Re-designing and replacement of naira notes.

 

                                                                                      

                                    The re-designing and replacement of naira notes by the CBN have been authorized by the presidency. It has been announced that the following existing naira notes will be de-designed and replaced, the notes that are to be given a new look are 1000, 500, and 200 naira notes.

              As issued by the President spokesman “  Mallam Garba Shehu" the decision of CBN to announce the redesigning and replacement of the new naira notes was done with the knowledge of the presidency and the highest ruling organ was convinced that the move will have positive effects on the nation's economy. The endorsement of the presidency was also confirmed by the Minister of finance, Budget, and national planning, she declared that the policy action was not done in isolation, that is to re-design and roll out the new notes.

         It was aired on  Wednesday 26^th of October, 2022 on Tambari TV, stated that the main reason as given by CBN and was stood to convince the president that the economy stands to gain in a way to reduce inflation that is biting harder in the individual earning, pruning down counterfeiting and excess cash in the circulation.

Along the line, the illicit money buried under the soil and in an abandoned corner of their houses will have a great challenge but workers, businessmen, and women with legal incomes will have no problems.  The presidency also emphasized how the designed naira notes will address food security and national security among others.

The CBN also stated that the development is to checkmate the increasing risk of counterfeiting evidenced by numerous security reports, and the higher risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant bad perception of some financial experts that had recommended the CBN, its decision to redesign the naira notes because the policy would have positive effects on the nation's economy at the long run. While some experts asserted that the excess naira notes in circulation outside the banking system would be reduced, and required liquidity for banks, and also more money will be available for banks to lend out to their customers. Though, the policy measure does not amount to the demonetization of big currency notes that are always carried out by the CBN to curb black money and corruption.

         While so much naira outside the banking system :

         The cash-based Nigerian economy has made numerous people not financially included. People that operate in the financial system tend to keep cash as a form of back- up given the erratic nature of the electronic payment system.  Huge illicit funds are kept outside the banking system to avoid scrutiny, the re-designing of currency should aid in bringing some of these secretly kept funds into the financial system, and addressing the basic reasons why people keep and transact large cash, need to be addressed to achieve a better outcome.

                           Wide money supply:

            A lot of money in circulation (M3) grew by 11.05percent in August 2022 compared with, 8.66 percent in July.  This was driven precisely by the growth in net domestic assets (NDA) of 26.19 percent in July 2022 compared with 22.78 percent in the preceding month.  The sustained growth in (NDA) was driven in great proportion by increased claims on the financial corporations and the private sector.  Analysts responded that this is overdue and a lot of things needed to be tried to ensure they do more, at least every 10 years, a country ravaging by kidnapping and imaginable corruption. It means the huge money outside the banking sector, this is known as black money, this ugly system should be flushed out, while the practice of changing money in the street should be discarded. History had it that many countries with stable economies have changed their national currency in the last five years from the U.S to other advanced countries.

         Though many disadvantages, may eventually associate with the redesigning of the nation's naira notes, those with the unexplainable huge amount of naira may seek to buy assets or exchange their illicit funds for hard currencies rather than bring them within the purview of the authorities, thereby fuelling inflation and further depreciation of the naira.

         However, the cost of such an action would be outrageous and misappropriation compared to the expected advantages stated by CBN. Furthermore, as the government is grappling with the fiscal deficit, dept crisis, several revenue crises, and underfunding of many government projects and programs, it is almost inappropriate to embark on such a profligate exercise. Besides, it will come with enormous transport costs and avoidable dislocations to small businesses, most of which are in the former sector. This is an intervention without, there are more teething that demands the attention of CBN. More issues are giving this country sleepless nights daily, rather, such as liquidity in the foreign exchange market, depreciation of the currency, the recent Moody's downgrading of Nigeria's soaring inflation, etc.

                                Could it solve the inflation trend/pressure?

               Expert's opinion, says that the inflationary trends might not be solved immediately, because there are other reasons, why inflation rear its head, such as the forex crisis which the re-designing action could exacerbate, as well as the impact of the security crisis on food price, inflation he added.    

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