The Central Bank of Nigeria has given reasons for excluding the lower denomination notes from its plans to redesign the naira notes.
Godwin Emefiele, governor of CBN announced on Wednesday that the bank had received the approval of President Buhari to redesign, produce and circulate new series of banknotes at N100, N200, N500 and N1,000 levels.
The currency is expected to be in circulation from December 15, 2022, while both the new and old currencies will remain legal tender and circulate together until January 31, 2023 when the existing currencies shall cease to be legal tender.
However, Hassan Mahmud, Director, Monetary Policy Operations of CBN, who was featured on Arise TV program on Friday explained that the bank will not redesign the lower denomination of naira notes due to the high cost it attracts.
“The currency that is going to be minted or re-designed is the higher denomination. The larger proportion of the currency unit, because when we talk of seigniorage, we get more seigniorage losses from the lower denominations. This is because the cost of minting those ones is higher than the intrinsic value of the polymer notes.
“The point I’m trying to emphasize is that the cost is not largely going to be such a volume that will negate or take out the benefit that we want to achieve.
“What is important is how the central bank is able to achieve its primary mandate which includes ensuring an efficient and durable currency coupled with the fact that it is a legal tender used for payment settlement within the economy,” he said.
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CBN also said that challenges such as hoarding of banknotes by members of the public, with statistics showing that over 80 percent of currency in circulation are outside the vaults of commercial banks; worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability; and increasing ease and risk of counterfeiting evidenced by several security reports prompted the need to redesign the naira.
According to Ahmed Bello Umar, the Director, Currency Operation of CBN, the bank is not expected to reprint the entire bank notes it plans to withdraw. “We have an agreed indent for next year which we will work with and it is not up to one-third of what we are taking out of the system. And two: we have a delivery schedule with the mint.”
“This will remove the need for us to spend money on print. It will reduce the need for us to spend money in minting, distributing, storing and destroying.
“Then if you look at the other angle, I think most of the cry that people are having with the cost of printing is the fact that people anticipate that we are going to replace N3.2trn bank notes.
The Bank spent a total of N281.07 billion to print banknotes in five years, (2016 and 2020) and while N3.88 billion was spent to destroy mutilated notes within the same period.
According to the 2020 annual report of the CBN’s currency operations department, the cost of printing banknotes was N33.37 billion in 2016, N49.52 billion in 2017 and N64.04 billion in 2018. N75.52 billion was spent on printing new naira notes in 2019 and N58.07 billion in 2020 respectively.
