The redesign of the Nigerian currency was one of the most anticipated reforms under the leadership of President Muhammadu Buhari.
In the last five years, the Naira has experienced depreciation losing about 94% against the US Dollar.
Recall that in October 2022, the naira suffered the worst depreciation in history, with the value moving from #580 per dollar to about 707 Naira per dollar and the Black market selling for about 860 Naira per Dollar.
Depreciation of the naira is a result of an increase in demand for dollars and hoarding of the naira. Statistics given by the Central Bank of Nigeria (CBN) was that 80% of the printed notes are not in circulation and outside the vault of the commercial banks.
So on 26th October 2022, CBN Governor, Dr Emefiele announced that the N200, N500 and N1000 denominations of the naira note would be redesigned and will be in circulation by 15th December 2022.
Although, many Nigerians have voiced their discontent with the new design of the Naira notes, unveiled on 23rd November 2022, because there is a shade of different colour from the previous notes but the designs remain the same.
Inasmuch as some people don’t like it, the CBN means well.
The redesign of the Nigerian currency is a step forward in the fight against counterfeit currency and will go a long way to improving our country’s cash flow.
Some individuals have made currency fraud their main source of income, resulting in a huge challenge of counterfeiting.
According to CBN, “Nigerians have set up factories and are just churning out bank notes because those bank notes don’t come back into the banking system”. The Central Bank of Nigeria is not able to fish out the counterfeits. So, there’s a problem if the regulating body can’t tackle this problem hence the reason for redesigning.
The currency change also aims to curb kidnapping and the fast-growing ransom industry. The business is illegal, they tend to hoard money which reduces the circulation of funds.
Lastly, redesigning the naira notes is to control the money in circulation so that other channels can be used. The redesign of the Nigerian currency is an outcome of the government’s vision to make Nigeria a modern, efficient and effective nation. This includes an electronic money supply system, digital initiatives, mobile money transfer and improving inter-regional trade and business in Nigeria.
Circulation Of New Notes
The central bank of Nigeria Governor Mr Emefiele with approval from the president has ordered all Nigerians to deposit the old N200, N500, and N1000 notes to the commercial banks before 31st of January as the old notes will cease to be legal tender from the said date.
Although, citizens have reacted to the note as unpleasant as it seems that the designs are beyond their expectations. The citizens lamented that the government would have done better since the country had a good number of young creative designers.
Well, the new currencies have only been seen on social platforms, it is yet to be in circulation as the circulation of the new currency will begin on 15th December 2022. The new currency might have a lot of differences from the old one when it is handled by the citizens.
The Economic Impact of Naira Redesign
After the announcement about the redesigning of the naira note, the naira appreciated against the dollar by about 26.24%.
A lot of people argue that the impact will be more negative after the circulation of the new note while some say it’s a welcomed idea and it will drive economic change.
Let me show you the impact of the Naira redesign both the positive and the negative:
- It will cause a lot of unease among the citizens, a lot of people would want to deposit money in the banks resulting in a lot of queues in the bank. The people settling far from the bank would find it difficult to deposit their old notes before the time. This will impose stress on the bank, and the people and it can cause a negative impact on the economy.
- There are just two printing points in Nigeria which are located in Lagos and Abuja. When printing is done, it has to be distributed, distributing currency around Nigeria is lots of work which involves lots of logistics and costs. With the current financial state of Nigeria, it means huge amounts of funds will be borrowed to meet up with this development which will increase the inflation the country is facing. One of the reasons for the inflation is the huge debt of the country.
- Logistics is another issue here. How is it going to be possible to get those printed funds to the needed destination considering the insecurity level in the country?
- Since the commercial banks and the governing bank has lost control of 80% of money printed, the redesigning of the new note would help banks regain control over the money in circulation.
- The redesigning of the naira notes will also help the country move towards the cashless economy policy as the Apex bank can reduce the number of printed notes in circulation and take control of the volume of printed cash in circulation to drive a cashless economy. The impact of this policy will create a positive impact on the economy.
- The rate of counterfeit money will be reduced as the apex fund tends to fully manage the circulation of printed notes.
The redesigning of naira notes has both positive and negative impacts. The implication of this idea is dependent on the Apex Bank and other Regulatory Agencies involved. How far are they willing to put in the right work and initiative that will bring out the positive side of this development?
Also, there are many theories on the redesigning of the currency. But the one thing that is certain, is that redesigning in itself is not enough to reduce inflation.
While we hope this decision will yield good results, we are hoping that the Apex Bank will also keep to its promise of managing the circulation of printed notes.