The Central Bank of Nigeria (CBN) under President Muhammed’s administration declared the redesigning of the naira on October 26, 2022.
According to the president, demonetization is due to the legal obligation and a means of reducing the country’s growing use of fake currency. Mr. Godwin Emefiele stated that the redesign was approved by the president to combat corruption, terrorism, and other illegal activities.
According to CBN, the new naira notes had begun issuing on December 15 last year. The bank initially declared that the notes should be returned to the banking system before January 31st of this year. But it was later extended to February 10, 2023.
According to the CBN, the currency redesign has so far mobilized 1.9 trillion nairas into the bank vaults. Nigerians will have seven days of leniency after the deadline of February 10 to return their old larger denomination notes to the central bank.
The president claimed that he approved the CBN’s proposal about demonetization because they convinced him that the economy would gain from the decline in inflation, current forgery, and the amount of excess cash in circulation.
The governor of CBN, Mr. Godwin Emefiele said that, as of September 2022, there were N3.2 trillion in circulation, of which N2.73 trillion was outside the bank vaults.
He deemed this development unacceptable because it could harm monetary policy action by causing higher inflation and currency speculation, which would expose vulnerable Nigerians to further economic hardships.
The CBN governor added that bank fees for cash deposits have been suspended with immediate effect for the duration of the switch from old to new notes. He continued by saying that no bank customer should be charged for money returned to or deposited into their accounts.
He also emphasized that the current notes were still legal tender and should be accepted as a form of payment for the purchase of goods and services. He assured the people that the CBN will continue to keep an eye on the economy and the financial system in particular.
Emefiele claimed that the CBN acted in good faith to advance both the goals of the banks and the welfare of the nation. He emphasized that currency management remained a crucial duty of the CBN as stated in Section 2 of the CBN Act 2007 and that there had been concerns about the management of the old series of banknotes as well as currency in circulation, particularly those outside the banking system in the nation.
However, the CBN governor pointed out that in recent years, currency management had to deal with several enormous problems that kept getting bigger and more complex. This resulted in unexpected consequences for the CBN and the nation’s credibility.
The CBN had recently seen much greater rates of forgery, particularly in the denominations of N500 and N1,000 banknotes, and that recent advances in photography technology and printing equipment had also made currency manipulation relatively simpler.
Benefits Of The Redesign And Cashless Policy
Although there are many different perspectives on the redesign of the naira currencies, there are many benefits of demonetization.
The major benefit of the redesign is that it will help to stop the hoarding of money. The fact that corruption is widespread in Nigeria is well known, and many corrupt individuals are accused of hiding significant sums of cash in soak-aways, overhead tanks, and even vacant homes.
Due to such circumstances, the federal government feels that the Nigerian Legal Tender must be redesigned to combat corruption once and for all.
Further than all these advantages of the CBN’s cashless policy and currency redesign, which include terrorism prevention and supply-side management among other things, the move will undoubtedly also ensure that future social intervention programs aimed at poor Nigerians achieve their desired success.
This is partially because eliminating cash would make it easier to track and oversee such funds, enhancing transparency and responsibility for those in charge of managing the resources.
Supporting The Cashless Policy And Currency Redesign
Despite opposition to the CBN’s cashless policy direction, experts have backed the initiative, stating that if the nation is to advance, the choice to restrict cash withdrawal limits to private persons and business organizations following the currency redesign program was the right one.
Under the new regime, the CBN has set a limit on cash withdrawals, limiting the weekly maximum over-the-counter cash withdrawals for both individuals and corporate organizations to N500,000 and N5 million, respectively.
It was generally accepted that the CBN’s action was intended to discourage vote buying as the general election of 2023 draws near, as well as to address currency hoarding to curb inflationary pressures and handle serious security challenges.
Analysts asserted that the new CBN policies will help to advance the goals of the monetary policy more quickly. They claimed that the measure would increase the monetary and financial space and boost banking sector profitability.
However, the experts issued a warning that the delayed uptake of e-banking, the rise in cybercrime during an election year, and other macroeconomic factors could reduce the policy’s positive effects. They also thought the naira could gain strength against the US dollar as a result of the program.
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Challenges Of The Cashless Policy And Currency Redesign
Despite the repeated assurance that the policy was designed with Nigerians, especially the average citizen, and the nation as a whole in mind, some individuals, especially elites who seemed to gain from the previous way of doing things, have continued to disagree with the CBN.
They have turned to defaming the bank to sour relations between the top bank and the citizens.
These disloyal Nigerians have given the impression that the CBN’s recent policy changes were against Nigeria’s interests and would worsen their situation.
The CBN governor emphasized that the Central Bank of Nigeria he oversaw would always place a priority on the needs of its customers. This was especially clear in the support that the bank provided to households and small businesses during the COVID-19 pandemic.
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