Business
Naira redesign: Anxiety as currency hoarders scamper for safe havens
BY EMEKA EJERE
It is getting clearer by the day that the recent decision by the Central Bank of Nigeria (CBN) to redesign the higher denominations of the naira is for the ultimate good of the struggling Nigerian economy.
Although the immediate effect of the policy is not helping the concerted efforts of the apex bank to achieve stability in the foreign exchange market, financial experts have commended the move, saying it would have positive effect on the economy.
The CBN governor, Godwin Emefiele, while announcing the issuance of the new naira notes on October 26, said bank customers should start paying their current notes to enable them withdraw the new bank notes once circulation begins on December 15, 2022.
Emefiele noted that the apex bank had become concerned over some daunting challenges in the management of the existing banknotes in circulation, especially those outside the banking system, insisting that such portend some consequences for the integrity of the CBN and the country at large.
Among the challenges that informed the decision, Emefiele said, was the “significant hoarding” of the banknotes, revealing that N2.73tn out of the N3.23tn currency in circulation as of September 2022 was outside the vaults of the commercial banks across the country.
He also cited the worsening shortage of clean and fit banknotes; increasing ease and risk of counterfeiting evidenced by several security reports and compliance with global standard to circulate new legal tender every five to eight years.
According to him, the naira redesign would also help to counter-terrorism financing, minimise incidents of kidnapping and deepen the cashless economy drive.
He noted, “On the basis of these trends, problems, and facts set out above, and in line with provisions of Sections 2(b), section 18(a), and section 19, Subsections a and b of the CBN Act 2007, the Management of the CBN has sought and obtained the approval of President Muhammadu Buhari to redesign, produce, release and circulate new series of banknotes at N200, N500, and N1,000 levels.
“In line with this approval, we have finalised arrangements for the new currency to begin circulation from December 15, 2022 after its launch by President Muhammadu Buhari. The new and existing currencies shall remain legal tender and circulate together until January 31, 2023 when the existing currencies shall cease to be legal tender.”
Already, there are indications that wealthy Nigerians who stashed cash in their homes are restless in their bid to either change the naira notes to hard currencies, especially the U.S dollars or deposit them in the banks.
Hunting the culprit
On Thursday, Chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa, revealed that three serving state governors are being monitored over their moves to launder stashed billions of naira through table payment of salaries to workers.
The anti-graft agency had sought the collaboration of the Association of Chief Compliance Officers of Banks in Nigeria, as well as Bureau de Change (BDC) operators in the fight against foreign exchange malpractices, money laundering and other fraudulent activities in the nation’s financial sector.
The EFCC had urged them to promptly disclose fraudulent activities about illicit deposits and the movement of money through money deposited in banks.
A statement on Wednesday by the Head, Media and Publicity of the EFCC, Wilson Uwujaren, partly read, “In view of the recent move by the Central Bank of Nigeria, to redesign and re-issue higher denominations of the naira, there is a need for us to be proactive and be circumspect of the actions of the criminals who will use the financial institutions to launder illicit funds and commit other nefarious activities.
“It is important for you to understand what this policy is all about, considering the fact that a lot of activities will happen, particularly as the 2023 general elections approach. We want to work with you to get more information on how to deal with these issues.”
According to Bawa, intelligence at the disposal of the commission showed that the three governors have concluded plans to inject the money into the system through table payment of their state workers’ salaries.
“Let me tell you something, the Intel that I have yesterday and I would want you to take this thing very seriously. Already, some state governors that have some of this cash stashed in various houses and the rest are now trying to pay salaries in cash in their state,” he told a national daily on Thursday.
He said raiding of BDC operators would continue as one of the important ways to protect the system against the laundering of stashed funds.
“They (BDCs) are very important in the sense that a lot of people that have this naira cash will want to convert them to USD or other foreign currencies, that is why they are very important”, he said.
“And based on the known gullibility of these people (BDCs), they are willing to accept this cash from the owners of these monies and they are willing to depart with the foreign currencies that they have and so that is why they are very important and very critical to us in this project that we said to ourselves that we are going to do.”
However, checks by Business Hallmark showed that a dollar went for as high as N895 on the black market on Thursday, despite several raids by the EFCC) in Lagos, Kano and Abuja.
Positive for economy
Meanwhile, some financial experts have commended the CBN for its decision to redesign the naira, saying that it would have positive effect on the economy.
A Professor of capital market at the Nasarawa State University, Keffi, Uche Uwaleke, said the decision will be positive for the economy in the medium to long term. Uwaleke, however, thinks the deadline of Jan. 31, 2023 was too short, considering the number of naira denominations involved, urging the CBN to consider extending it.
He said, “The measure does not amount to demonetisation of big currency notes often carried out by central banks to curb black money and corruption. But it will go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in.
“If it leads to large deposits in banks, it means the banks will have more money to lend which may reduce interest rates. Perhaps, more importantly, with increased currency in circulation now in the vault of banks, I expect to see improvement in monetary policy transmission.”
Uwaleke said it might also have the effect of reducing speculative attacks on the naira in the parallel market in the medium term.
“I expect that the Financial Intelligence Unit will be on the lookout for huge deposits as a way of monitoring illegitimate transactions.
“Despite the huge cost involved in changing currency notes, I think it’s time to sanitise the system, especially now that electioneering activities have kicked off,” he said.
Also, an economist, Dr Tope Fasua, said the measure would have significant effect on the economy, adding that it was essentially about “black money.” He suggested that the CBN should take such measures more frequently.
“When central banks do this, they try to pull in monies people are hiding; illegal money, corruption money, kidnapping money. Nigeria has managed to become a hub for these kinds of illegalities.
“I will even suggest that the CBN does this more often, maybe every 10 years. You will see a scenario where the banks are awash with liquidity. There are many people sitting on billions in naira, and even in dollars. The CBN should also see how it can pull in the dollars,” he said.
A former Deputy Governor of CBN, Kingsley Moghalu, has also thrown his weight behind the decision to redesign naira notes, saying the apex bank is trying to gain control over money supply in the economy.
In a series of tweets, Moghalu said: “I fully support the central bank’s redesign of the naira. If 80% of banknotes in circulation are outside the banks, that’s troubling. The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender to get new ones or else it becomes illegal tender after January 31 2023.”
In the same vein, the Arewa Youths Consultative Forum (AYCF), has urged the EFCC to be watchful as the new policy would expose those with ill-gotten wealth.
AYCF National President, Yerima Shettima, said security operatives should ensure that those with ill-gotten wealth account for how they made their money.
He said: “It goes beyond the issue of kidnapping, we have a situation where money is not in circulation, most of these wicked politicians kept the money in their custody for election and whatsoever purpose.
“People are suffering; so for me, it’s one of the best ideas the CBN has introduced, and Nigerians should support it.
“This money will be forced to come out and some of them must account for how they got the money. They must explain how they got all the money they kept in their private homes.
“The second advantage is that the kidnappers who are in the villages who are hiding money would become jittery; they will bring it out and be forced to deposit it in the bank. People have to account for what they do and explain their source of income.
“The EFCC and other security agencies should be very watchful at this critical point, so that people will begin to account for ill-gotten wealth.”
Meanwhile, the CBN has written to the banks on how to implement the naira redesign policy. The memo was titled ‘Re: Implementation of naira redesign policy’.
In the memo signed by the Director of Banking Supervision, Haruna B. Mustapha, with Reference Number BSD/DIR/CON/LAB/015/064, dated October 31, 2022, the apex bank said banks’ currency processing centres “shall remain open from Monday to Saturday to accommodate all cash that will be deposited by customers.”
