The Nigerian Central Bank has announced that new redesigned Naira notes will be released to the public from December 15 this year.
According to the Apex bank, N200, N500 and N1000 Notes will be redesigned.
Further details show that by January 31, 2023, existing Notes will no longer be accepted as Legal Tender.
Although there are current concerns that the dollar-to-naira rate may increase as more persons may want to convert their existing naira notes to dollars, instead of depositing them with banks.
Currently, the Dollar to Naira rate is pegged at N438.16
This development has been noted as having dire consequences on the already existing inflation of the country if pressure mounts on the dollar and the foreign exchange is not stabilised, experts say.
However, some others believe that the policy will help control the money in circulation and in the long run have meaningful impacts on the country’s fiscal stabilisation.
The CBN noted that it was going to help reduce insecurity, ‘if money outside the banking vault, used to fund ransom payments and terrorism, begin to dry up.’
Other Things to Note
By January 31st, 2023, you must do away with Old Naira Notes
With the policy of the Central Bank of Nigeria to redesign the Naira notes, this would mean that by the last day of January in 2023, that is three months from now, you may not use the current N200, N500 and N1000 notes for transactions in the country.
The CBN has however been reported as asking that Nigerians go to the banks to deposit the Naira Notes they have with them.
So, if you currently have lots of money in cash (N200, N500 and N1000 denominations)that you cannot exhaust before January 31st, 2023, you may want to deposit the money at any commercial bank in the country. Deposit Transactions below N150,000 will attract no deposit fee, according to affirmations credited to the CBN.
Although the exact amount of the N200, N500, and N1000 notes in circulation at the moment has not been stated by the CBN, a trend analysis gives a possible insight on what percentage these denominations may account for in total value of money in circulation.
Based on the five-year trend above, it may be predictable to say that 94 percent of the value of Nigeria’s currency, currently in circulation will be affected by the CBN’s new redesigning of the Naira. Between 2015 and 2019, the contribution of N1000, N500 and N200 note to the value of currency in circulation has hovered between 93.65 percent to 94.91 percent.
Challenge of the unbanked
However, most of these monies are usually not kept in the banks. A review of recent figures of money in circulation out of banks, shows that 83percent of currency in circulation as at August, 2022 in the country were unbanked.
A Dataphyte report earlier also noted that the volume of money unbanked between January to November, 2021, stood at N26.17 trillion.
The CBN policy of redesigning the currency according to its governor, requires Nigerians to deposit existing currencies in banks latest January 31st, so as to have access to the new notes although over 42 million adult Nigerians were reported to be lacking access to banking services as at December 2021.
36.5percent bank accounts in the country were also reported to be inactive.
The Enhancing Financial Innovation and Access study, a UK’s Foreign Commonwealth & Development Office supported program noted that as of 2020, only 45 percent Nigerians are banked.
This would mean that a larger percentage of the country’s population are unbanked.
The report further noted that only one in every three adults in the Rural areas of the country are banked, with banking services not reaching many places in rural areas. 44percent of the Adult population (18 years and above) in the rural areas are reported excluded from banking services.
The 44percent of the total population of adults in Rural areas quoted by the EFInA, stands at 30.668 million persons excluded from banking activities in Nigerian communities.
Only 4percent of the sampled communities in Nigeria by the ‘Enhancing Financial Innovation and Access’ study have bank branches, 1 percent have Automated Teller Machine (ATM) and 62 percent of these communities have no financial access points.
According to the World Bank most recent data, there are only 4.5 commercial Bank branches to every 100,000 adults in Nigeria and 16.15 ATM’s to every 100,000 adult Nigerians (18 years and above).
Only 32.69 percent of Nigerians who fall under the poor persons category and aged 15 and above as at 2021, have an account with a financial institution or mobile money service provider.
Nigeria has been unable to tackle further access to financial services or ownership of accounts with banks and other financial banking institutions , despite a record for instance, of 1.1 million Point of Sale Terminals, that should aid these access.
The situation of these rural communities and unbanked and CBN redesigning of Naira policy also comes at a time where many states and rural communities have been hit by flooding, causing displacements, sacking of buildings and lack of access to major places.
An economist who prefers not to be named due to the sensitivity of the issue noted that the policy of the CBN is necessary given peculiarities of situations in the country.
The economist also noted that policies evolve over time and during evolution may come with some discomfort but that doesn’t make them bad.
“This is a matter of national security and the efforts put in place by the government are aimed at securing the country, aside from the economic benefits of redesigning the naira notes. Nigeria is not the only one that redesigns its currency, countries do that and as a country, we should not be against policies that can further ramp up development”
On what can be done to ameliorate the challenge of conversion of existing currencies to new ones by rural areas or unbanked, the expert opined that the apex bank should use its regulatory powers to mandate micro-finance banks and other financial institutions to ensure that there is reach to these areas.
This, it was noted, can be very pivotal in helping those in these areas who will be impacted by the CBN policy.
Another policy analyst, Samuel Atiku, told Dataphyte that it was important for the CBN to come up with ways to ensure that those in the rural areas were not cut out from access to finance through its new policy.
He noted that it was going to be difficult if there were not extra provisions considering those who cannot access financial services or even banks in their areas.
Samuel stated that the instance of flooding and banditry shut out some communities already and while the policy of redesigning the Naira is more security oriented than economic, the government should fashion ways of giving hope for those in the rural areas or the unbanked.
Citing an instance of agency banking, Samuel stated that while the policy is not condemnable, it has opened room for more challenges such as for those in rural communities and raised the in-depth thought the CBN gave to the announcement before rolling it out.
While noting that it is very complex to roll out a particular solution to those without access to financial services or banks, the CBN could come up with modalities to capture this set of persons in its plans.
This will be the Fourth Time Nigeria’s Currency will be ‘Redesigned’ Since Independence
This is the fourth time since 1960 that the Nigerian currency will be redesigned, history says.
The first time happened under a military administration led by Muhammadu Buhari in 1984.
In April 1984, the colours of all the banknotes in circulation were changed with the exception of the 50 Kobo banknotes. It was noted that the policy became necessary as a way to tackle prevalent currency trafficking prevalent at that time.
On 28th February, 2007, with a hinge on economic reforms, N20 was issued for the first time in polymer substrate, while the N50, N10 and N5 banknotes; as well as N1 and 50K coins were reissued in new designs. The N2 coin was introduced.
On 30th September, 2009 the redesigned N50, N10 and N5 banknotes were converted to polymer substrate.
The newly announced redesigning of the currency will be the fourth of such redesigning.