Recently, the Central Bank of Nigeria issued a statement that it has concluded plans to redesign the Naira. The CBN Governor cited money hoarding and counterfeiting as a major reason for it’s decision.
This initiative is laudable, but we need to put the apex bank’s claim through a rigourous scrutiny. Especially, judging from the history of the sort of economic policies adopted by the CBN in recent years, the economic impact of which has deepened Nigeria’s financial woes.
It’s agreeable that redesigning currencies curb counterfeiting. It is also agreeable that redesigning and printing of new currencies will cost billions of Naira of public fund.
CBN should show us through public engagement and credible statistics the percentage of counterfeit to each Naira to warrant this design and printing of new Naira. For want of a more recent report, CBN in it’s 2020 currency report, a total of 67,265 pieces of counterfeit notes with a nominal value of N56.83 million was confiscated in 2020, indicating a 20.80 per cent decrease in volume and 12.18 per cent decrease in value, compared with 84,934 pieces valued at N64.71 million in 2019. The Global standard for number of counterfeit per million is 100. The ratio of counterfeit notes to volume of banknotes in circulation was 13 pieces per million in 2020, compared to 20 pieces per million banknotes in 2019.
The CBN claims that it is also redesigning the Naira due to hoarding. I believe we should investigate this claim further. This is because, currently, Naira-dollar devaluation is so high CBN has to employ artificial valuation. Between last year and this year, Naira has been devalued atleast three times and with the look of things there is likelihood of further devaluation, coupled with an increasing inflation rate; which means that the purchasing power of Naira is weakened. How does it make economic sense that a currency whose value is highly decreasing is been massively hoarded as claimed by CBN. Those that have the capacity to hoard such huge amount are the political class and would also have the sense to convert it to Dollars. The conversion argument further makes the claim of the CBN Governor that a redesign in currency will hamper ransom payment; thereby making it laughable.
It is grand self delusion to believe that Naira redesign in itself will remedy rising inflation in this Country, especially given the fact that this policy has no way to appreciate the value of Naira in the real sense.
CBN should scrutinize it’s many ruinous policies that leads to inflation such as it’s increased penchant to print money for the Federal Government, it’s direct financing of Nigeria’s budget and violating the CBN Act by exceeding the 5% stipulation of ways and means Law , and printing many for State allocations.
There are three major reasons why CBN’s reason for redesigning the Naira should be investigated:
This exercise is not free, neither is it cheap. It will cost billions and billions of tax payers Naira. The redesign, ink purchasing, registering the ink, logistics and printing; these are not cheap. In these days of dwindling revenue, high budget deficit and high debt rate; the money that will fund this is not cheap. According to CBN report the total cost incurred on printing of banknotes in 2020 amounted to N58,618.50 million, this is the amount of printing an existing design; now let’s imagine the cost of printing a redesign and it’s logistics.
So it must be shown through reasonably justifiable means that this is an effective policy and needed at this time.
The risk of over printing, which will lead to further inflation. Going from history, this CBN Governor has a particular penchant for printing money. When too much money is printed it leads to too much money in circulation which is a cause of inflation or hyperinflation. In the bid of printing the redesigned currencies to substitute the old ones, hopefully the Apex bank won’t print more to fund the Government.
Policies of public officers must as a matter of fact always be scrutinized and elaborately considered, especially in a country like ours going through financial crunches. Every financial public policy must be rigourously considered before implementation.
Opatola Victor is an Abuja based legal practitioner and policy analyst.