Controversy as Buhari backs Naira redesign, disowns Finance Minister
…Stresses Nigeria stands to gain from exercise
…Experts maintain mixed reactions
…CBN’s move good for mopping up excess liquidity from circulation —ANAN
By Seun Ibiyemi and Matthew Denis Abuja
More controversies on Sunday trailed the redesign of Naira by the Central Bank of Nigeria (CBN) as President Muhammadu Buhari confirmed his support for the decision of the Apex bank to replace N1,000, N500 and N200 notes, effective Decemebr 15, 2022.
The approval of the President ushered more controversies into the running debate which have trailed the new move of the Apex bank, conflicting and overriding the position of the Minister of Finance, Budget and National Planning, Zainab Ahmed, who had expressed hostility to the Apex bank’s position.
Recall, Ahmed who is also a member of the Buhari’s cabinet and the Federal Executive Council had earlier disowned the policy, saying if implemented; the redesigning would portend great consequences for the nation and its economy.
President Buhari’s approval on Sunday, however, was an overriding shock that shows he is not on same page with the Minister.
A statement credited to the President issued on Sunday by his Spokesman, Mallam Garba Shehu, said the decision of CBN to launch new designs and replace high value Naira notes had his support and he was convinced that the nation will gain a lot by doing so.
This President’s confirmation of his endorsement of the CBN’s move is coming on the heels of Minister of Finance, Budget and National Planning, Zainab Ahmed’s declaration that the Apex bank did not carry her ministry along in its plan to redesign and roll out new naira notes.
Speaking in an Hausa radio interview with the renowned journalist, Halilu Ahmed Getso, and Kamaluddeen Sani Shawai, to be aired Wednesday Morning on Tambari TV on Nilesat, President Buhari said reasons given to him by the CBN convinced him that the economy stood to benefit from reduction in inflation, currency counterfeiting and the excess cash in circulation.
He said he did not consider the period of three months for the change to the new notes as being short.
According to him, “People with illicit money buried under the soil will have a challenge with this but workers, businesses with legitimate incomes will face no difficulties at all.”
In the interview, the President also addressed issues of food security and national security, among others.
Recall that the Central Bank of Nigeria (CBN) during the weekend urged Nigerians to support the currency redesign project which is in their overall interest and that of the economy at large.
The Apex bank further insisted that it followed the law and due process to carry out the redesigning exercise, which is 12 years due.
This is just as a former Deputy Governor of the CBN, Prof. Kingsley Moghalu has commended the Apex bank on the proposed redesigning of the Naira, saying the measure will address insecurity in the country.
CBN Director of Corporate Communication, Mr. Osita Nwanisobi, had in a statement, expressed surprise at the Finance Minister’s claim, stressing that the CBN remains a “very thorough institution that follows due process in its policy actions.”
He said the CBN management, 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.
Nwanisobi urged Nigerians to support the currency redesign project, stressing that some persons were hoarding significant sums of banknotes outside the vaults of commercial banks.
He argued that such a trend should not be encouraged by anyone who means well for the country.
He pointed out that currency management in the country had faced several escalating challenges which threatened the integrity of the Naira, the CBN, and the country in general, adding 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 even 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.
While assuring Nigerians that the currency redesign exercise was purely a central banking exercise and not targeted at any group, the CBN Spokesman 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 e-Naira.
This, he said, is in addition to helping 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.
The CBN Director urged Nigerians, irrespective of their status, to support the Naira redesign project as it is for the greater good of the economy.
The CBN Governor, Mr. Godwin Emefiele, had last week Wednesday announced a proposed redesign of the currency in the variation of N200, N500 and N1,000.
Emefiele, who pointed out that the change was a sequel to the approval of President Muhammadu Buhari, said circulation of the new banknotes would commence on December 15, 2022.
He said the development was also aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports, and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.
Emefiele said there was significant hoarding of Naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.
He said as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable.
Emefiele explained that the new and existing notes would remain legal tender and circulate together until January 31, 2023, when the existing currencies shall seize to be legal tender.
