Nigeria's currency redesign 2023: A case study approach, By 'Tope … – Premium Times

We travel out to many prestigious universities around the world and are bombarded by copious amounts of case studies pertaining to their companies, governments and projects, which offer great insights for learning, and to which we add our intellect to making those cases and indeed the entire systems within which they operate, get better. I argue that we should write more case studies about ourselves – even of our small companies and entities. Here, we have several constraints. Perhaps the academia wants to mind its business and not ‘pokenose’ into other people’s businesses. Perhaps, we believe that case studies should be written about massive conglomerates only. And as it pertains to government, the private sector and academia, in trying to protect their bread and butter, completely steer clear. Even those organisations of which case studies should be written are not willing to divulge information and egos get in the way; if you write about them and there’s any negativity, those who run the system may take offence.  Also, the few analyses and case studies that we have had have been parked in one corner, gathering dust, forgotten to history. However, I daresay that until we institute a constant culture of learning, our problems will not only abide but metastasize. I have therefore chosen today to write a sort of case study about the ongoing Naira redesign, with a view to expatiating on the many learning points.
On the 26th of October 2022, the Governor of the Central Bank of Nigeria announced that the bank will be pulling out the old design of the N200, N500 and N1000 notes starting from the 15th of December of the same year. This process, he said, will culminate on the 31st of January, 2023, when the old currency will no longer be legal tender. Said he:
“Evidently, currency in circulation has more than doubled since 2015; rising from N1.46 trillion in December 2015 to N3.23 trillion in September 2022. This is a worrisome trend that cannot be allowed to continue… In recent years, the CBN has recorded significantly higher rates of counterfeiting especially at the higher denominations of N500 and N1,000 banknotes… Although global best practice is for central banks to redesign, produce and circulate new local legal tender every five to eight years, the naira has not been redesigned in the last 20 years. On the basis of these trends, problems, and facts, and in line with provisions of sections 2 (b), section 18 (a), and sections 19, subsections (a) and (b) of the CBN Act 2007, the management of the CBN sought and obtained the approval of President Muhammadu Buhari to redesign, produce, and circulate new series of banknotes at N200, N500, and N1,000 levels. In line with this approval, we have finalized arrangements for the new currency to begin circulation from December 15, 2022. The new and existing currencies shall remain legal tender and circulate together.”
The Governor went ahead to list the worsening shortage of clean and fit banknotes, the increasing ease and risk of counterfeiting evidenced by several security reports and recent developments in photographic technology and advancements in printing devices have made counterfeiting relatively easier, as part of the reasons for the move. On the sidelines were other reasons – a need for the Central Bank to have a better handle on money in circulation, reduce inflation by reducing money hanging around everywhere where the banking sector cannot account for them, reduce speculation against the Naira, and also target criminals whose stock in trade is raw cash by promoting a less cash-heavy economy.
People waited with bated breath for 15 December, 2022, and what that date arrived, the rate of replacement of the old currency has been slow. The Central Bank had to send some of its senior staff to remote areas to gauge the level of awareness and compliance. The experience in the field as I have been told, was that many people were not aware in the rural areas, and many banks had closed shop in those places due to crime and for business reasons. As the initial deadline loomed, it was clear that there was crisis on ground. Many would have lost their livelihoods, and there would have been mass protest if this happened. The rate of production of the new currency seemed a lot slower than the rate of demand, and so some Nigerians started taking advantage, exchanging old notes for new one for huge premium. In all the scarcity, some Nigerians still got their hands on the money for the weekend-ly ‘spraying’ at our ubiquitous owambes. This further fueled anger among the people. Whodunnit? Was it the bankers who hoarded the new currency for their personal benefits? The CBN further directed that banks only pay the new currency through automated teller machines (ATMs). I understand that each of these ATMs could take up to N8 million. But most of them are descended on so fast and empty out in an hour or less. The CBN, in collaboration with other security agencies have also found out several sharp practices being perpetrated by sundry bankers. In fact, the CBN alleges that the initial new currencies rolled out simply disappeared as they suspect politicians cornered them through the banks.
On the 30th of January, a day before the initial deadline, the Governor of the Central Bank of Nigeria announced that on the order of the President, the deadline will be shifted be exactly ten days. But the situation became even tighter and messier afterwards. Somehow cash got tighter to come by and there has been riots on the streets, with many banks destroyed, especially in the Ibadan area.
The CBN instructed banks to go back to paying the new currency across the counter on Thursday February 2, 2023. Governors of APC states also met the president to complain about how the policy is going and the president promised to have a rethink only after the expiration of the new ten days moratorium. I believe the cash scarcity will ease out in a few days. But that is if the already scarcity-crazed people will allow the banking sector to get its act together.
Ramifications of the Problem
The issue here is; ‘what really happened?’ what did someone miss out? We must have a mindset to learn from our mistakes. For me, it is not about noise and finding who to lynch. Inside the lessons of the moment lie the wealth that we need to preserve for public policy and for our children unborn.
In spite of the above issues and points, I believe strongly that but for the timing near the elections, the fact that the CBN is having to learn many things in the process, the radical shifts in the demography and social psychology since 1984 (39 years ago), the unintended consequences that only emerges after the fact, this policy is a good one, and we need to perhaps begin to scale up to polymer notes that are now better done, harder to forge, and that the next time, we should probably give a longer deadline and start early to infuse new notes in the system. Indeed, there is no single staff of the CBN who was there in 1984 remaining there today who could share some institutional memory. Our focus should probably begin to shift to loftier goals rather than the pursuit of kidnappers and forgers. Those ones should be footnotes.
Our banking infrastructure needs urgent rejig. More than anything else, we can see that the abandoned rural areas still contain a lot of value that can be unleashed if we hadn’t taken this philistinic approach of abandoning them and narrowly focusing on where the velocity of money will come from. It is a noted fact that the presence of small banks that can lend money locally for the explosion of productivity around value addition to what a people produce, is a sure way to economic development. That is how they did it in Germany, Japan, even the USA and United Kingdom. Our community banks did not do this when they had the chance, but they could be repositioned and reintroduced. Those banks should also be able to chase liquidity from the same system and organically grow their balance sheet. It’s been very stressful for many Nigerians. Apologies are well deserved from the policymakers and implementers, and even from those who wanted to insert politics into it. Indeed, with hindsight and given the several new issues coming up as a result of our peculiar sociopsychology as a people, apologies are fitting from those of us who supported the policy at its infancy. The timing is too touchy for who we have become. And that is a scary prospect. We are a nation whose people are evolving into very strange creatures… a nation where we may not be able to effect any beneficial policy successfully even for our own good. Also the policy has too many moving parts which sometimes run out of control.
The option left to the CBN is to flood the banking sector with as much currency as possible. No longer can we afford the luxury of waiting for the old money to come in before issuing new ones. New money will have to drive out old. The new currency must soon enough become ubiquitous, and within limits, easy for anyone to get in approved quantities. As policies go, this is one tough one. A SHOCK THERAPY, it must be called. But I believe that poor Nigerians stand to gain eventually from the increased discipline, increased value for money in public procurement, and indeed the confidence that we may now gain from printing currency locally, among other advantages.
‘Tope Fasua, an economist, author, blogger, entrepreneur, and recent presidential candidate of the Abundant Nigeria Renewal Party (ANRP), can be reached through
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