As Clock Ticks for Return of Old Naira Notes

Obinna Chima writes on the need for bank customers to comply with the January 31, 2023 deadline for the return of old N200, N500 and N1,000 banknotes fixed by the Central Bank of Nigeria

With exactly 28 days to the January 31, 2023 deadline fixed by the Central Bank of Nigeria (CBN) for the withdrawal of old N200, N500 and N1,000 banknotes from circulation, it is expected that bank customers would utilise the next few days to comply with the directive.

Expectedly, the October 26, 2022 announcement by the CBN Governor, Mr. Godwin Emefiele, to redesign the naira and the deadline for the return of old banknotes fixed has continued to attract mixed reactions with politicians in particular crying foul.

The exercise, which is coming on the eve of the 2023 general elections had been criticised as politically motivated by a section of the political class.

For instance, the Senate last week urged the central bank to extend the withdrawal date of old currency notes from January 31 to June 30, 2023. The Senate resolution was sequel to a point of order raised by Senator Mohammed Ndume (APC-Borno) during the plenary last Wednesday.

Raising Orders 41 and 51 of Senate Standing Rule, Ndume had said the call for extension of the date should be considered as a matter of urgent national importance in order to forestall imminent hardship on Nigerians.

Ndume had said, “This senate notes that many Nigerian banks on Thursday, December 15, opened their vaults to customers and depositors to exchange their old currency for the newly redesigned currency which has a stipulated deadline of January 31.

“Some Nigerians are already envisaging long queues in the banking hall across the country as a result of people trying to get access to the new naira note.

“The old notes are expected to be in circulation along the new ones until January 31 when the old ones are expected to be phased out.

“It is expected that many Nigerian businesses will start to rig the old notes as soon as banks start paying redesigned notes to customers.”

The lawmaker had also said access to the new notes would be compounded by recent circular by the CBN which limited the amount of cash withdrawal by corporate entities to withdraw within certain period of time.

In his contribution, Senator Adamu Aliero (PDP-Kebbi), also said it was true that in rural areas, people were not even aware that there was going to be currency change.

“So this motion is very apt and timely. If we insist on the date given by CBN, it will cause a lot of hardship for our rural dwellers.

“Majority of our people live in rural areas where there are no banks and PoS. It is appropriate we extend the time as suggested in the motion,”Aliero said.

Notwithstanding the resolution of the Red Chamber, it is instructive to note that just like most central banks around the world, the CBN enjoys operational and monetary policy independence. Therefore, the Senate cannot decide how the apex banking sector regulator would go about its activities.

Section 19 of the CBN Act 2007 empowers the apex bank to issue national currencies in, “such forms and designs and bear such devices as shall be approved by the President on the recommendation of the Board.”

Buhari had on two occasions expressed support for the naira redesign policy and had urged the central bank to continue with the policy. He had also highlighted potential benefits of the policy, saying he did not consider the period of three months for the change to the new notes as being short.

According to him, “people with illicit money buried under the soil will have a challenge with this, but, workers, businesses with legitimate incomes will face no difficulties at all.

“On this change of currency, there will be a lot of money but time has been given, three months is enough for whatever money you have, to get it changed through the legal system. So, I don’t know why people are complaining about it.”

So, the central bank must not once more bow to the pressure from the National Assembly.

The CBN governor had explained that the decision to redesign the naira denominations was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.

Other reasons adduced for the exercise were the need to control currency in circulation – with 80 per cent outside the vaults of commercial banks.

He pointed out that as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks. The scenario was particularly troubling given the country’s high rate of inflation and foreign exchange challenges.

Also, Emefiele recently said the Nigerian payment system had recorded significant achievements since the introduction of the cashless policy in 2012.

The CBN governor, who was represented at a public hearing with the House of Representatives, by Deputy Governor, Financial System Stability (FSS) Directorate, Dr. Aisha Ahmad, said following the successes achieved in the payment system, Nigeria had been adjudged Africa’s undisputed real-time and digital payments leader, with over 3.7 billion real-time transactions in 2021.

 He also pointed out that electronic banking adoption had significantly increased among the Nigerian populace while the cashless policy had further spurred policy innovation that had expanded the breadth and depth of financial system participants, transaction channels, and financial access points.

Emefiele told the lawmakers that CBN’s recent redesigning of the N1, 000, N500 and N200 notes and the nationwide implementation of the cashless policy were intended to further sustain the achievements in the payment system. This was in line with the quest to foster a safe, credible and efficient payment system that would be the pride of all Nigerians and the envy of the world, he stated.

He insisted that the cash withdrawal policy was neither targeted at any segment of the society nor intended to disenfranchise hardworking Nigerian citizens and businesses, as insinuated in some quarters.

Emefiele assured during the hearing in the House that the central bank would continue to monitor the implementation of its monetary policies and be flexible on the limits in response to feedback received.

He said, “We crave the National Assembly’s continued support as the bank continues its implementation of transformational payments and financial industry initiatives in line with its mandate.”

