The central bank of Nigeria has recently given the public notice of the release of new naira notes from denominations of N200, N500 and N1000. This will begin on the December 15th, 2022 and end on the 31st January, 2023. Some may ask, why has the central bank of Nigeria at this time, decided to change the Nigerian naira notes to a new currency. Well, let’s dive a bit more into the various reasons for such changes;
- It is required in banking worldwide as best practice
In best practice of banks worldwide, it is required that the central bank of a country changes the domestic currency at least every five to eight years. In Nigeria, the current naira notes; N200, N500, were released in April 2001 while the N1000 note was released in October 2005. This makes the N200 and N500 approximately 21years old while the latter about 17 years in circulation. In comparison, it is derived from data records that the average lifespan of a $1 bill is between 6 to 7 years, after which it is then replaced due to wear. This of course, brings us to our next point;
- Tackling counterfeit currency
It is no news that our currency has over the years endured the dolor of currency counterfeiting. This has been more rampant with the 500 notes and the 1000 notes. The counterfeiting of currencies has been an age-long battle. Although not peculiar to the naira only, it is solely done for personal gain and could also be motivated by political reasons.
Counterfeit currencies come with its implications; companies and individuals record monetary losses when they fall victim to money counterfeits, the brand image of these . It also reduces the overall value of the Nigerian naira, each time you buy a counterfeit good, a legitimate company loses revenue. This translates to lost profits and the loss of U.S. jobs over time. Moreover, you work hard for your money and by buying from reputable sources, you help to guarantee that you are getting what you paid for.
- Manage Inflation
The Central bank has in recent times, brought out different means by which they could tackle the steep rising inflation in the country. It has implemented measures like increase in interest rates. The introduction of the new Nigerian currency notes will not only fight and tackle counterfeit currencies, it will help curb inflation rates in the country. The annual inflation rate has over-time skyrocketed to an all-time high of roughly about 21%, and this figure is expected to grow at a fast rate by December this year and January the following year. These are due to both internal and external pressures, for example, the ongoing war between Ukraine and Russia has in economically caused a global spike in inflation rates of which Nigeria has not been exempted.
The introduction of the new currency will reduce the number of monies in circulation. Of which the central bank reports that about 15% of customer’s funds lie in the bank, while a large portion of about 85%, lies outside the bank. Of course, the cash laying outside the bank is not within the sphere of control of the central bank of Nigeria.
In summary, this is a good and timely move from the central bank, and we hope to see more intellectual decisions made to improve our economy.