New Naira Notes Crisis: Effects on Economic Activities

Last updated on March 13th, 2023 at 11:42 am

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The limited availability of the new naira notes has more woes to the already existing economic hardship in Nigerians face in their personal and business life.

The crisis started the moment Nigerians deposited their old naira notes, but couldn’t withdraw the newly redesigned notes ones or withdraw the old notes.

How the new currency notes crisis started in Nigeria

On October 26, 2022, the governor of the Central Bank of Nigeria (CBN) Godwin Emefiele announced that the apex bank had redesigned NGN200, NGN500, and NGN1,000 naira notes.

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cbn_governor_and_president_buhari_launch_new_naira_notes_in_abuja
L-R: CBN Governor Godwin Emefiele and President Muhammadu Buhari during the launch of the newly redesigned Naira notes at the State House, Abuja, on November 23, 2022. Photo credit: @NigeriaGov

Among other reasons the apex bank cited for redesigning the naira, particularly the higher nominations include:

  • hoarding of over 80% of banknotes by members of the public;
  • higher rates of counterfeiting of higher denominations of NGN500 and NGN1,000 banknotes;
  • too much of naira notes in circulation since 2015 (rising from N1.46 trillion in December 2015 to N3.23 trillion in September 2022.);
  • to fully implement a cash-less policy;
  • to enable security agencies to track anyone who withdrew huge sums to determine its use;
  • the worsening shortage of clean and fit banknotes;
  • to moderate inflate;
  • to curtail the activities of kidnappers and bandits;
  • increasing ease and risk of counterfeiting evidenced by several security reports.

The CBN governor said in a press release:

“On the basis of these trends, problems, and facts, and in line with provisions of sections 2 (b), section 18 (a), and 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 N200, N500, and N1,000 levels.”

CBN Press Release

Unveiling of the new naira notes

As promised, President Buhari officially launched NGN200, NGN500, and NGN1,000 new naira notes on Wednesday, November 23, 2022, at the Presidential Villa in Abuja.

Present at the launching were CBN governor Emefiele; Minister of State for Budget and National Planning, Clem Ogba, and other top government officials.

Deadline for deposit of old naira notes

To realise the rationale behind the redesigning of the naira notes, the CBN boss declared that the deadline for Nigerians to deposit the old naira notes for the new ones would be January 31, 2022

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Emefiele also made it clear, as if he would forever remain the CBN governor, that “CBN must now regularly redesign currency after every five to eight years as policy demands”.

Circulation of the new currency

On Thursday, December 15, 2022, the newly redesigned naira notes went into circulation, instead of the deposit money banks (DMB) to start dispensing it, they resorted to feeding the machines with a mixture of old and new notes across Nigeria.

That day marked the beginning of redesigned naira note crisis in Nigeria as commercials began rationing the newly redesigned currency.

It was discovered that all financial institutions had a limited supply of the new notes, even as the apex urged Nigerians to deposit the old notes over-the-counter and use the ATM to withdraw the newly redesigned notes.

Unfortunately, people who deposited the old notes discovered that the ATMs were dispensing the same old notes they deposited over the counter.

It was a national crisis across Nigeria. ATMs across the country were jampacked by Nigerians who wanted to withdraw from ATM.

Ban Over-the-counter Withdrawal

Through the end of 2022, many Nigerians didn’t see the redesigned notes and some bank officials confirmed that there was an insufficient supply of the new notes.

As the scarcity persisted, there were reports that some bank officials were sabotaging the efforts of the CBN by selling the new notes while the apex bank insisted that there were enough new naira notes to go around.

On Wednesday, January 4, 2023, Mr Emefiele directed financial institutions to stop over-the-counter withdrawal of newly redesigned naira notes.

Enforcing withdrawal limit

As if the orders were not enough, the CBN governor commanded the commercial banks to set the withdrawal limit of the new notes at NGN100,000 for individuals and NGN500,000 for corporate bodies.

The maximum cash withdrawal via ATM per day was pegged at NGN20,000 and NGN100,000 per week.

The announcement further compounded the economic hardship on businesses and individuals, leading to an outburst which forced the CBN to increase the limit to NGN500,000 for individuals and NGN5 million for corporate accounts.

The first review of the withdrawal limit was announced by the CBN on Wednesday, December 21, 2022.

Does the limit solve the problem of naira notes scarcity?

No, because the newly redesigned naira notes were not enough to go around while banks who were trying to meet the January 31, 2023 deadline withheld the old notes.

The governor of Kaduna state Nasir El-rufai who spoke on the economic hardship of the CBN’s policy on cash withdrawal limits alleged that;

“CBN mopped up over NGN2 trillion of the old notes but only printed NGN300 billion of the new notes”.

