With about 20 days to the release of the new naira notes into circulation, President Muhammadu Buhari, this week unveiled the redesigned notes. Whilst there has been mixed reaction to the new notes which still had the same pictures, graphics and texture of the old notes but with a new color of the N200, N500 and N1,000 notes, it has become evident that there is no going back on the December 15, 2022 release of the new notes.
Also, the Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele had at the end of the Monetary Policy Committee (MPC) meeting last week mentioned that the deadline for the current notes in circulation remains January 31, 2023. According to him, there would be no extension as there is ample time for Nigerians including those in the rural areas to deposit their old notes in the banks before the end of the deadline.
Emefiele, whilst fielding questions at the end of the MPC meeting in Abuja had noted that infrastructures have been put in place to ensure that the unbaked as well as those in the rural areas are not left behind in the transitioning form old to new notes.
Although there had been several arguments for and against the move of the apex bank, one aspect that has not been focused on so much is its impact on financial inclusion. The apex bank as well as the banking industry as a whole has been at the forefront of pushing for financial inclusion in the country which has so far achieved 64 per cent financial inclusion.
This is still a long way away from the 95 per cent target that has been set to be achieved by 2024 which is less than two years away. The naira redesign policy alongside some other policy initiatives that had been taken by the apex bank may help in achieving this target.
The naira redesign policy is expected to see the introduction of N200, N500 and N1,000 notes into the economy with effect from December 15, 2022 as the current notes will cease to be legal tender by January 31, 2023.
However, unlike in previous times where individuals can take the old notes to the banks and exchange them for the new notes, the new notes can only be withdrawn from and existing bank account. This means that individuals with the old notes will need to deposit their funds in a bank account wherein they can subsequently make withdrawals in order to be able to get the new notes.
While some may argue that individuals in the rural areas would be adversely affected by this, it should be noted that several policies to cater for them has been put in place. These include agency banking which has permeated most parts of the country.
CBN deputy governor, Financial System Stability, Aishah Ahmad, had noted that policy direction will focus on innovation through investment, licensing new participants while clarifying and refining the regulatory frameworks in other to identify, calibrate and manage the emerging risks by increasing strength building in the financial system.
“Studies show that Nigeria regulatory landscape of the payment system is well developed, more work however must be done in implementing these regulatory frameworks particularly establishing full engagements.
“This is absolutely required to harness the benefits of digital financial services while addressing the risks posed by leveraging new technology and business delivery.”
She added that payment system transformation will play a key role in meeting aspiration wide spectrum of stakeholders in the financial system mechanism and customers will enjoy more efficient services at more favorable prices.
One of such is the licensing on more Payment System Banks (PSBs) which are specifically to cater for the needs of individuals in the rural areas, using technology to reach out to the unreached. As at December 31, 2021, which is the latest data provided by the Nigeria Inter-Bank Settlement System (NIBSS), total bank accounts in the country stood at 191.4 million of which 122.3 million of them are active. Total savings account was 120.4 million while current accounts stood at 49.8 million.
However, with many bank customers running their savings accounts like a checking or current account, they end up not realising the benefits of having a savings account. Recently, the CBN had revised upward the interest rate payable on savings.
“We believe that this exercise would help in increasing financial inclusion, moving towards a more cashless economy, and ensuring greater formalisation of the Nigerian economy,” Emefiele stated at the unveiling of the new notes.
Asides having on impact on financial inclusion in the country, the CBN governor who had earlier mentioned a desire to see Nigeria get to a 100 per cent cashless economy has pointed out that the redesigning of the naira notes will help in achieving this objective.
The CBN governor had noted that the apex bank will henceforth take cashless policy seriously, saying people will fill countless forms and provide their data before they can withdraw large amounts.
“Our policy of redesign and reissue is not targeted at anyone. But of course we have the laws and we will indeed be more intense in ensuring that the provisions of the law and our CBN regulations about the size and volume of currency that people can carry, or hold or withdraw, we will insist that this is done going forward.
“In other countries, in the US, you want to withdraw $10,000 from the counter, you will be interrogated, you will fill numerous forms, they will even track the use of that $10,000 cash that you are withdrawing. Or you want to withdraw £10,000 from the counter, they will refuse and if you insist, then you will fill forms.
“The problems we have had in the past is that we say this is a cash economy. There is no economy that is inbuilt thinking that it has to be cash economy. The world has moved away from predominantly cash to cashless economy. And I think Nigeria and the Central Bank of Nigeria is prepared at this time to move towards a cashless economy.
“And that is the reason for the reissue of these notes. We will insist that cashless would be nationwide. We will restrict the volume of cash that people can withdraw over the counter,” he added.
