Godwin Emefiele, the governor of the Central Bank of Nigeria, CBN, has revealed why the top bank opted to restructure the country’s currency.
The CBN governor gave a speech during a news conference in Abuja about the release of a new naira note, noting that the development came about as a result of ongoing issues with the management of the current series of banknotes and currency in circulation, particularly those outside of Nigeria’s banking system.
The statement reads in part:
Emefiele said “As you all may be aware, currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2 (b) of the CBN Act 2007. Indeed, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank”.
“In recent times, however, 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. These challenges primarily include:
▪ Significant hoarding of banknotes by members of the public, with statistics showing that over 80 percent of currency in circulation are outside the vaults of commercial banks;
▪ Worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability;
▪ Increasing ease and risk of counterfeiting 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 the global best practice was for the central banks to redesign, produce and circulate new local legal tender every 5–8 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 explained
He said In line with the approval, CBN has finalized arrangements for the new currency to begin circulation from December 15, 2022.
The CBN boss explained that the new and existing currencies shall remain legal tender and circulate together until January 31, 2023 when the existing currencies shall seize to be legal tender.
“Accordingly, all Deposit Money Banks that are currently in possession of the existing denominations of money may start surrendering them to the CBN right away. The freshly created currency will be distributed to the banks in first-come, first-served order.
Customers of banks are urged to start depositing existing cash into their accounts so they can withdraw the new banknotes once circulation starts in mid-December 2022. As a result, all banks are required to maintain their currency processing facilities open from Monday through Saturday to accommodate all of the cash that will be repatriated.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”.
“Members of the public are to please note that the present notes remain legal tender and should not be rejected as a means of exchange for purchase of goods and services”. He concluded