
According to him, about 85 percent of nation’s currency in circulation was outside the banking system and that the CBN would not allow the situation to continue because it was adversely affecting monetary policies of the CBN.
Naira hoarders
Emefiele said, “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 and 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”.
The challenges, he said, included hoarding of Naira by some unscrupulous members of the public, with statistics showing that about 85 percent of currency in circulation was outside the vaults of commercial banks.
The apex bank boss added that the worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability as well as increasing ease and risk of counterfeiting evidenced by several security reports were reasons for redesigning the notes.
According to Emefiele, recent developments in photographic technology and advancements in printing devices have made counterfeiting relatively easier and that, in recent years, the CBN has recorded significantly higher rates of counterfeiting especially at the higher denominations of N500 and N1000 banknotes.
The CBN boss noted that although global best practice was 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.
There have been claims even by top government officials that some unscrupulous members of the society were hoarding large volumes of currency notes in warehouses, farms, septic tanks and other secret places.
The activities of currency hoarders have become evident as very dirty, smelly Naira notes have been in circulation, especially since political activities heightened across the country- an indication that such notes must have been hoarded in damp places and for a long period of time.
Money laundering
Those in the real estate sector of the economy have told stories of how desperate members of the public move around large cash, running into billions, with the intention to buy houses and lands across the country.
Those behind such transactions are aware that it would be foolhardy to deposit such ill-gotten cash in their bank accounts, for the fear that the Economic and Financial Crimes Commission (EFCC) would come after them and they won’t be able to explain how they came about such large cash. Therefore, they turn to the property industry to launder the money.
If well implemented, the cashless policy would help in no small measure the anti-corruption crusade in the country because public officials, who always insist on cash ‘kick-back’ before award of contracts, would have a re-think.
Government contractors are said to always have to deal with such corrupt officials who collect bribes before awarding contracts and would not accept bank transactions which can easily be traced.
How large cash fuels insecurity
The argument has also been advanced that a cashless economic policy would frustrate the activities of criminal gangs, especially kidnappers and bandits, who abduct innocent members of the public and demand huge amounts of cash. It would be a nullity to expect victims to pay huge ransom as such cash will not be available to anyone in the first instance.
While launching the new Naira, President Muhammadu Buhari was quoted as saying, ‘‘A cycle of banknote redesign is generally aimed at achieving specific objectives, including but not limited to: improving security of banknotes, mitigating counterfeiting, preserving the collective national heritage, controlling currency in circulation, and reducing the overall cost of currency management.”
Legislators concerns
After a rowdy session while debating the Naira redesign policy of the CBN on the 16th of last month, the Senate resolved to support the policy.
The Upper Chamber mandated its Committee on Banking, Insurance, and other Financial Institutions to embark on an aggressive oversight to ensure that Nigerians are adequately protected from the CBN, banks and other agencies involved in the process.
Resolutions of the Senate were sequel to a motion on the policy by the Chairman, Senate Committee on Banking, Insurance and other Financial Institutions, Senator Uba Sani, APC Kaduna Central.
The Upper Chamber urged Nigerians and the general public to comply with CBN’s directive to deposit cash holdings at their respective Deposit Money Banks.
The senators, who called for aggressive enlightenment on the part of the CBN especially in the rural areas to ensure that all Nigerians are aware of the new policy, insisted that such mass awareness creation would help Nigerians in the rural areas to comply with the policy so as not to lose their hard-earned money.
The lawmakers also urged the CBN to put measures in place in the face of ubiquitous Financial Technology (FinTech) to ensure that the local populace are able to bank their cash with ease within the stipulated time, adding that such a measure of would also ensure the security of the local population who might be waylaid and dispossessed of their cash by criminal elements like bandits and insurgents. Earlier in his presentation, Uba said that the Senate “Notes that terrorism will also be halted as access to the large volume of money outside the banking system used as a source for funds to pay ransom to bandits/terrorists.
“Notes also that the redesign of the currency would assist in the fight against corruption as the exercise would rein in the higher denominations used for this purpose and the movement of such funds from the banking system could be tracked easily.”
However, following the announcement of the N100, 000, and N500, 000 weekly cash withdrawal limits, for individuals and corporate bodies, the Senate, on Wednesday, kicked against the plan and called for a review.
The Upper Chamber vowed to drill Edward Lametek Adamu and Mrs. Aisha Ndanusa Ahmad when they appear for screening for the position of Deputy Governor of the nation’s apex bank.
Buhari had, last week, written to the Senate to confirm the two Deputy Governors for their second and final terms. Members of the House of Representatives were also reported to have opposed the policy, especially as it affects weekly cash withdrawals.
The question remains: why insist on huge cash when one can conveniently transact legitimate businesses electronically?
Fate of rural dwellers
The CBN has, meanwhile, promised to protect Nigerians, especially those in rural areas, without bank accounts, to ensure they don’t suffer any loss in the proposed Naira redesign.
According to the bank, it would “protect Nigerians in unbanked, underserved and rural areas.”
In the past, unbanked rural dwellers suffered significant losses as some were unable to change their old bank notes or were defrauded by criminal elements who took their old notes with a promise to return with new bank notes but never did.
The CBN Director of Corporate Communications, Mr. Osita Nwanisobi, said in a statement, on the 13th of last month, “The CBN remains committed to the seamless implementation of the initiative to ensure the achievement of its objectives to preserve the integrity of the local legal tender by reducing the significant amount of cash outside the banking system and its use in criminal activities, curtail counterfeiting, and promote financial inclusion, amongst others.
“Whilst noting the progressive increase in financial access points and alternative banking channels over the years (electronic/internet banking, mobile apps, ATM, Cards/PoS, eNaira, agent banking, etc.), the bank acknowledges that these may not be evenly distributed across all geopolitical zones and in some rural areas.
“In operationalizing this initiative, the CBN has been collaborating with relevant agencies and other stakeholders in the financial system in its execution, particularly ensuring that vulnerable citizens are not disenfranchised.
“Furthermore, agent locations across the country have been fully enabled for BVN registration, opening banking accounts/wallets & e-Naira wallets, electronic card distribution, and cash deposit, among others.
“Due to the policy, the agents have also been accorded priority to enable them to deposit cash collections through bank branches across the federation.” With all the Naira notes produced locally by the Nigeria Security Printing and Minting, it is heart-warming that the CBN has ended the practice of printing the nation’s currency abroad, which used to be a major factor capital flight.
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