The redesign of currency can have a major impact on the circulation of money in an economy. when a new currency is developed, the old one is not necessarily eliminated, but simply replaced. This means that those who own the old currency must either exchange it for the new version or keep it as a collector’s item. This can equally cause confusion and uncertainty if people are not informed of the new design before the exchange takes place.
Recall on the 26th of October, 2022, the Central Bank Governor, Godwin Emefiele announced that the citizens are expected to swap the old Naira notes of N200, N500 and N1000 respectively with the redesigned ones, for the new notes would circulate together until January 31st 2023, then the old notes would cease to be legal.
This exercise, according to the CBN governor, was taken in order to take control of the currency in circulation and to phase out over 80 per cent of the currency outside the vaults of commercial banks.
This policy from the CBN though intended for good has caused a lot of controversy and sparkle display of absurd behaviours such that citizens are seen in the banking halls screaming and pulling off their clothes to compel the banks to grant them access to their money no matter how little to survive the rash and hard times in the country.
This unfortunate event could be likened to what happened sometime in Greece when the Greek government shut all banks in the country on June 29 2015, after the European Central Bank capped emergency funding to lenders to strict capital controls and foreign transaction limitations.
The outcome of Greece’s capital control has been positive. As a result of the restrictions, the amount of money that could be withdrawn from Greek banks was limited, discouraging people from taking their money out of the banking system. This in turn allowed the Greek economy to slowly recover, and the restrictions were gradually reduced until their complete removal on the 1st of September 2019.
The successful review of Greece’s 3rd bailout memorandum in August 2015 allowed for the further easing of the rules and the inflow of new cash into the banking system. Following the lifting of the restrictions in August 2019, the global markets’ trust in the banking system and the country’s economy was restored, with the opposition Syriza party accusing Mitsotakis’ ruling New Democracy of trying to take advantage of the issue on a communication level.
As of now, Greece is back on the path of economic recovery, although it still has to repay billions of euros to the European Central Bank.
The current situation at the time of this report in Nigeria is that the banks have continued to hoard the new Naira notes for their high net-worth customers or sell them as usual to their clients who resell the same to citizens for their usage. What they fail to realise is that once this is over people will no longer have faith in saving their funds in the bank.
In an ideal society, redesigning a currency should not only increase the circulation of the new notes but ordinally creates a feeling of nostalgia that affect how money is perceived by the public which in turn encourages people to spend more.
We do hope that the CBN governor and all the stakeholders involved should come to terms with the reality of pegging a maximum transaction for Automated Teller Machines and Point of Sales (PoS) at N20,000 per day for individuals subject to N100,000 per week and over-the-counter (OTC) cash withdrawals by individuals and corporate entities at N100,000 and N500,000, respectively.
This policy from Godwin Emefiele the Governor of the CBN has strangulated millions of Nigeria, confusion has also set in, people are hungry, anger mounting all across the cities and businesses closing down due to the unaccessible funds. We do hope that there will be an urgent reversal of the cash withdrawal limit and the time frame for the exchange of old Naira notes to ease the harsh difficult conditions on an entire nation.