As a result, he said all banks currently holding the existing denominations of the currency might begin returning the notes to the CBN immediately, adding that the newly designed currency would be released to the banks on a first come, first served basis.
Emefiele also urged bank customers to begin paying into their bank accounts the existing currency notes to enable them to withdraw the new banknotes once circulation begins in mid-December 2022.
CBN’s move good for currency strength, security, but implementation window too short — Moghalu
Meanwhile, a former Deputy Governor of the CBN, Prof. Moghalu, while featuring on Channels TV ‘Sunday Politics’ programme, has commended the Apex bank on the proposed redesigning of the Naira Moghalu.
He said, “I fully support the Central Bank of Nigeria in redesigning the Naira. If 80 per cent of banknotes in circulation are outside the banks, that is troubling.
“The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender them 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 to 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.”
He, however, expressed doubt that the step would solve inflation, because there also are other major reasons for inflation such as the forex crisis, which the new move can exacerbate, as well as the impact of the security crisis on food price inflation.
According to him, the step, however, has become necessary for national security but the window for implementation is too 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,” he added.
Expert maintain mixed reactions
Meanwhile, reactions of experts on the subject have continued to assume mixed reflections.
Speaking to Nigerian NewsDirect on the development, the Chief Executive Officer of Accountants National Association of Nigeria (ANAN), Dr. Kayode Olushola Fasua said that the CBN has not done anything wrong, mentioning that the move is on the positive side for mopping up excess liquidity from circulation.
“It is global best practice for currency notes to be redesigned, produced and circulated every five to years to save it from counterfeiting and hoarding. The last time we redesigned ours was in 2014 when we redesigned and circulated the N100 note to commemorate 100 years of Nigeria’s existence.
“I think this current move is to curb inflation by mopping up excess liquidity from circulation, thereby also reducing the incidence of vote-buying in next year’s election if you consider the possibility of massive hoarding of our currency (up to 85 per cent) which is why interest rates have to go up according to the CBN Governor. It will also addresses the counterfeiting of Naira,” he said.
Dr. Fasua emphasized that the timing, however, may not be appropriate.
“Considering the cost implication at a time when we should be thinking of how to fund critical infrastructure and debt servicing, spending taxpayers money on redesigning our currency notes may be ill-timed,” he said.
“We should focus more on increasing the purchasing power of the Naira by increasing our production and export capacity,” he submitted.
This is just as the Executive Director of Nigerian Workforce Strategy and Enlightenment Centre (NIWOSEC), Dr David Kayode Ehindero has stressed that the plan by the CBN to redesign the Naira currency is a misplaced priority.
According to him, resigning Naira will not have effect on the value of Naira.
Considering the cost of printing new notes, he said it is a misplaced priority.
Meanwhile, a Professor of Economics at the University of Ilorin, Kwara state, Professor Gafar Ijaya, has commended the Central Bank of Nigeria for its move to redesign the Naira notes.
Ijaya said the exercise was coming 12 years behind schedule, as provided in the Act that established the Apex Bank.
He said the Act empowers the Central Bank, to redesign the nations currency in every five to eight years.
Professor Ijaya who gave the commendation during a chat with newsmen, explained that the redesigning of the currency, every five to eight years, would help to check counterfeiting, hoarding and inflation in the country.
While noting that it has been 20 years since the Naira notes were changed, Professor Ijaya said once introduced, it would help check money laundering.
“The policy (redesigning of the selected currencies) is not new.
“The CBN Act provides for redesigning between five to eight years but for the past 20 years, this was not done. So, by the Section of the Act, the CBN has that power,” he added.
“It would also help check to address the issue of counterfeit or fake currencies.
“The CBN recently lamented the issue of hoarding of banknotes. The evidence provided was that 80 per cent of the currencies in circulation are outside the vaults of the financial sector, which has led to a drop in the rate of investment and an increase in the rate of inflation,” he said.
Furthermore, he explained that with this new policy, the CBN will have tighter control of the cash in circulation.
He further enjoined Nigerians to be prudent in their spending and embrace new innovations so as to ensure economic growth and stability.