According to him, the CBN’s October 26 pronouncement on the redesigning of some denominations of the naira and its circular of December 6 on the revised cash withdrawal limits and nationwide implementation of the cashless policy had elicited mixed reactions by the public, as keenly noted by the bank.

He said while a segment of Nigerians applauded the policies, others raised concerns, particularly with respect to the effect of the policies on the underserved and rural communities in Nigeria.

Justifying the naira redesign policy, Emefiele stressed that it would help control inflation, as the exercise would help mop up currency outside the banking system, thereby ensuring more reliable data on money supply, which will in turn facilitate better monetary policy formulation and effectiveness.

In addition, he said the policy would boost the appreciation of the naira, as the higher denomination and the volume of banknotes outside the banking system used to speculate on the currency would reduce.

Emefiele stated that the naira redesign programme would help fight banditry and terrorism, as the large volumes of cash used to pay ransom to bandits/terrorists would be reduced.

He explained, “It will assist in the fight against corruption as the exercise would rein in the higher denominations used for this purpose and the movement of such funds from the banking system could be tracked easily.”

The CBN governor noted, “Despite the dominance of highly advanced payment systems, many countries carried out currency redesign to remain ahead of counterfeiters, ensure durability, fight corruption, and reduce the cost of currency management, among other reasons.

“It is against the backdrop of the foregoing that the CBN, in line with its statutory powers as enshrined in Section 2(b) and 19 of the CBN Act 2007, sought and obtained the approval of Mr. President to redesign and issue new series of naira notes in the N200, N500, and N1000 denominations.”

Commenting on the revised cash withdrawal limits, Emefiele noted that the CBN was not unmindful of the concerns raised in response to the new cash withdrawal policy and remained flexible to make the necessary adjustments to ensure wider public acceptance of the policy.

He said, “Consequently, we have reviewed the cash withdrawal limits upwards to N500,000 weekly for individuals (from N100,000) and N5,000,000 weekly for corporates (from N500,000). Furthermore, the applicable charges above the limit have been reduced to three per cent and five per cent, respectively.

“Mobile money agents who provide cash-in cash-out services in rural areas have also been recognised and provided for in the revised guidelines.”

The redesign was also aimed at tackling vote-buying by politicians given that inflation is often spiked-off during election.

The Director General of the Nigeria Financial Intelligence Unit (NFIU), Modibbo Turkur who commended the CBN for the policy of limiting currency withdrawal and the introduction of new currencies, said the NFIU would seal up all government accounts in the early January 2023.

The NFIU boss had explained that most persons that engage in vote buying do so because of free funds at their disposal.

“With the activation and flag up of the accounts, any withdrawals we will be alerted and the report will be sent to the relevant agencies for action.

” We don’t arrest, but be rest assured that we will monitor all withdrawal of huge of funds that is done within the period of the elections. We will also activate flagging off the accounts of the candidates of the political parties and others under our radar.

“We will also strengthen the policy of the CBN, and with the non-cash banking economy, there would be no going on our flag up on cash withdrawals and the early warning system”, the NFIU Boss stated.

The Chairman of the Economic and Financial Crimes Commission, EFCC, Abdulrasheed Bawa, had stated that with the naira redesign and reissue policy, there was need for prompt disclosure of fraudulent activities through the exchange of relevant information about illicit deposits and movement of money through deposit money banks.

“In view of the recent move by the Central Bank of Nigeria to redesign and re-issue higher denominations of the Nigerian currency, the naira, there is a need for us to be proactive and be circumspect of the actions of the criminals who will use the financial institutions to launder illicit funds and commit other nefarious activities.

“It is important for you to understand what this policy is all about, considering the fact that a lot of activities will happen, particularly as the 2023 general elections approach. We want to work with you to get more information on how to deal with these issues,” he had told members of the Association of Chief Compliance Officers of Banks in Nigeria.

Bawa, who stressed that the EFCC believes that the financial institutions have an important role to play in ridding Nigeria of financial and economic crimes, also charged the banks’ compliance officers and BDC operators to be wary of activities of criminals who might want use the financial institutions to hoard monies for the purpose of vote buying.

He emphasised the need for financial institutions to take more seriously the issue of Know Your Customer and improve intelligence sharing with the Commission.

“The EFCC cannot do the job alone. We need to work with you as critical stakeholders, particularly in ensuring a seamless exchange of relevant information to forestall the commission of economic and financial crimes. We need better cooperation, synergy, collaboration, intelligence sharing and, if need be, joint operations with you.

“If there is better management, in terms of communication about the people bringing in monies or the modus operandi being used to disguise this origin of the monies, it will go a long way in tackling the issue of money laundering and financial crimes.

“You are very critical in the fight against economic and financial crimes. This is because at the end of it, money leaves the bank and money goes in, either for deposit or withdrawal,” Bawa said.

Therefore, there is need for Nigerians to support the currency redesign project which is in the overall interest of the economy.