The CBN and Finance Ministry will do well to iron their differences out of the public glare
Last week decision by the Central Bank of Nigeria (CBN) to redesign some Naira denominations (N200, N500, and N1000) has continued to generate considerable debate in the country. While circulation is expected to begin from 15th December 2022, both the new and existing currency notes will remain legal tender until 31st January 2023 when the latter will no longer be accepted. “Although global best practice is for central banks to redesign, produce and circulate new local legal tender every 5–8 years, the Naira has not been redesigned in the last 20 years,” stated the CBN governor, Godwin Emefiele, while announcing the policy.
While we hope that the CBN succeeds in its plan given the enormous cost that would come with failure, several issues have been thrown up. One, older generation of Nigerians who were around during a similar redesign of currency notes in 1984, incidentally when President Muhammadu Buhari was a military head of state, have unpleasant memories to recall. Two, the planned currency change is due to take effect from 31st January 2023 after which the current notes will no longer be legal tender. That is just about three weeks before the presidential election. There are fears that the possible economic and social disruptions from implementing the policy could manifest in a fragile transitional period. Three, the CBN is silent on what would happen to lower denominations (N5, N10, N20, N50 and N100) that are currently in circulation even though inflation has rendered them practically worthless. Are they being phased out? Besides, what happened to the coins that the CBN produced some years ago?
However, more fundamental is the issue of consultations with relevant stakeholders before the CBN announced the policy. Section 19 of the CBN Act 2007 empowers the apex bank to issue the national currencies in “such forms and designs and bear such devices as shall be approved by the President on the recommendation of the Board.” President Buhari has not only confirmed his approval but has also highlighted potential benefits of the policy. But his Minister of Finance, Budget and National Planning, Zainab Ahmad, told National Assembly members that she had no inkling of the policy and if implemented, it would portend great consequences for the economy.
Technically, the CBN is independent, so the governor doesn’t need the permission of the Finance Minister on the issue, especially after securing presidential approval. But the idea of contemplating this kind of high-profile action that will significantly impact the economy without the minister’s input may be counterproductive. Proper political management demands a necessary synchrony of purpose between monetary and fiscal authorities, especially for a policy of great strategic public consequence as this. Therefore, irrespective of what the enabling Act says, horizontal and vertical communications with relevant stakeholders ought to precede the announcement by the CBN.
Now that the president has publicly expressed his support, we hope that the CBN and Finance Ministry will iron out whatever may be their differences out of the public glare. However, part of the indiscipline exhibited by officials under the current administration is externalising things they can resolve internally, including fighting in the open on matters as sensitive as national security. On this issue, the president needs to call his officials to order, having approved the policy. There should be no room for mixed messages. Decisions that affect every Naira in people’s pocket is a matter of grave public interest. When such decisions create dissension among officials who should ordinarily act together through consultation for a common public good, there is a problem.
For the CBN, the jury is still out about the necessity, timing and other issues on this policy. For that reason, failure is not an option.
