Merits of Naira Redesign, Cashless Initiatives

Merits of Naira Redesign, Cashless Initiatives

James Emejo writes that the naira redesign and implementation of the cashless policy would plug fiscal leakages, boost government revenues, and aid the economic empowerment of vulnerable Nigerians as well as benefit the country as a whole.

Since the CBN embarked on the redesign of the Naira as well as expanded the implementation of the cashless policy programme, which began in 2012, a section of Nigerians, apparently with vested interests have not considered the benefits of the policies but have rather criticised them and tried to stir public objection.

Critics of the cashless policy have argued that it would further impoverish Nigerians and create unemployment in the financial value chain. But they lacked evidence to buttress their rejection.

It is not surprising that most of the objections to the central bank policies are by those who currently benefit from the rot in the system – politicians, and other corrupt public officials who take undue advantage of the opaque system of administration that does not allow for transparency in government business.

Corruption remains the biggest challenge facing the country and has continued to retard its growth trajectory. 

At 62, Nigeria is still groping in the dark in search of its pathway to socio-economic prosperity – bad leadership, weak institutions, and abuse of due process are among a litany of moral and ethical deficits that have held it bound over the years.

Corruption, including vote-buying among others, has also influenced the selection of those in the seat of power: often times those who are not qualified have succeeded, and their performance had been abysmal.

As a result of the lack of transparency in financial dealings, social safety interventions for instance have been compromised as monies end up in private pockets while the vulnerable are left in worse conditions.

Because monies cannot be partly accounted for or traced as a result of physical cash handling, a lot of underhand transactions are perpetrated and often go unnoticed by anti-graft and regulatory agencies.

It is partly in view of the foregoing and the need to address some of the actions that have continued to shortchange the economy and the vulnerable in particular that the central bank, with the permission of President Muhammadu Buhari, decided to redesign the local currency as well as introduce limits on physical cash withdrawals.

Naira redesign

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on October 26, 2022, announced policy initiatives to redesign the N200, N500, and N1, 000 denominations, and subsequently introduced the cash withdrawal limits to regulate the movement of cash in the system as well as solve other challenges including currency counterfeiting among others.  

In announcing the Naira redesign programme, the CBN governor said the move was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports, and the 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.

Emefiele, further explained that there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.

According to him, 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.

However considering the timing of the policies – being an election year – some Nigerians, particularly politicians, believed that the apex bank’s move was targeted against certain individuals and have refused to see beyond their assumptions to know that the actions are in the best interest of Nigerians and the economy if the country must address the current gale of insecurity, corruption and economic sabotage among other actions of some privileged elites who continued to take advantage of a dysfunctional system to short-changed the country.

If anything, there have been early successes of the CBN intervention – the monetary policy committee (MPC) of the central bank recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.

Also, the cashless policy has led to a reduction in banditry and kidnappings, which were rampant in the recent past.


According to Emefiele, the central bank’s principal objective for the currency redesign initiative was to make our monetary policy decisions more efficacious, saying: “We have started to see inflation trending downwards and exchange rates relatively stable.

 “We aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the military is making good progress in this important.

According to him, “Available data at the Central Bank of Nigeria showed that in 2015, Currency-in-Circulation was only N1.4trillion. As of October 2022, currency in circulation had risen to N3.23 trillion out of which only N500 billion was within the banking system and N2.7 trillion was held permanently in people’s homes.

“Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN. It should also be noted that the notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth.”

Emefiele said since the commencement of the programme, the apex bank had collected about N2.1 trillion, “leaving us with about N900 billion”. In essence, the currency redesign policy has helped to mop up monies outside the banking system that had often contributed to rising inflation and currency speculation, which had resulted in foreign exchange challenges in recent times.

The cashless policy

Though the CBN cashless policy began in 2012, but the expansion of its scope following the currency redesign has attracted attention and relevance. Following the naira redesign, the CBN had limited cash withdrawals to N500,000 per week for individuals and N5 million for corporate organisations.

The bank had explained this measure would help to limit the use of cash for illicit activities such as banditry and terrorism financing and help to track the movement of money through electronic channels. If anything, limiting cash handling with reduce the rate of armed robbery and other associated risks.

Cashless Policy Benefits

Experts say that there is no doubt the advantages of the currency redesign exercise will enormously benefit the economy in the long run, as emphasised by the CBN Governor.

If anything, the number of employment opportunities already created by the policies further demonstrates that rather than impoverishing Nigerians, the cashless policy has the potential to boost wealth creation across the country.

Already over 30,000 super agents had been engaged to carry out mobile services across the country. 

Further highlighting the benefits of the cashless policy, Emefiele pointed out that generally, currency redesign policies (sometimes called demonetization policies) are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties.

“Chiefly, it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth,” Emefiele said.

According to him, the macroeconomic impacts of currency redesign are multidimensional and could seem uncertain especially at this early stage when its inconvenience is widespread.

Emefiele said, “By spurring more people to use bank accounts, this policy will further increase bank account ownership and increase the use of accounts by enhancing people’s saving behaviour, and further encourage some hitherto informal business operators to formalize the pattern of transactions and adopt more formal settlement channels.

“In addition, the short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government.”

Speaking on the long-term benefits of the cashless policy, the Central Bank Governor said the policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance.

“As experiences from other jurisdictions have shown, effective currency redesign can support regulatory reform, increased legislative reach and coordinated fiscal and structural policies,” he said.

According to the apex bank boss, the recent policy interventions would also help Nigerians to access easy loans with affordable interest rates.

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