Mixed reactions trail CBN’s proposed launch of new notes

Finance experts have expressed mixed feelings over the proposed plan by the Central Bank of Nigeria (CBN) to begin the circulation of new N1,000, N500, N200 and N100 notes.

CBN Governor, Godwin Emefiele, on Wednesday disclosed that the apex bank would on December 15, 2022 begin the circulation of new notes, stressing that the move was to tackle counterfeit, mopping up 80 per cent of currency in circulation outside the vaults of commercial banks and checkmating worsening shortage of clean and fit banknotes in the economy.

In a chat with Westernpost, the CEO Wyoming Capital and Partners, Mr. Tajudeen Olayinka noted that the apex bank is trying to systematically suck back into the banking system, the quantum of money outside the vaults of banks.

“Doing so, CBN will be able to eliminate counterfeit banknotes and reduce the quantum of illegal money/proceeds of crime that are possibly adding up to challenges of inflation.

“As a matter of fact, CBN is attempting to use the new policy as a strategic weapon to controlling inflation.

“More people and businesses will resort to the use of electronic money, by directing their customers and counterparts to pay transactions’ money directly into their bank accounts, to eliminate the risk of receiving counterfeit money.

“Those holding illegal money would attempt to buy foreign currencies in the black market, but might be required to deposit Naira equivalent at the banks which could expose the source of the money they are exchanging because of disclosure requirements.

“So, we might see more temporary pressure on the Naira in the coming days, but could ease off as we approach the deadline.

“In addition, CBN might also be using the new policy to encourage more people and businesses to embrace e-Naira. I think more people will surely embrace e-Naira because of this policy.

“It is obvious CBN is considering several policy options to controlling inflation and possibly stabilize the economy. The truth is that macroeconomic challenges that have bedevilled the economy will not go away overnight, but we must commend CBN for doing something,” he said.

Uche Uwaleke, a Professor of Capital Market Studies and the Chairman of Chartered Institute of Bankers of Nigeria, Abuja chapter, said the decision to replace some naira denominations with new ones would be positive for the economy in the medium to long term.

He explained: “First, although the measure does not amount to demonetization of big currency notes often carried out by Central Banks to curb black money and corruption, it will go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in.

“If it leads to large deposits in banks, it means the banks will have more money to lend which may reduce interest rates. I also think it may have the effect of reducing speculative attacks on the naira in the parallel market.

“I expect that the Financial Intelligence Unit will be on the watch out for huge deposits as a way of monitoring illegitimate transactions.

“Despite the huge cost involved in changing currency notes, I think it’s time to sanitize the system especially now that electioneering activities have kicked off.

“However, I think the deadline of Jan 31, 2023 is short in view of the number of naira denominations involved, from N100 to N1000. The CBN may consider extending it with time.”