The minister of finance, budget and national planning, Mrs. Zainab Ahmed, has faulted the plan by the Central Bank of Nigeria to redesign and roll out new N200, N500 and N1000 notes.
Recall that the CBN governor, Mr. Godwin Emefiele, had on Wednesday October 26 announced that the bank would release re-designed naira notes by December 15, 2022 and by January 31, 2023, the current N200, N500 and N1000 denominations would cease to be legal tender.
The move, according to Emefiele, is targeted at controlling the currency in circulation as well as curbing counterfeit currencies and ransom payment to kidnappers and terrorists.
Speaking at the 2023 budget defence session of the senate committee on finance on Friday, Ahmed said neither she nor the other ministers were carried along in the planning and execution of the policy.
Responding to the issue raised by Mr. Opeyemi Bamidele, the minister warned that the new notes could have dire consequences on the value of the Naira.
Bamidele had noted that barely two days after the announcement, the policy had started to have negative effects on the value of the naira to the US dollar.
“Just two days after the announcement of the policy, the value of the naira to a US dollar had risen from N740 to N788 to a US dollar due to massive rush to exchange naira for dollars.
“To me, the policy may be a well -conceived one, but the timing going by realities on ground, is very wrong as the Naira may fall to as low as N1,000 to a US dollar before January 31, 2023 fixed for full implementation of the policy,” Bamidele said.
Responding, the minister said: “We were not consulted at the ministry of finance by CBN on the planned naira redesigning and cannot comment on it as regards merits or otherwise.
“As a Nigerian privileged to be at the top of Nigeria’s fiscal management, the policy, as rolled out at this time, portends serious consequences for the value of the naira to other foreign currencies.
“I will, however, appeal to this committee to invite the CBN governor for required explanations as regards the merits of the planned policy and the rightness or otherwise of its implementation now.”
The consensus among the lawmakers was that the policy might be well-conceived, but the timing was wrong as the naira might fall to as low as 1,000 to the dollar before January 31, 2023 fixed for full implementation of the policy.
However, the CBN said it did not need to consult anyone on the matter.
Spokesman for the apex bank, Mr. Nwanisobi, said in a statement that the CBN remains a very thorough institution that follows due process in its policy actions.
He explained that the management of the CBN had duly sought and obtained the approval of President Muhammadu Buhari in writing to redesign, produce, release and circulate new series of bank notes.
He urged Nigerians to support the currency redesign project, saying it was in the overall interest of Nigerians.
He further said some persons were hoarding significant sums of banknotes outside the vaults of commercial banks.
Furthermore, he noted that currency management in the country had faced several escalating challenges “which threatened the integrity of the currency, the CBN, and the country” adding that every top-rate central bank is committed to safeguarding the integrity of the local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy.
On the timing of the redesign project, Nwanisobi explained that the CBN had even tarried for too long considering that it had to wait 20 years to carry out a redesign, whereas the standard practice globally was for central banks to redesign, produce and circulate new local legal tender every five to eight years.
Assuring Nigerians that the currency redesign exercise was purely a central banking exercise and not targeted at any group, the CBN spokesman expressed optimism that the effort will, among other goals, deepen Nigeria’s push to entrench a cashless economy in the face of increased minting of the eNaira.
This, he said, is in addition to helping to curb the incidents of terrorism and kidnapping due to access of persons to the large volume of money outside the banking system used as a source of funds for ransom payments.
The CBN also allayed concerns about the cost of printing the new notes saying they will come at no outrageous cost as it would be done in-country by the Nigerian Security Printing and Minting Company (NSPMC) in Abuja and Lagos and within the budget of the apex bank.
ThisDay quoted the director of monetary policy, CBN, Mr. Hassan Mahmud and the director, currency operations at the bank, Mr. Ahmad Umar, as saying on a television interview yesterday that 85 per cent of the currency in circulation was being held by 10 per cent of the population who are unable to account for the funds, and that the redesign policy would help reduce money in circulation.
“I think we should look at it from the perspective of what we intend to achieve before you start thinking of the cost. I don’t want to go to the extreme that CBN is supposed to be a profit-making organisation, but it is supposed to achieve certain gains. You must tally those gains in terms of macroeconomic stability or price stability, which are its primary mandate.”
For his part Umar said: “The cost is not largely going to be such volume that will negate or net out the benefits that we want to achieve. What is important is how the CBN is able to achieve its primarily mandate, which includes other mandates of ensuring an efficient and durable currency….
“But again, the emphasis has been that this cost is not even something that is out of what CBN’s budget; it is not extra huge sums that will attract a big hole in the cost of minting the currency.”
On the fall of the Naira in the parallel market after the redesigning announcement, Umar said: “Let me start with the movement in the BDC exchange rates segment of the market. Basically, you can say people are panicking trying to exchange the excess Naira they have for the dollar. But then, we have to remember that they BDC segment of the market is just less than five percent of the entire foreign exchange market.
“I imagine as we progress with the banks receiving old Naira, the BDCs themselves will be in quagmire; they will not be able to explain their sources of getting so much money.
