As the dust settles from the CBN’s proposal to restructure the local currency, implementation has taken center stage.
The accumulation of opposing views on the matter suggests that the adjustment was preferable to maintaining the local currency’s status quo.
Already, the dust produced by Finance Minister Zainab Ahmed’s opposing opinion on the CBN’s decision making process on the topic has faded as quickly as it erupted following President Muhammadu Buhari’s statement in favour of the apex bank, while other experts backed the CBN.
The CBN looks poised to implement the Naira adjustment as banks begin complying with its instructions to prepare for a seamless transition.
All commercial banks opened stores for clients last weekend, which may have helped some depositors prepare for the impending removal of old Naira notes.
Some banks report growing cash deposits, but the origins are unclear.
No rush or banking hall surge was seen 39 years ago when the previous Naira change occurred.
Bank insiders told Vanguard MoneyDigest that a boom in cash transactions may not happen. As the currency overhaul process gains momentum, they predict more electronic transactions.
The bankers told Vanguard MoneyDigest they do not expect much opposition from criminals with big volumes of cash they stored away owing to the source of the money.
According to them, their role is to take all the money and document transactions properly in preparation for complete disclosures.
Buhari’s Special Assistant on Media and Publicity, Mallam Garba Shehu, said he believes revamping the currency will benefit the country.
In a Hausa radio interview, Buhari said the CBN convinced him that the economy stands to profit from a drop in inflation, currency counterfeiting, and surplus cash in circulation.
Three months for the new notes wasn’t too short, he added.
People with unlawful money buried in the ground will have trouble, but employees and businesses with legal revenues won’t.
BCAN believes the timeline for removing previous notes was too short. They’ve asked CBN to extend the deadline for surrendering old notes.
BCAN President Dr. Uju Ogubunka told Vanguard MoneyDigest last week: “Redesigning the Naira as needed is the CBN’s obligation.”
“CBN’s justifications are real and backed by known facts. BCAN supports CBN’s strategy. We just ask that the exercise cause the banking public and Nigerians little discomfort. BCAN will collaborate.
“The exercise’s timeline should be evaluated.
“Those who help should consider it a serious national task and be very, very diligent.
“CBN should anticipate issues and prepare responses. It will succeed.”
The CBN stated the Naira redesign initiative followed appropriate protocol, including President Buhari’s approval.
The top bank quelled fears over the expense of creating the new notes, stating they will be created in the nation and under budget.
According to CBN spokeswoman Osita Nwanisobi, the apex bank is highly rigorous and follows due procedure in its policy operations.
According to Nwanisobi, the CBN management requested and received the President’s written clearance to redesign, create, distribute, and circulate new N200, N500, and N1,000 banknotes.
He urged Nigerians to embrace the currency reform effort, saying it’s in their best interest and that some people were stockpiling banknotes outside commercial bank vaults. This trend shouldn’t be promoted, he added.
Economists and financial professionals say currency reform is a beneficial idea if managed properly.
David Adonri, Vice-Chairman of Highcap Securities, affirmed the CBN’s independence in changing the currency and backed its arguments.
In this case, the CBN’s reasons for altering the currency are acceptable, but there’s no need not to involve the Finance Ministry so they can prepare for the shift. When the monetary power is autonomous, as we want, the Central Bank doesn’t need the President’s authorization to operate.
“A central bank’s independence prevents political influence on monetary policy.”
Moghalu on Naira redesign
Kingsley Moghalu, a former CBN deputy governor, said the revamp is a ‘essential move’ for the economy.
Moghalu said the CBN wants to manage the money supply.
He remarked, “I endorse the Central Bank’s Naira makeover.” “If 80% of banknotes are outside banks, that’s troubling. The CBN wants to return all those notes to banks. After January 31, 2023, those having the notes must surrender to acquire new ones.
This is an unorthodox technique to tighten the money supply because of rising inflation.
People hoarding large quantities of cash outside the banking system for criminal purposes would travel to the parallel FX market to acquire hard currency, putting more downward pressure on the Naira’s value as too many Naira chase too few dollars.
“I think the implementation timeframe is short. This will strain commercial banks and the financial system. A 90-day timeframe would have been ideal, but I appreciate the necessity to minimize electoral interference.
Prof. Uche Uwaleke of Nasarawa State University stated that replacing some naira denominations will be helpful for the economy in the medium to long term. The action does not equal to demonetisation of large currency notes, which central banks sometimes use to prevent dirty money and corruption, but it will help bring in a lot of naira notes floating outside banks.
If it increases bank deposits, banks will have more money to lend, which might lower interest rates. I think it may also reduce parallel market naira speculative assaults. The Financial Intelligence Unit will likely monitor large deposits for fraudulent activity. Despite the cost of replacing currency notes, I think it’s time to clean up the system, especially since electioneering has begun. The deadline of Jan. 31, 2023 seems short given the 100 to 1000 naira denominations involved. CBN may prolong it.”