The Central Bank of Nigeria (CBN) has significant hoarding of naira, worsening shortage of clean and fit banknotes as well as the ease of counterfeiting as the reasons behind the decision to redesign and reissue N100, N200, N500 and N1000 notes.
The CBN Governor, Godwin Emefiele, who announced the apex bank’s decision to redesign and reissue the higher denominations of naira on Wednesday in Abuja said, “In recent times currency management has faced several daunting challenges that have continued to grow in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country.”
Emefiele, who stated that hoarding of banknotes by members of the public had resulted in over 80 per cent of the currency in circulation being outside the vaults of commercial banks, added that “As at the end of September 2022 available data at the CBN indicate that N2.7 trillion out of N3.23 trillion currency in circulation was outside the vaults of commercial banks across the country and supposedly held by members of the public.”
Continuing, he said, “Evidently, currency in circulation has more than doubled since 2015, rising from N1.46 trillion in December 2015 to N3.23 trillion as of September 2022. I must say, that this is a worrisome trend that cannot continue to be allowed.”
He added that the worsening shortage of clean bank notes had a negative effect on the perception of the CBN with the attendant increased risk to financial stability.
The CBN helmsman stated further that the current banknotes were easy to counterfeit as evidenced by several security reports.
“Indeed recent development in photographic technology and advancements in printing devices have made counterfeiting relatively easier. In recent years, the CBN has recorded significantly higher rates of counterfeiting especially at the higher denominations of N500 and N1,000 banknotes,” he said.
Emefiele stated that although the global best practice is for central banks to redesign, produce and circulate new local legal tender every five to eight years, the Naira has not been redesigned in the last 20 years.
“On the basis of these trends, problems and facts, and in line with Sections 19, Subsections A and B of the CBN Act 2007, the management of the CBN sought and obtained the approval of President Muhammadu Buhari to redesign, produce, and circulate new series of banknotes at N100, N200, N500, and N1,000 levels”, he added.
Consequently, he enjoined customers of banks to begin paying into their bank accounts the existing currency to enable them to withdraw the new banknotes once circulation begins in mid-December 2022.
In the same vein, he directed all Deposit Money Banks currently holding the existing denominations of the currency to begin returning the notes back to the CBN immediately as the newly designed currency would be released to the banks on a first come, first served basis.
He added, “All banks are therefore expected to keep open, their currency processing centres from Monday to Saturday so as to accommodate all cash that will be returned by their customers.
“For the purpose of this transition from existing to new notes, bank charges for cash deposits are hereby suspended with immediate effect. Therefore, DMBs are to note that no bank customer shall bear any charges for cash returned/paid into their accounts,” Mr Emefiele further stated.
He urged members of the public to note that the present notes would remain legal tender and should not be rejected as a means of exchange for the purchase of goods and services.
He also used the occasion to reassure the general public that the CBN would continue to monitor both the financial system in particular, and the economy in general, and always act in good faith for the achievement of the bank’s objectives and the betterment of the country.