WHEN CBN GAVE US NAIRA IN A NEW COLOUR
The Central Bank of Nigeria (CBN) unveiled new designs (or colour if you wish) of the N1,000.00, N500.00 and N200.00 denominations of the Naira yesterday, as usual, reactions followed, so were jokes about how you could simply dye the old notes to make them look like the new ones. I have zero technical understanding of how currency designs should work, but I know that people working in CBN have the competence to deliver on the job. For those who may not know, countries in Africa borrow our expertise in Central Banking, CBN seconds its staff to central banks of other countries to put things in place for them.
Was there a redesign? I do understand the jokes about dyeing the Naira, the mood needs to be lightened once in a while, but the claims that no redesign was done is what I cannot place. CBN notified us on October 26, 2022, that Naira would be redesigned, however, it appears that we all had our own expectations of what the redesign should be. Ladies and gentlemen, the current notes cannot be spent after January 31, 2023, they will cease to be what is called a legal tender, they cannot be accepted for transactions anymore and this is the point of the redesign. Is “colour change” a new thing? People who are at least in their 40’s would recollect that the N1.00 note used to have the colour of the current N10.00 and N10.00 used to have the colour of the current N5.00, while N5.00 that we have currently used to have the colour of the last issued N1.00 note. The question that should be on our mind is whether the change will achieve anything? I think it will and I will explain below.
When CBN notified us of the plan to redesign the notes in October, apart from stating that it is standard practice globally to change currency designs every 5–8 years, three reasons were provided;
1) People were hoarding Naira notes; out of N3.2 trillion in circulation, N2.7 trillion were reportedly not in the banking system. 85% was considered too high.
2) Shortage of clean notes. In spite of the fact that new notes are circulated from time to time, something was wrong, we have currency vendors now taking N24,000.00 to sell you N20,000.00 crisp N500.00 notes. A 20% margin selling currency issued by CBN, because the notes were no longer available in the banks.
3) Alarming rate of counterfeiting. This is quite dangerous, if allowed, it can put inflation out of control.
So, did/will CBN’s redisign of notes or “colour change” address those three major reasons? What remains clear was that CBN needed to render the current notes USELESS and I think this is being achieved. Here is a review;
1) Upon the announcement, when people started taking their cash to the banks, it was obvious that people have truly been hoarding the notes (for reasons I’ve not been able to fathom). Every currency has the year of issue printed on it, we started seeing currencies with 2005–2007 dates (15 years plus). If you would check notes you have with you, 2–3 years old is ideal, they get withdrawn once unfit and replacements issued, but some people have been storing the cash — a very difficult to explain act. Only people involved in crimes like drugs trafficking, human trafficking, kidnapping and terrorism etc who do not want their dealings traced to the financial system use large volumes of cash and STORE them by themselves, every other person feels safer keeping their money in the bank.
2) Shortage of clean notes — whether we won’t come back to this situation where we buy and sell currency remains what can only be answered in the future and I will be watching, but truth be told, we have turned abnormal into normal. When I was younger, when N20.00 used to be our highest denomination, banks made crisp 50 kobo, N1.00, and N5.00 notes available to people, sometimes, they enforce giving you those denominations, there was no reason to buy, unfortunately were here today where currency is sold with 20% margin. Whoever has stored those old N200.00, N500.00 and N1,000.00 for sales at parties will be forced to bring them out.
3) Counterfeiting — CBN knows more than us, whoever has invested in producing the old notes has to make new research and investments to be able to counterfeit the new notes and maybe by the time they get it right, we would have been ripe to make another change. The goal is to make counterfeiting unprofitable and yes, EVERY currency in the world is counterfeited.
Cost of Printing New Currencies — I noticed some reactions in this direction as well suggesting that it is a waste and a ploy to just spent money. The simple answer to this is that whether we redesign or not, CBN mints currencies from time to time anyway. The only cost I see here that may be new is the change of security features.
Lastly, I learnt yesterday that only 4 countries in Africa print their currencies in their country and Nigeria is one of the countries. There are 54 countries in Africa, we should be happy tht we are among the giants.
