In a national broadcast on Thursday, President Muhammadu Buhari spoke to the citizens of the country about the Central Bank of Nigeria’s currency swap policy. The scarcity of both old and new notes has negatively impacted economic activities in the country. To address this issue, the President has issued a directive, among many others, stating that only the old 200 naira notes will be considered legal tender until April 10, 2023.
Sympathy for Nigerians
In his address the president said he is aware of the difficulties suffered by many Nigerians due to the actions of some unscrupulous officials in the banking industry who have been entrusted with implementing the new monetary policy. “I am deeply pained and sincerely sympathise with you all, over these unintended outcomes,” said the president.
Banknote Redesign Authorisation
In his address the president went back in time and said that in the last quarter of 2022, he had authorised the Central Bank of Nigeria (CBN) to redesign the N200, N500, and N1000 Nigerian banknotes.
For a smooth transition, he said he had similarly approved that the redesigned banknotes should circulate concurrently with the old bank notes until 31 January 2023, before the old notes ceased to be legal tender.
He said that due to the challenges faced by citizens in getting the new notes, an extension of ten days had been authorised until 10th February 2023 for the completion of the process. He noted that all these activities were being carried out within the ambit of the Constitution, the relevant law under the CBN Act 2007, and in line with global best practices.
Restoring CBN Control
The president went on to state a few critical points underpinning the policy decision. He explained that these points included the need to restore the statutory ability of the CBN to keep a firm control over money in circulation.
He said that when the administration commenced its first term in 2015, Currency-in-Circulation was only N1.4 trillion. He also pointed out that the proportion of currency outside banks had grown from 78% in 2015 to 85% in 2022.
He explained that as of October 2022, currency in circulation had risen to N3.23 trillion, out of which only N500 billion was within the Banking System while N2.7 trillion remained permanently outside the system, thereby distorting the financial policy and efficient management of inflation.
More reasons for Currency Redesign
The president provided some more reasons why the currency redesign is necessary.
He said there is a significant amount of bank notes that are outside of the banking system. This situation has made them practically unavailable for economic activities, which in turn, hinders the attainment of potential economic growth.
He also said that projections for economic growth suggest that the government must aim to expand financial inclusion in the country by reducing the number of unbanked individuals. By doing so, the government hopes to improve economic growth.
Lastly, he said the prevailing security situation in the country has been a major concern for the government, and that the currency redesign will successfully combat banditry and ransom-taking in Nigeria.
New Directives on the Naira Note
The president provided some new directives concerning the naira notes:
- He directed the CBN to deploy all resources to educate citizens on the policy and to provide access to cash withdrawal and deposits.
- He instructed the CBN to collaborate with anti-corruption agencies to penalise those who impede or sabotage the policy.
- He approved the release of old N200 notes back into circulation as legal tender alongside new N200, N500, and N1000 notes for 60 days.
- Existing old N1000 and N500 notes, he said, remain redeemable at the CBN and designated points.
- He encouraged citizens to make deposits and take advantage of platforms and windows provided by the CBN to ease supply pressures.
Few words on the 2023 general elections
The president claimed that the new monetary policy has reduced the influence of money in politics, which he claimed is a legacy of his administration.
He also urged citizens to vote without fear and assured that security will be provided and their votes will count. And finally he admonished citizens to avoid violence and actions that could disrupt the electoral process.