Naira redesign policy, flaws and perceived benefits


In this piece, Odunewu Segun x-rays the flaws and perceived benefits of CBN’s controversial naira redesign policy, and what it has cost Nigerians.

From all indications, the cashless policy of the Central Bank of Nigeria (CBN) has more benefits than drawbacks despite the furor it has generated in the last three months.

However, the slow adoption of e-banking in the country, lack of adequate infrastructure by commercial banks to handle the cashless drive and other macroeconomic factors appear to deflate the purported altruistic intention of President Muhammadu Buhari’s administration to introduce the twin-track policy of naira redesign and new limits on cash withdrawal from banks.

Nigerians got respite on Monday, March 13 after days of speculations when the CBN issued a statement allowing both the old naira notes and redesigned notes to continue to be legal tenders in the country till December 31, 2023 as ordered by the Supreme Court on March 3, 2023 after much fireworks.

This is coming almost 12 days after the Supreme Court issued a ruling brought before it by some governors that the old Naira notes coexist with the redesign notes till December 31, 2023.

The Supreme Court had on March 3, 2023 ruled that old banknotes remain legal tender until the end of the year, bringing relief to millions affected by a chaotic redesign of the naira notes.
The justices said that not enough notice was given to the public before the old notes were withdrawn.


Despite the apex court judgment, the federal government failed to comply with the ruling by keeping mum, fueling the crisis further more.

With little cash in circulation, many people were unable to get cash to pay for food and slept outside banks. Majorly affected by the cash crunch are micro and small enterprises whose owners do not have bank accounts, and as such, cannot not receive online money transfer.

Many of such businesses have been recording low sales, or fold up out rightly. In fact, many POS operators have ceased to operate, as they could not access cash for their potential customers.

Mass demonstrations hit major cities across the nation as the people marched against banks, stripped themselves naked in banking halls and demanded for their money. Banks closed most of their branches as furious customers beat up their workers for the problems caused by the government.

“They made us put all our money into our accounts, and now we can’t access it. It’s unbearable,” says 35–year old Gbenga Awosoro. He works in a construction firm in the Lekki area of Lagos, but has not been able to access his account due to the crisis.

“The last time I went to the shops, I had to buy eggs instead of fish – that really hurt me – not the food, but having to buy what I didn’t want to, just because the banks won’t let me get my money.”

The policy was announced on October 26, 2022 and the new notes were released in mid-December. People were initially given until the end of January to hand in all their old notes, although this had previously been extended amid the chaotic scenes.

Justification amidst pains

According to Emefiele, the move to redesign the currency was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports and increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.

The CBN said it redesigned the higher denomination notes – 200, 500 and 1,000 naira – to replace the dirty cash in circulation, to tackle inflation, curb counterfeiting and promote a cashless society.

Emefiele said that as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable as this has the potential to harm monetary policy actions, further leading to higher inflation and currency speculation, thereby exposing vulnerable Nigerians to further economic hardship.flaws

Areas of flaws

While the policy looks good on presentation, the slow adoption of e-banking, especially in rural areas and other macroeconomic factors remained a major flaw.

Analysts said although the law does not give a procedure for the Naira redesign, a cursory look at global best practices indicates certain sine qua non that are not at play in this instance.

For instance, going by the outcome in India, a six-month timeline proved to be wholly short-sighted and ineffective and achieved none of its grand objectives.

Be that as it may, a herd of analysts agree with Emefiele that the case of Nigeria as an African country is different.
According to a senior economist at SPM Professionals, Paul Alaje, the whole idea was to limit how much cash people have access to, in order to encourage them to make digital payments, so that CBN can monitor where money goes.
“But commercial banks don’t have the capacity or structure to make digital payments work seamlessly, hence the ensuing financial crisis that has been rocking the country in the last two months.”

Analysts views

A Professor of Finance and Capital Markets, Nasarawa State University, Keffi, Uche Uwaleke, argued that the cash withdrawal limit is part of the currency redesign package, adding that the two are mutually dependent.
“If depositors of old currency notes are able to exchange them for new naira notes which get withdrawn from the banks, then the primary aim of currency redesign is defeated. It now behooves the CBN to ensure that bank charges on money transfers and other related charges are reduced to the barest minimum.”
The apex banks, according to reports, withdrew over N2 trillion from circulation, and only printed about N500 billion, creating a scarcity that has nearly brought the country on its knees.

As a result, some bank customers started sleeping at ATM points to withdraw money before dawn thus contributing to the scarcity.

Some commercial banks responsible for the smooth transmission of the financial market into cashless have allegedly been complicit in their role which worsened the hardship experienced by Nigerians.
The network issue of non-alert and failed online transactions during the surge was an avoidable challenge that ought to have been worked on long before the deadline, by upgrading servers and apps.

This is in addition to them reportedly flouting CBN directive on the distribution and circulation of new notes into the economy, while some were accused of hoarding the notes in their vaults.

It has also affected business transactions and it has impacted upon the economy very negatively, where some workers now stay at home because they cannot access money to transport them from one location to another.

At the peak of the crisis, President Buhari in a national broadcast noted that “Notwithstanding the initial setbacks experienced, the evaluation and feedback mechanism set up has revealed that gains have emerged from the policy initiative.

“I have been reliably informed that since the commencement of this programme, about N2.1 trillion out of the banknotes previously held outside the banking system programme have been successfully retrieved. This represents about 80 per cent of such funds.
He thereafter gave approval to the CBN that the old N200 bank notes be released back into circulation and that it should also be allowed to circulate as legal tender with the new N200, N500, and N1000 banknotes for 60 days from February 10, 2023, to April 10, 2023, when the old N200 notes cease to be legal tender.
However, 16 governors from the ruling All Progressives Congress (APC) openly defied President Buhari, advising residents in their various states to continue to spend the old notes.

Reacting to the announcement by the CBN on Monday, president, Bank Customers Association of Nigeria, (BCAN) Dr Uju Ogubunka advised bank customers to be patient.

On the effort of the association on the current issue of new naira notes scarcity he said, “What we have done is the effort we made. We are not operators or regulators; all we can do is to make our little suggestion.

“I believe that that is the best way to go since we still have the old notes, they have not been destroyed yet.

While the majority of Nigerians have described the directive as a good development, others said it will only impact positively if effective and vigorous sensitisation and public enlightenment campaigns are carried out by the CBN to restore the confidence of the people who have been traumatised by the naira crisis.