Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), has stated that the proposed redesign of some naira notes would improve the value of the currency and rein in inflation.
His statement came shortly after he announced the redesigned N200, N500, and N1,000 notes would start circulating by December 15, 2023.
The naira redesign is simply a change in the currency’s appearance and security features. The redesign would have no impact on the face value of the naira.
The apex bank said the policy would enable it to retake control of the excess money outside the banking system, thereby increasing the value of the currency and containing inflation.
- Emefiele said, “The issue is that, as you have heard, as of September 2022, we had N3.23 trillion naira in circulation; out of that, N2.73 trillion is outside the vaults of the banks. So, first of all, we want to mop all the N3.23 trillion back into the CBN so we can retake control of the money supply and see how this will help rein in inflation. No doubt we believe it has a positive impact on inflation.”
Responding to the question of whether the decision to redesign the new notes will impact the value of the naira, the governor said, “well, I do not want just easily to admit that that will happen, but we suspect that this will happen and that it will positively impact the value of the naira because we don’t want to do any speculation.”
CBN deadline on return of old currencies
Godwin Emefiele gave Nigerians 100 days to return the old money to the bank. If nothing changes, the old naira will not be an acceptable legal tender by February 1, 2023.
He added that the “timeline for moping up: I will say today is the 26th, so we have 6 or 7 days to the end of October, till January 31, 2023, which is almost 100days. I think that is adequate to mop up the currency in circulation back to the vaults of the CBN.”
What you should know
Although the CBN has good intentions, the policy could backfire if it forces some people to exchange their naira for dollars to meet the deadlines. Particularly those who are desperate to turn illegal funds into legitimate currency and those who require the money for elections.
This might lead to a spike in demand for dollars, further hurting Nigerians’ position in the currency market. The exchange rate at the black market spiked to N770/$1 on Wednesday as traders awaited the CBN announcement.
