Victor EzejaThe redesign of the New Naira Notes by the Central Bank of Nigeria (CBN) has continued to generate mixed reactions among economic experts.
Chief Executive Officer, Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, says the newly redesigned Naira has no monetary policy significance on the economy.
Dr. Yusuf stated this while speaking to the scarcity of newly redesigned naira notes on the Arise News Morning Show on Monday.
He faulted the assertion that the currency reissue policy would help bring down inflation, arguing that it has no empirical or theoretical basis.
The immediate past Director General of the Lagos Chamber of Commerce and Industry (LCCI) said CBN is unnecessarily inflicting pains on Nigerians, especially the unbanked population residing mostly in rural areas, who are grappling with the challenges of poverty, high cost of goods and services, exchange rate crisis, among others.
“All this redesign has no monetary policy significance at all. People have said it will bring down inflation by redesigning the Naira. However, it has no basis for all of that both empirically and theoretically,” Yusuf stated.
Recall that CBN had in October, announced its intention to redesign N1,000, N500 and N200 naira notes, and subsequently, released them for circulation on December 15, 2022, with a deadline to phase out old notes by January 31, 2023.
The apex bank equally stated that over 80 per cent of the nation’s currency in circulation is outside the vaults of commercial banks and decried hoarding of banknotes by members of the public, which poses challenges to currency management and the economy.
“There are statistics showing that over 80% of the currency in circulation is outside the vaults of commercial banks.
“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.”
“We believe that redesigning the N200, N500 and N1000 bank notes, will certainly reduce the cost of cash management, reduce the volume of cash in circulation, disrupt counterfeiting activities and enhance the adoption of digital and electronic transactions.
“The CBN remains committed to people-oriented and people-centred policies, which impacts were felt in various sectors of the economy”, CBN Governor, Emefiele had said early December.
Reacting to the CBN’s argument, Yusuf said the cash in circulation is not too much when compared to other countries’ economies.
He stated that Nigeria’s cash-to-GDP ratio is one of the lowest in the world at 1.5 per cent, arguing that cash dominance in a financial system is measured by cash to GDP ratio.
“If you look at the data, cash dominance is measured by cash to GDP ratio and cash to GDP ratio in Nigeria is one of the lowest in the world. We have a GDP of over 200 trillion and this cash we are talking about is just N3 trillion, just about 1.5%. How much more cashless can you be?”
“In the United States, cash to GDP ratio is about 10%, in the UK it is about 3% but in Nigeria, it is 1.5%. You need cash to service an economy. The cash we have is not too much for this economy. You need to look at the data and important policies should be data-driven, they should be evidence-based.
“Total money supply in this economy is N51 trillion while the cash component of money is just N3 trillion and cash outside the bank is just N2.8 trillion, just about 5% of that. So is that too much?,” Yusuf queried.
He admitted that the CBN as the monetary policy authority, has the right to reissue the currency, as part of currency management but the way the bank is pushing the new notes policy is hurting Nigerians who are at the receiving end.
“The CBN should not inflict unnecessary pain on Nigerians, we have enough problems already. People are grappling with the high cost of goods and services. They are grappling with the problem of poverty. They are grappling with the problems with the exchange rate and all of that,” he added.
According to him, looking at the prevailing scarcity of the new currency notes, it is doubtful that the CBN would meet the deadline which is about three weeks from now.
The CPPE CEO pointed out that elsewhere, the authorities usually give up to two years for the new currency to circulate well, and wondered why the apex bank is insisting on phasing out the old notes within such a short period.
He lamented that the policy has no accommodation for the over 30 million unbanked population, adding that 50 percent of the economic structure in Nigeria is informal and people need cash for transactions even in much more developed economies.
Members of the National Assembly had urged the apex bank to extend the deadline but it insisted that the old notes must go out of circulation on the stipulated date.
In at least the past three weeks when the new notes were released to commercial banks, there has been scarcity of the bills across the country with ATMs dispensing only old notes.
Yusuf said CBN needs to shift ground to make the old notes withdrawal from circulation more seamless to avoid hurting Nigerians.
On the argument that the policy is also intended to curb vote-buying during the upcoming election, the economic expert said it is not the main responsibility of CBN and ordinary Nigerians shouldn’t bear the cost of such drastic decision.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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