The Central Bank of Nigeria CBN recently announced that it has secured approval to redesign the country’s N200, N500, and N1000 bank notes.
The announcement has been generating heated debate among Nigerians who seem equally for and against the move.
To be clear, governments around the world redesign their currencies from time to time to stay ahead of counterfeiting. But the main criticism against the CBN’s move seems to be the hefty pricetag the redesign will cost the country. Here are answers to 7 questions about the naira redesign.
1. will the redesign reduce inflation?
No. It will exacerbate Nigeria’s already worse inflation numbers. Inflation is when goods and services prices rise over a short period. Nigeria imports almost everything with dollars, and as hoarders are forced to convert their stash into dollars, it is already leading to a crash in the naira exchange rate which will, in turn, lead to an increase in the prices of goods that are imported.
2. Is the Naira getting redenominated?
No. The naira is not getting re-denominated. The last major currency redenomination in Africa was when Ghana redenominated its Cedi in 2007 by removing three zeros from it, and the main reason it did that was to reduce the bulk of cash people carry around. If Nigeria is to do something similar, items worth N1000 will be worth N1 and so on, though the entire range of the country’s currency will be redesigned, not just the larger denomination bank notes.
3. Why is the CBN redesigning the naira?
The main reason for the decision was to fight against counterfeiting, the country’s larger denomination currencies haven’t been redesigned in almost 20 years. Another reason for the naira redesign is the CBN claims that almost 80% of the country’s N4 trillion banknotes is outside the banking system. Most of the currency is in the hands of criminals like bandits and kidnappers, drug dealers and corrupt politicians who hoard money to influence elections.
4. How will the redesign affect the average Nigerian?
Most Nigerians won’t even notice any significant difference during the switchover period. Some businesses might begin to request digital payment only as the deadline date comes closer, bank transfers and POS payments will be required more. Avoid banking halls as much as possible during this period because the banks will be busier with people trying to deposit cash before the January 31 deadline.
5. How will the naira redesign affect insecurity in the country?
Nigeria is facing massive security challenges across the country, criminal gangs often kidnap people and demand cash ransom from their victim’s families. The redesign will force most of them to dispose of their existing loot before the deadline date and it will make getting cash much more complex after that. Some of these criminals might be desperate and try to use legitimate financial institutions to store their loot, which will expose them to law enforcement agencies.
6. When will the newly redesigned naira be released?
According to the CBN, the newly redesigned naira notes will go into circulation nationwide on 15 December. Nigerians will have until January 31, 2023, when all old N200, N500 and N1000 will seize to become legal tender in the country.
7. Is the naira redesign a good idea?
Yes, it is. Those who are concerned about the price tag have valid reasons to be, but the long-term advantages will outweigh the short-term concerns. Besides being an incumbrance to criminals, it will also deepen the adoption of the CBN’s cashless policy as most businesses will begin to ask for digital payments. Digital payments lead to efficient accounting and better efficient tax collection by the government to improve the lots of the average Nigerian.