Market News

Dissecting legality of naira redesign and homegrown monetary policies - NIGERIAN TRIBUNE

FEBRUARY 04, 2023

As Nigerians commend the Central Bank of Nigeria for extending the deadline for existing naira notes to cease being legal tender, CHIMA NWOKOJI looks at the 11-year journey of cashless policy and what the law says about currency redesign in Nigeria.

Based on the foregoing, we have sought and obtained Mr President’s approval for the following: a 10-day extension of the deadline from January 31, 2023, to February 10, 2023; to allow for collection of more old notes legitimately held by  Nigerians and  achieve more success in cash swap in our rural communities after which all old notes outside the CBN lose their legal tender status.”

These were the words credited to the CBN governor, Mr Godwin Emefiele, announcing the extension of deadline for the return of old naira notes.

The buzz word in the media and across Nigeria today is “naira redesign.” It is trending more that “cashless policy.”

Incidentally, naira redesign has become a tool for achieving the cashless policy introduced in 2012. Before now, cashless policy had trended as the naira redesign is doing today.

When the Central Bank of Nigeria (CBN) introduced a policy on cash-based transactions which stipulated a cash handling charge on daily cash withdrawals that exceed N500,000 for Individuals and N3,000,000 for corporate bodies, there was opposition as there is today for the redesign.

The policy on cash-based transactions (withdrawals) in banks, aimed at reducing (not eliminating) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.). When he was announcing the redesign project, the Governor of CBN Mr. Godwin Emefiele had mentioned that Nigeria was heading to a 100 percent cashless economy.

Therefore, industry watchers are convinced that the absence of newly redesigned naira notes could be a deliberate act aimed at fast-tracking the same cashless policy that started 11 years ago.

Why cashless policy?

Although many analysts have contended that the 10 days extension of deadline from January 31 to February 10, 2023 is not enough, they also argue that the CBN has serious production and logistics limitations with regard to the supply of new naira notes and just like the national assembly, they want more time.

“Otherwise, there will be very serious business disruptions, especially within the SMEs space, the informal sector and the rural economy. Many innocent Nigerians will lost their hard-earned money,” the Centre for the Promotion of Private Enterprise (CPPE) had argued in its position paper on the naira.

The most pertinent question therefore is:

Do we need cash, especially if the fight against corruption must be a success.?

The cashless policy was introduced for a number of key reasons, including: To drive development and modernisation of Nigeria’s payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies in the world by the year 2020.

The year has come and gone, but Nigeria, still far from being among the top 20 economies, is pursuing a new vision.

Another reason is to evolve an efficient and modern payment system that positively correlates with economic development, and a key enabler for economic growth.

Others are: To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach as well as to improve the effectiveness of monetary policy in managing inflation and driving economic growth.

The growing shift towards digital payments is strongly debated among governments, central banks and financial experts. Indeed, the proliferation of new electronic and mobile instruments has opened the door to a possible revolution of the payments landscape and experts believe Nigeria must flow with the tide.

To justify a withdrawal of paper money, governments argue that a fully digitised system would eradicate tax evasion and money laundering, reduce transaction costs and enable financial authorities to stimulate economic growth.

A cashless system would indeed, enable governments to track and record every transaction, leaving no loopholes for fraudsters to exploit.

There are suggestions that the demise of paper money would enable governments to exercise full control over the banking system, including tracking and recording all transactions.

Little wonder Nigerians are complaining about scarcity of the newly redesigned Naira banknotes while the CBN governor was busy launching the National Card Scheme to, among other things promote Cashless economy barely over a year after the launch of e-Naira.

CBN analysis showed that only 10 percent of daily banking transactions are above N150,000 but the 10 percent account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10 percent incur in terms of high cash usage.  All that the 90 percent of the banking population can do is to begin to embrace electronic channels of transactions and de-emphsise the use of cash.

In 2017, a Bloomberg analyst, Srinivasan Sivabalan, asked the question: “Do we need cash?”

According to him, humans have used all sorts of things to exchange items of economic value — rare metals, strings of shells and even sunken boulders.

Those objects have gotten more ephemeral, with paper money replacing most coins, the same way digital forms are increasingly supplanting paper.

Could physical cash go away entirely? The answer is no, but less and less of it will definitely be available.

While economists see great payoffs in a cashless society: lower transaction costs, new tools to manage economic growth and an end to tax evasion and money laundering;  critics see an end to privacy, frightening new powers for tyrants and costs that would fall disproportionately on the poor.

“The giant, if unintended, experiment that followed India’s attempt to withdraw 86 percent of cash in circulation showed one thing clearly: the end of cash is not likely to be a neat or simple process in terms of economic activity,” Sivabalan stated.

In 2016, the Indian government under Prime Minister Narendra Modi had a plan to stop corruption and reduce the amount of money in circulation by withdrawing and reintroducing the 500 and 1,000 denominations of the Indian rupee within six months.

In 2018, a Bloomberg report stated that the scheme froze “agriculture and small businesses with a liquidity shock, put people through unnecessary hardship, disrupted supply chains, and destroyed demand for everything from autos to property”.

All these extreme cases according to some finance experts have been foreseen by the CBN and appropriate measures put in place to mitigate them.

