By ‘Leye Abiola, Haneefah Yusuf, Soliat Adebowale, Chukwunonso Obi and Glory Emmanuel
The Central Bank of Nigeria recently announced its intention to release new designs of the naira in December and it has been one to watch.
Truthfully, the current naira notes have been in circulation for about 20 years. Global best practices require nations to review their currency every 5-8 years but that we have gone 20 without any review places a question on the capability of the Central Bank over the years.
The redesign brings to mind scenarios of an old woman getting a sweet sixteen facelift. Beauty and upgrades are good, but it is clear that the intentions of such deceptive makeovers are not honourable.
Is the naira redesign essential? In some ways. But is it the next thing especially in a time like this when the naira has repeatedly fallen against the dollar and other foreign currencies? We are not quite sure.
Sadly, the controversies surrounding this facelift clearly indicate that this was not a step in the right direction. The Ministry of Finance publicly disavowed the CBN’s announcement with a greater percentage of economic analysts agreeing this is not the next step for our volatile economy.
The CBN’s reasons for the redesign are surprisingly far from the reality of available data from the same apex financial institution. The new currency would curb counterfeiting but statistics show that counterfeiting has significantly reduced.
Similarly, hoarding money to chase fewer goods is not significant enough for a currency change. With the constant devaluation of the naira, why would anyone with sound financial education still hoard cash somewhere? The elites who have access to such funds have probably converted them to dollars or landed properties.
Either way, the printing of new naira notes does not directly do anything to save the fallen naira. What this announcement has only done is create panic- the kind one gets from ice cream bowls used for less honourable purposes. Banks have to extend their working hours and the elite who do not want to risk being outed for hoarding resort to luxurious purchases that only increase the existing inflation rate and further devalue the naira.
This is besides the fact that the cost of printing new notes would take a toll on our existing deficits. Reprinting existing designs in 2020 amounted to N58,618.50 million, imagine how much it would cost to design and print new bank notes. With the end-of-year festivities around the corner and the general elections in less than a quarter, is this really the best time for this?
Politically speaking, opinions in some quarters are that this is a move to get politicians to return cash funds they might have kept for electioneering purposes. Good enough, but speculations are that some new policy may be issued afterwards that will prevent the opposition from withdrawing large sums. Politics is, after all, a dirty game.
A better approach, in our opinion, is to allow the new notes to be circulated at the same time as the existing notes in place of a strict deadline after which the old notes cease to become legal tender. Thus, the old notes fade out by natural attrition and a simultaneous supply of new notes.
We also think that the discordant tunes between the CBN and the Ministry of Finance have gone on for too long. When elephants fight, the grass bears the brunt. We should not expect anything other than instability when major decision-makers cannot agree.
What do you get when you give a 60-year-old grandma a sweet sixteen facelift? A well-contoured face without the graceful wrinkles of old age. But it is the same old woman and try as she may to keep up with the ‘youngies’, it will eventually tell. Change the look, but it is only a matter of time before the internal systems that should have been maintained will fail to match the glam-up.
That is where we may be headed if the CBN does not evaluate this decision. The focus, we believe should rather be on increasing the value of the naira and controlling cash flow. After all, what makes a piece of paper legal tender is the value that has been placed on it.