Ladies and Gentlemen. You will recall that on 26 October 2022 the Central Bank of Nigeria received the approval of President Muhammadu Buhari to redesign the N200, N500, and N1000 Nigerian banknotes. By the approval, the redesigned banknotes will circulate concurrently with the old notes , up to 31 January 2023 after which date the old notes loses their legal tender status. However, given the need to improve the level of circulation of the new notes , the President magnanimously extended the deadline by another 10 days to 10 February 2023 for olds notes to circulate as legal tender.
Let me assure all Nigerians that the CBN , working with the Deposit Money Banks and other very important stakeholders such as the Economic and Financial Crimes Commission (EFCC) , the Independent and Corrupt Practices Commission (ICPC) and the Nigerian Financial Intelligence Unit (NFIU) are working together to ensure that the ultimate goal , which is to deliver to all Nigerians , a new currency that meets global standards is achieved. Fellow Nigerians , the Central Bank of Nigeria is aware of the difficulty being faced by Nigerians in accessing the new Currency at this initial stages of its issue and circulation but wishes to plead with all to please show some understanding as everything is being done to correct some of the observed lapses in the implementation of this ambitious program. Please, also permit me to say that this difficulty is transient given our strong believe that the ultimate gain of the policy to our Country far out ways the short run pains of today.
As the new deadlines approach, please permit me to express our sadness over the unscrupulous and unpatriotic conduct of some of our colleagues in the banking industry, whose greed and malevolence are sabotaging the CBN’s efforts. I assure you all that the enforcement agencies are on the proll of these unpatriotic colleagues and their collaborators. A few of them involved in the sale of the new currency have been arrested by EFCC, ICPC and indeed the DSS; and let me assure all Nigerians that these unscrupulous persons shall face the full wrath of the Law. On our part , let me assure all that the CBN possesses the capacity, manpower, and equipment and grit to produce and circulate the new notes and are doing all in our power to ease the inconvenience on all Nigerians , particularly the vulnerable Nigerians.
I want to use this opportunity to once again emphasize that this policy is not targeted at anyone or any group of persons. Rather it derived from our inhouse analysis to strengthen our macroeconomic fundamentals and better our socio-economic conditions.
Why the Naira Redesign Policy?
As you all know, 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.
Besides, the general practice across the globe is that a central bank should normally redesign its currency within 5-8 years. From the on-set of this currency redesign program, we made it clear that for over 19 years, the CBN has not been able to undertake this important currency and liquidity management function that has important ramification for the effectiveness of monetary policy and exchange rates relatively stable. Secondly, we aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the Military are making good progress in this important.
Available data at the Central Bank of Nigeria showed that in 2015, Currency-in-Circulation was only N1.4trillion. As of October 2022, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the Banking System and N2.7 trillion held permanently in people’s homes. Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN. It should also be noted that the Notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth.
So far and since the commencement of this program, we have collected about N2.1 trillion; leaving us with about N900 billion . To achieve effective distribution, of the new currency the CBN has taken the following steps:
We held several meetings with Deposit Money Banks (DMBs) and provided them with Guidance Notes on processes they must adopt in the collection of old notes and distribution of the New Notes to all Nigerians. These includes specific directives to DMBs to load new notes into their ATMs nationwide to ensure an equitable/transparent mechanism for the distribution of the new notes to all Nigerians. This approach was initially adopted following reports that some DMBs were favoring their Prime customers at the expense of their small account holders at bank branches. After sometime, and in a meeting with the DMBs, we decided to allow withdrawals over the Counter but subject to no more than N20,000. We also gave instructions that bank branches be kept open on Saturdays and Sundays. At our last meeting held this morning, the CEO of the banks reported that although calm was beginning to return to their banking halls , their were still some areas of pressure and everything is being done to divert more resources to such pressure points in order to ease the tension. The Meeting further resolved to extend the Cash swap initiative nationwide and expand the number of participating agents as well as formally include some Micro Finance Banks in the cash swap initiative.
We commenced a nationwide sensitization through the Print and Electronic Media to create an awareness on the redesigned Notes to Nigerians including collaboration with the National Orientation Agency to reach all Nigerians across multiple channels.
We deployed 30,000 Super Agents nationwide to assist in our Cash Swap initiative in the hinterlands, rural areas, and regions underserved by banks in the Country to ensure that the weak and vulnerable ones amongst us can swap/exchange their old notes.
We deployed all our staff, particularly the Assistant Directors, Deputy Directors, and Directors in Abuja to proceed to all CBN branches Nationwide to join the mass mobilization campaign and monitoring programs, working with the Deposit Money Banks, Agents, and our Branch Controllers across the 36 states of the Federation.
This is meant to ensure compliance with all our guidelines already issued for smooth implementation of the program. The CBN welcomed the participation of the EFCC, and ICPC who joined our monitoring teams nationwide and this has further enhanced compliance at bank branches and agent locations
We are happy that so far, the exercise has achieved a success rate of over 80 percent as about N2.7 trillion held outside the banking system has been returned. Nigerians in the rural areas, villages, the aged and vulnerable have had the opportunity to swap their old notes, leveraging the Agent Naira Swap initiative as well as the CBN Senior Staff nationwide sensitization team exercise.
