PRESIDENT Muhammadu Buhari recently unveiled the redesigned naira notes involving the N200, N500 and N1000 denominations. The new banknotes will be put in circulation on December 15 and can be accessed at any deposit money bank’s branch in Nigeria. In the same vein, old banknotes are to be deposited into bank accounts latest by January 31, 2023. This means that old notes shall cease to be legal tender and will no longer be acceptable by the public or the bank after that date. There will be no charges on cash deposits during this exercise until after January 31, 2023.
According to the president, the redesign of the naira will enable the Central Bank of Nigeria (CBN) to exercise ample control over the amount of money in circulation, prevent counterfeiting, encourage a cashless economy, stave off cash hoarding, encourage financial inclusion, and reduce kidnapping and terrorism. The CBN governor, Mr. Godwin Emefiele, emphasised that the “integrity of the local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy” are the responsibility of the CBN. As part of the exercise, the amount of money that can be withdrawn from the counter will be reduced drastically, while bulk withdrawal will require several procedures and security checks to track its use to ensure a steady transition into a cashless economy. Not many would fault the government’s action and intention in carrying out the redesigning venture, but it bears restating that the health of a country’s currency has less to do with redesigning and much more with the level of production and productive activities in the economy.
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To be sure, the redesign of the naira is a fait accompli and within the remit of the CBN. Nonetheless, we believe the reasons offered for the exercise are tenuous. The fundamental issue with the naira is the downward spiral in its value. It is now over N750 to the United States (US) dollar in the parallel market. The redesign of the naira will not raise its value. As we have said before, Nigeria requires a functioning productive economy to strengthen the naira. Several issues must be addressed to enhance the productive capacity of the economy. These include the provision of adequate and constant energy supply, especially electric power, to stimulate production and close the huge infrastructure deficits in the country. Nigeria also needs a secure environment and improvement in the institutional environment for doing business to attract domestic and foreign investments.
At the inception of this government, the exchange rate was N160 to the US dollar. That it is now N750 or more to the dollar shows that the naira has been massively devalued under President Buhari’s government. The government needs to look elsewhere to reverse this trend as the lost value cannot be regained through redesign. Beyond curbing counterfeiting, it seems that the government merely wants to be seen to be doing something even when the acts have no intended visible value, and are mere window dressing. Countries around the world redesign and reissue their currencies chiefly to prevent counterfeiting, keep counterfeiting low, or stay ahead of counterfeiters. Usually, such exercises come with challenges such as liquidity shocks, disruption of supply chains and shrinking demand for goods and services. Thus, the three-month timeline to redesign, produce and distribute new naira notes is ambitious and could lead to severe hardships for citizens.
Now that the government has done this bit of window dressing, we would advise it to shift attention to more productive acts and strategies that would add value to the naira. This shift in strategy should address the ultimate concerns of Nigerians for increased productive activities, jobs and a strengthened naira.