By Ukpe Philip
Some finance and economic experts have reacted to the redesigning of N100, N200, N500 and N1,000 banknotes by the Central Bank of Nigeria, a move it believes will curb hoarding of naira outside the banking system.
The governor of the CBN, Godwin Emefiele had disclosed during an emergency briefing of the bank held on Wednesday that currency management had faced severe challenges which have continued to escalate.
New notes will be released December 2022, while the old notes will no longer be a legal tender after January 31, 2023.
Emefiele said the challenges primarily include, significant hoarding of bank notes by members of the public with adding that statistics shows that over 85 per cent of currency in circulation are outside banking system.
The decision is coming at about three months to the general election which will commence February 25, 2023.
Ayo Teriba, the Chief Executive Officer of Economic Associates in his reaction told THE WHISTLER that the decision will have no effect on the economy.
Contrary to Emefiele’s claim about the decision improving the naira, Teriba said it will not add to the value of the currency which trades around N757 per dollar at the black market.
He said, “There is no reason why it should have any effect. Currencies get withdrawn from circulation and are replaced with new ones routinely. So, if you want to change the design and withdraw the existing one from circulation, it is not too far from withdrawing worn-out currencies and replacing them with newly printed notes.
“The value of the notes will not change, the colour will change, the picture on it may change but all those things are immaterial from an economic point of view.
“Currencies are printed not to be kept in banks but to be put in circulation. That is why it is called currency in circulation. So, currency in circulation is broken down in to two components: currency outside banks and vault cash- the cash that banks keep aside to honour request for cash by their customers.”
According to him, redesigning currencies is a routine, arguing that only a portion of currencies are supposed to be left in the vault of banks.
Teriba added, “Only a negligible faction of currency in circulation usually stay in banks vault, because it stays in bank vaults in transit. The ultimate destination for every currency that is printed is outside banks so that currency may well circulate from hand to hand for like ten years. That is the proper thing.
For Uche Uwaleke, a Professor of Capital Market Studies and the Chairman of Chartered Institute of Bankers of Nigeria, Abuja Chapter, the decision will curb black money and corruption.
He said, “Although the measure does not amount to demonetization of big currency notes often carried out by Central banks to curb black money and corruption, it will go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in.
“I expect that the Financial Intelligence Unit will be on the watch out 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 sanitize the system especially now that electioneering activities have kicked off.”
Uwaleke also argued that the timeframe given to recall the currency is short given the amount in circulation.
He said if the redesign leads to large deposits in banks, it would mean that banks will have more money to lend which may reduce interest rates.
“I also think it may have the effect of reducing speculative attacks on the naira in the parallel market,” he added.
Professor of Economics at the University of Abuja, Prof Oyinlola Olaniyi, told THE WHISTLER that the decision will be a major shock on people who have hoarded stolen funds that they can’t account for.
Olaniyi said, “If you have old notes, take it to the bank and if have stolen money and you have hoarded it on your house knowing that if you bring it out you will be questioned, then that is exactly one of the things governments wants to achieve.
According to the economist, the withdrawing the old notes will be a way of sanitizing the system.
According to him, people with ulterior motives kick against the decision particularly considering it is happening during election period.
Olaniyi said, “When they (CBN) do things like this, one effect they target is to sort out money that has been hoarded and cannot be spent. It was done by Muhammadu Buhari and Idiagbon when they took over power and politicians were accused of stealing so they change the colour of the naira.”
Olaniyi said the bank’s effort to drive a cashless policy will also be easier to achieve.
He said, “Fortunately, now, we do a lot of transaction via electronic means. Normal people do not carry too much money at home. People are no longer carrying too much money about. What comes to my mind on this is that if people have hoarded money, it will be difficult for them to bring it back into the system because they can’t explain the source.
“If stolen funds are brought into the system, the authorities will know because if you pay money through with BVN, even if it is paid into ten accounts they will still know.”
The post How Issuance Of New Currency Will Affect Politicians, Others — Economists is first published on The Whistler Newspaper
Source: The Whistler.