Benefits of A Currency Redesign Policy
Generally, currency redesign policies (sometimes called demonetization policies) are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties. Chiefly, it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth.
The macroeconomic impacts of currency redesign are multidimensional and could seem uncertain especially at this early stage when its inconvenience is widespread.
By spurring more people to use bank accounts, this policy will further increase bank account ownership and increase the use of accounts by enhancing people’s saving behavior. It could encourage some hitherto informal business operators to formalize the pattern of transactions and adopt more formal settlement channels.
In addition, the short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government.
In the long-term, the policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance. As experiences from other jurisdictions have shown, effective currency redesign can support regulatory reform, increased legislative reach and coordinated fiscal and structural policies.
In summary, the general benefits of a currency redesign include:
Reduction of Broad Money Supply: Effectively implemented currency redesign large causes a fall in money supply. This will lead to reduction of value of money in circulation and a deceleration of the velocity of money in the economy leading to less pressures on domestic prices.
Lowering Inflation: the policy is typically expected to cause deflation in the market as less cash holding reduces currency outside banks and retards money circulation. The accompanying decline in money supply will thus slow pace of inflation.
Collapse of Illegal Economy Activities: People who have earned money through illegal ways would be afraid to declare the money as they may be prosecuted by the Income tax department on the legitimacy of their income.
Easy Loans: Loans will become easier and interest rates may come down. As banks will have more money so more loans will be given out which will increase the money supply in the market and it will create inflation.
Before concluding this remark, let me state and sadly too, that we have observed some incidences of widespread hoarding and predatory activities of some vendors. We appeal to those involved in these nefarious activities to please desist from such practices. This is because , these actions if left unchecked could derail the achievement the objectives of the naira redesign policy.
a.Hoarding – We have noticed that some members of the public are hoarding the new notes thereby restricting their flow through the economy. Cash kept at home will not circulate but may fuel a perception of scarcity which leads to higher demand for the currency, signalling to those who don’t have an urgent or immediate cash need to store cash. The CBN would like to encourage the public to use alternative channels as much as possible for their transactions and hold minimal cash in line with the cashless policy.
Panic Queues – The CBN has also noticed long queues at some bank ATMs and banking halls. Whilst some of these withdrawal requests are genuine and DMBs continue to load the ATMs only with new notes, monitoring suggests that there appears to be some opportunistic and panic queuing. The Bank wishes to reassure the public that the new notes are available for all who need it at the appointed time. There is no need to queue for new notes if you have alternative channels of payment and don’t have an emergency cash need. We reiterate that the new redesigned notes are more than enough to go round for legitimate needs.
Damage of Bank Branches & Assault of Bank Personnel – It has also come to our notice that at some branches, customers have become aggressive, verbally and/or physically abusing bank staff. They have also damaged or destroyed bank property, premises, and assets. We enjoin Nigerians to be peaceful and law abiding when they visit bank branches as this wanton destruction will be counterproductive, reducing the number of financial access points in these communities.
Incidences of Economic Opportunism – We have also noticed that some Nigerians are capitalising on the transition to charge exorbitant fees or demand cash payment on the false pretext that POSs don’t work, especially at petrol stations. These selfish actions for personal monetary gain is creating hardship for Nigerians and may come at the expense of fellow citizens lives and livelihood.
Conclusions
The CBN reiterates the availability of an appropriate amount of currency (redesigned N200, N500, and N1,000 denominations and current N100, N50, N20, N10 and N5 denominations) to support economic activities.
The Bank is collaborating with entire financial ecosystem DMBs, OFIs, MMOs, Super Agents, MFBs Payment System Providers and EFCC, ICPC and other law enforcement to ensure that Nigerians have a variety of options for financial transactions either through electronic channels or in exceptional circumstances, cash.
We are mindful of the challenges some citizens have faced and are addressing them. There have been reports of occasional failures in e – channel platforms. Our monitoring suggests that whilst there has been an expected surge in electronic transactions, these have not risen to unprecedented levels and the payment system is well equipped to handle even higher transaction volumes. Whilst transaction failures are bound to occasionally occur, the public is encouraged to have full confidence in Nigeria’s globally recognised payment system infrastructure. Banks have also been instructed to ensure 24/7 service availability and promptly address any customer refunds arising from such service failures.
We call on all Nigerians to be calm, law abiding, and considerate of their fellow citizens (particularly the vulnerable and weak) in the conduct of their affairs as we execute this policy of national significance. As with all far reaching consequential policies, there is an transition period during which short term hiccups will be inevitably experienced but eventually overcome.
The CBN is committed to ensuring a seamless, inclusive and equitable implementation of this exercise for the overall benefit of the people, financial system and Nigerian economy as a whole.
The advantages of the currency redesign is overwhelmingly enormous will benefit the economy in the long-run. We will take all the necessary steps to ensure that there will be a smooth flow of currency swap and minimize the inconvenience in the short-term.
I thank you for your attention.