CBN staff currently on mass mobilization and monitoring together with officials of the Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices Commission (ICPC) are working together to achieve these objectives.

In the words of Emefiele last week, “The cash-less policy which commenced in 2012, signposts our common drive to strengthen the national payment system and deepen the usage of electronic platforms in Nigeria.

“In line with the National Payments System Strategy, the CBN has been deliberate in collaborating with relevant stakeholders to enhance the national payments infrastructure through initiatives such as the Bank Verification Number (BVN), Real Time Gross Settlement System (RTGS), Shared Agent Network Facility (SANEF), Regulatory Sandbox, Open banking and the eNaira, the Central Bank of Nigeria’s Digital Currency, to mention a few”

Currency redesign in other climes

Analysts said although the law does not give a procedure for the Naira redesign, a cursory look at global best practices indicates certain sine qua non that are not at play in this instance.

For instance, going by the outcome in India, a six-month timeline proved to be wholly short-sighted and ineffective and achieved none of its grand objectives.

In the US, plans to effect the currency re-issuance has been on since 2011 with the first currency to be deployed, 15 years after, in 2026.

Be that as it may, a herd of analysts agree with Emefiele that the case of Nigeria as an African country is different.

Looking at peculiarities of the country, the presidency and the CBN chose  three-month timeline that is now extended, to redesign, produce and distribute new currencies, in a manner that would prevent counterfeiting, encourage a cashless economy, stave-off cash hoarding, encourage financial inclusivity and reduce kidnapping and terrorism in the entire country.

There is “A seven-day grace period, beginning on February 10 to February 17, 2023, in compliance with Sections 20(3) and 22 of the CBN Act, allowing Nigerians to deposit their old notes at the CBN after the February deadline when the old currency would have lost its legal tender status.”

The governor had at different occasions insisted that despite advice offered by the IMF and the World Bank, developing economies such as Nigeria had the liberty of adopting “homegrown solutions” to their economic problems.

His words: “The IMF and World Bank provide advice that we work with. But even at some of our private meetings, we realise that there are challenges, leading us to adopt homegrown solutions to address them.”

He however agreed that both the IMF and World Bank are Nigeria’s prime development banks, and the country had received support from them at different times in resolving some economic challenges, particularly concerning finance.

However, “Nigeria’s situation is very peculiar, and that is why we have continued to engage the IMF and World Bank to show understanding of our local problems. And they are indeed showing understanding,” he reiterated.

To underscore their support and belief in the peculiarity of the Nigerian situation, opposition political parties last week gave reasons in support of the naira redesign project.

The Peoples Democratic Party, the Labour Party and the Zenith Labour Party expressed their views in separate interviews with newsmen, in Abuja, on Friday.

Mr Phrank Shaibu, the spokesperson for the presidential candidate of the Peoples Democratic Party, Atiku Abubakar, said

“Even though the CBN policy affects all 18 political parties, APC is the only one frustrated because their plan to deploy bullion vans and bribe poor voters and security agents on the day of election has failed woefully.”

Speaking in a similar vein, the presidential candidate of the Zenith Labour Party, Chief Dan Nwanyanwu, described the CBN naira redesign policy as a patriotic decision which should be supported by all.

He said “I want to say that the decision taken by the Central Bank of Nigeria and with the approval by President Buhari is the best for this nation.

“It is a patriotic decision taken by CBN as it relates to the new banknote and the time stipulated for the removal of the old note.

“So, whether they are National Assembly members or anybody whatsoever, who is opposed to this is very unpatriotic.

“Must you carry cash in all your transaction? Go and do the transfer? Let us not cry, we have been enduring for seven and half years.

“This money will get back into circulation, immediately after the election, and I suspect CBN will release a little so that Nigeria will have some money in their hands. Those crying are crying because they want money to go and buy votes.”

He added that the CBN has the support of over 95 percent of Nigerians on the project.

Also, the national publicity secretary of the Labour Party, Dr Yunusa Tanko said, “We are not surprised that those at the forefront of cash-and-carry politics, who are used to deploying bullion vans for election purposes are the ones complaining about this laudable government policy targeted at curbing inflation. Look at the inflation figures today; inflation numbers are coming down.”


Sections 18 (a), 18(b) and 20(3) of the Central Bank of Nigeria Act provide the CBN with the power to redesign and re-distribute currencies. According to Section 18, the CBN shall “arrange for the printing of currency notes and the minting of coins; as well as issue, re-issue and exchange currency notes and coins at the bank’s offices and at such agencies as it may, from time to time, establish or appoint”.

Section 20 (3) states that “notwithstanding sub-sections (1) and (2) of this section, the Bank shall have power, if directed to do so by the president and after giving reasonable notice on that behalf, to call in any of its notes or coins on payment of the face value there and any note or coin with respect to which a notice has been given under this subsection, shall, on the expiration of the notice, cease to be legal tender.”

As provided above, the only requirement for reissuing currency is that the CBN intends to do so, arranges for the process to be done, and gives reasonable notice of its intention to do so.


This website uses cookies We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you've provided to them or that they've collected from your use of their services
Real Time Analytics