New Naira, Who this?

The release of the new 200, 500 and 1,000 naira notes has been the talk of the town this past week. As usual, as with almost everything else in the country, Nigerians seem to have found a funny side to this recent development. The new design which has the 200 naira note in red, the 500 naira note in green and the 1,000 naira note in blue, caused a stir amongst Nigerians with people surprised about the choice of colors and what the effect of this change would be. While it may seem funny and foreign right now, it’s important to understand that this change is necessary.

Currently, currency management in Nigeria faces rising challenges which continue to threaten the integrity of the central bank of Nigeria (CBN) and the currency itself. This made it a problem for the CBN to perform their key functions — maintaining the integrity of the local legal tender, making its supply effective and promoting efficient monetary policies.

While the new naira would not immediately alleviate all of the problems the currency currently faces as regards foreign exchange, it will help right a lot of wrongs. One of this being that Nigeria has over 80% of the currency in circulation outside the banking system. This alarming situation comes about as a result of consistent and persistent large scale hoarding of the naira. Finding it unacceptable that the country has more than N2.73 trillion of the N3.23 trillion currency in circulation outside the banking sector, the CBN aims to control the supply of money by drastically reducing the cash in the economy — from bank vaults and from the hands of individuals.

Some still argue that inflation might not be tackled due to insecurity and other fiscal problems, the CBN remains adamant that this move is necessary for national security and for the general interest of the economy. The naira redesign also seeks to fight the increasing ease and risk of counterfeiting which has been evidenced by several security reports and to also help in addressing misappropriated election funding that has proved dangerous to the nation’s economy.

By reducing the money in circulation, the CBN is able to adopt its cashless policies which seeks to limit the amount of money in circulation and stops individuals who have large stock of money saved in private residences to be used for fraudulent activities.

Yes, as funny and foreign as the naira notes may look right now, it is important to see beyond this and to focus on the benefits that the change plans to bring. A more stabilized economy, ability to carry out monetary policies conveniently, controlling inflation, fighting corruption and insecurity to mention a few. The redesign couldn’t have come at a better time having to wait 20 years, as the CBN argues that the notes should ideally be redesigned every 5 to 8 years.

The CBN has expressed that this policy is not targeted at any one group but is hugely directed at improving the state of economy by increasing the minting of the eNaira, curbing terrorism and cases of kidnapping and tackling other issues of insecurity.

by The P.A