The Central Bank of Nigeria (CBN) has provided an explanation for the exclusion of lesser denomination bank notes from the redesign plans and added that it may only issue one-third of the money now in use.
In response to the multiple controversies concerning the price of printing new notes, the CBN revealed this on Friday.
Godwin Emefiele, the governor of the top bank, stated on Wednesday during an emergency meeting that the N200, N500, and N1,000 notes would be redesigned.
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The lender estimates that the new currencies will go into circulation on December 15, 2022, and that the old notes would lose their legal tender status on January 31, 2022.
According to the CBN, out of the N3.2 trillion in money in circulation, 85% is not in bank vaults.
The CBN stated on Arise TV that the action will also aggressively pursue its cashless agenda while squeezing liquidity out of the system.
In response to the controversy over the decision, Ahmed Bello Umar, Director of CBN’s Currency Operation, stated that redesigning the currency was intentional and was not meant to completely replace the N3.2 trillion to be withheld.
Umar said, “It removes the need for us to spend money in prints. It will reduce the need for us to spend money in minting distributing, storing and destruction.
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“Then if you look at the other angle, I think most of the cry that people are having with the cost of printing is the fact that people anticipate that we are going to replace N3.2trn bank notes.
“The essence is not to do a complete replacement of it. We have an agreed indent for next year which we will work with and it is not up to one third of what we are taking out of the system. And two: we have a delivery schedule with the mint.”
The consequence is that in order to free up more space for other cashless channels, the CBN may print about N1.6 trillion.
The Central Bank of Nigeria (CBN) spent N58.6 billion in 2020 to produce 2.52 trillion Naira worth of notes.
The bank will probably spend more over N60 billion to redesign and reprint the new currency.
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The apex bank’s Hassan Mahmud, Director of Monetary Policy Operations, said that the institution will not change the lower denomination currencies.
“The currency that is going to be minted or re-designed is the higher denomination. The larger proportion of the currency unit, because when we talk of seigniorage, we get the more seigniorage losses from the lower denominations. This is because the cost of minting those ones is higher than the intrinsic value of the polymer notes.
“The point I’m trying to emphasise is that the cost is not largely going to be such a volume that will negate or take out the benefit that we want to achieve.
“What is important is how the central bank is able to achieve its primary mandate which includes other mandate. So ensuring an efficient and durable currency and couple with the fact that it is a legal tender used for payment settlement within the economy.”
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Mahmud claims that the reprinting’s budget is appropriate.
The CBN also stated that the practice of sprinkling naira notes during special events will lessen with fewer notes in circulation.
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