Naira Redesign – Blessing or Curse?

In October 2022, The Central Bank of Nigeria (CBN) announced to the nation that a Naira redesign would be coming into effect from December 15, 2022. Under this program, all old N200, N500 and N1,000 notes were expected to be deposited in the banks in exchange for new notes. Understandably, quite a number of people viewed this with an admixture of circumspection and uncertainty. Various commentators took to the media either in support of the program or to highlight its potential pitfalls. As the terminal date for the phase out of the old notes began, a sense of palpable tension began to envelop the country with politicians leading the horde and citing the “undue pain” the exercise would inflict on the public. The jury is still out on whether these cries were altruistic or self serving but what has become evident is that no one could have foretold that the country would come to such a sorry pass whereby citizens became literally “cashless”. All of a sudden, one could no longer access cash from ATM’s and most banks were still paying the old currency. Suddenly, queues sprang up all around the few ATM’s that were dispensing cash while banking halls were filled to the brim with customers struggling to withdraw the new notes. This has been the situation for the last couple of weeks and only time will tell how this will end.

So what lessons have been learnt. Clearly, the CBN underestimated the volume of cash that is required to effectively turn the wheels of this economy. Whatever the merits of the currency redesign, it bears reflection that same could have been achieved without the needless pain that the common man has had to endure. A simple strategy for me would have been to push out massive volumes of the N100 and N200 notes while making the higher denominations of N500 and N1,000 much scarcer. It is curious that the CBN adopted the converse as its strategy wherein all ATM’s dispense only N1,000 while the lower denominations appear to have limited availability. A report a while back appears to have suggested that bank ATM’s would need to be reconfigured in order to handle the lower denominations. Surely, if this is true, the CBN had enough time to work with the banks to resolve this challenge. Banks have also been accused of being complicit in undermining the CBN policy by either hoarding the new notes or giving them to unscrupulous politicians. While these may be valid, one cannot help but get a sense that a supply chain issue exists somewhere, and despite the CBN’s claim to the contrary, there just doesn’t seem to be enough new notes to go round. Whether this is a deliberate strategy by the CBN or the result of shoddy planning is anyone’s guess.

All said, the time to act is now and the CBN needs to find a way to improve supply and ameliorate the suffering of the populace in accessing their hard earned money. As our elders have frequently admonished, “a word is enough for the wise”.