The Punch

House of Reps Wades Into New Naira Notes Crisis

Aggrieved by the furore the January 31 deadline caused across the country, Nigeria’s House of Representatives sent an invitation to the CBN governor.

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The lawmakers wanted Emefiele to explain to them the feasibility of the January 31, 2023 deadline set for Nigerians to deposit and exchange their old naira notes with the newly redesigned currency notes.

The CBN had jettisoned previous invitations by the House on the deadline until January 31, 2023, when he honoured their invitation.

That’s after the Speaker of the Lower Chamber threatened the apex bank boss with arrest.

Emefiele bowed to pressure and appeared before the House of Representatives Adhoc Committee on Cashless Policy.

During his meeting with lawmakers, he extended the deadline date to deposit the old naira notes for the new notes from January 31 to February 17, 2023, which also means holders of the old notes could spend them till February 10.

“Even if the old notes have exhausted the legal tender status, you can bring it to the CBN, you will not lose your money,” the troubled CBN governor was quoted by ThisDay Newspapers.

Political Undertone to Naira Redesign

When the CBN announced in late October 2022 a plan to redesign the three higher naira denominations, experts differ on the plan ahead of the 2023 General Elections.

While the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf described it as a distraction that should be avoided the CEO of Wyoming Capital and Partners Tajudeen Olayinka believes that the measure would suck back currency outside the bank vaults, according to a report by Vanguard.

Adding more political flavour to the CBN’s naira redesign motive, the Presidential candidate of All Progressive Congress (APC) Asiwaju Bola Ahmed Tinubu alleged that the move was designed to instigate Nigerians against the ruling party under which he’s contesting.

The new naira notes crisis in Nigeria came at a time Nigerians were grappling with fuel crisis.

The two crises brought business activities to a halt while a bank came under attack in Ibadan, Oyo state capital on Friday, February 3, 2023.

Governor of Nasir el-Rufai of Kaduna frankly said on three national TVs that there were cabals within Aso Villa working against the ambition of Tinubu.

He specifically said that some people whose preferred candidate lost the APC presidential ticket to the former Lagos state governor were against him as the party’s standard bearer.

He also alleged that some northern heavyweights wanted the power to return to the Northern region.

Emefiele’s credibility issue

Although the CBN governor assured Nigerians that the exercise had no political undertone, he continues to battle with credibility issues over the naira redesign.

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Emefiele was among APC presidential aspirants who bought the form for NGN100million in 2022.

He was the first CBN governor to take such action and even had the gut to challenge those who said he couldn’t contest for the political post as a sitting CBN governor.

Effects of Naira Redesign on Economic Activities

In December 2022, the World Bank cautioned the CBN over the naira redesign, stating that it would affect the poor and small business owners due to “timing and short transition period”.

Despite the good intentions explained by Emefiele, below are the effects of naira redesign and short deadline on Nigerians and economic activities:

Impact on small businesses

Small businesses that depend on day-to-day cash transactions were unable to access their funds

It led to a drop in patronage because prospective buyers couldn’t access their funds from their banks due to an insufficient supply of the new naira notes.

Business owners who handle perishable goods like tomatoes, and meat  recorded losses

Financial pressure on family

The short deadline for Nigerians to exchange their old notes with new notes and the unavailability of the old and new notes put pressure on breadwinners.

Exposed banks to attacks

Due to the frustration experienced by the people, financial institutions and their staff were exposed to attacks from frustrated customers.

For instance, a branch of Wema bank in Ibadan was destroyed by irate protesters on Friday, February 3, 2023, due to scarcity of naira notes and fuel.

Put POS operators out of business

The scarcity of the old and newly redesigned naira notes pushed some POS operators to close shops. Those who managed to open charged exorbitantly.

Threatens Nigeria’s fragile peace

Already, there were cases of kidnapping, and banditry, so, putting Nigerians under another round of stress to withdraw their hard-earned from their bank account through a chaotic situation could lead to ENDSars-like protests across the country.

Conclusion:

The new naira notes crisis in Nigeria has shown that the management of Nigeria’s apex bank only focused on the benefits of the cash-less policy without recourse to the heavy economic hardship Nigerians go through every day.

It also shows that the CBN, who constantly said there were enough new notes to replace the new ones, may have misinformed the president.

As the policy bites harder on the economic activities of Nigerians, it is expected that the CBN/FG issues a statement to comply with the ruling of the Supreme Court which says the old and new notes should circulate side by side till December 31, 2023.

Author

  • Opeyemi Quadri

    Ope is a finance writer and researcher with 10+ years of experience in content creation. His interests cut across decentralized finance, investment, foreign exchange, government policies and politics.

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