CBN destroys over N6tn banknotes under Buhari

The Central Bank of Nigeria is likely to have destroyed approximately N6tn worth of mutilated and obsolete banknotes by the time the administration of President Major General Muhammadu Buhari (ret.) ends in May 2023, according to an analysis by The PUNCH.Information Guide Nigeria

Already, information collected from the yearly reports of the CBN’s currency operations department between 2016 and 2020 revealed that the central bank destroyed mutilated banknotes worth N4.1tn over the five-year period. As of press time on Sunday, our correspondent was unable to easily get information on the amount of disfigured banknotes discarded by the central bank in 2021 and 2022.

As a result of its plan to revamp the N100, N200, N500, and N1,000 bills, the central bank is projected to destroy more than 80 percent of the N3.23tn banknotes currently in circulation.

The move will increase the present administration’s total destruction of naira notes to at least N6tn.

Godwin Emefiele, governor of the Central Bank of Nigeria, stated on Wednesday that the bank would issue redesigned naira notes by December 15, 2022.

Emefiele made this news at a special press conference in Abuja, where he explained the rationale behind the decision.

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According to the governor of the Central Bank of Nigeria (CBN), the purpose of the action is to manage currency in circulation as well as reduce counterfeit currency and ransom payments to kidnappers and terrorists.

A breakdown of CBN statistics for the period 2016-2020 revealed that in 2016, the central bank destroyed N829.94bn in damaged currency. In 2017, the CBN once again destroyed N977.23 billion in defaced banknotes. In 2018, 2019, and 2020, N814.59 billion, N814.44 billion, and N698.59 billion in banknotes were destroyed, correspondingly.

In a similar development, additional data revealed that the CBN spent N3.88 billion to destroy the N4.1 trillion in disfigured banknotes that were discarded between 2016 and 2020.

This follows expenditures of N1.43 billion on currency disposal in 2016, with costs of N594.6 million, N662.2 million, N647.8 million, and N538.5 million in 2017, 2018, 2019, and 2020, respectively.

Some parties have continued to criticise the CBN over its plan to alter the naira banknotes.

However, experts are divided on the matter, with some arguing that the move will exacerbate inflation.

Professor Jonathan Aremu, a former assistant head of research at the CBN, criticised the decision of his former employers when he discussed the amount of money spent by the central bank to destroy old notes and the potential cost of printing the new naira notes that will take effect on December 15, 2022.

He said, “Changing of currency notes is not an essential monetary policy tool. Our CBN is part of politicians, so people may read this intention as political geometry for hidden reasons. I am yet to be convinced of the basis for this. Buhari did this in 1985 under his military regime, to do the same again under democratic governance is not clear.

“Some people have said it is part of monetary recklessness and prodigality since it will give opportunity for huge contract and expansion of money supply amid an inflation crisis being faced by the country.”

Professor Akpan Ekpo, an economic expert and former member of the CBN’s Monetary Policy Committee, criticised the action by the central bank as ill-timed and one that will further waste the nation’s desperately needed cash.

According to him, the time limitation involved in eliminating the currency in circulation will inflict unimaginable suffering for rural Nigerians without access to banking services.

Ekpo said, “The cost will be very high. They are trying to mop up liquidity to curb inflation. The poor people in the villages, and the farmers will suffer because they don’t have access to banks. They will face a lot of hardship to go to the bank and queue up.

“There are elections coming up. The timing is not good. I don’t think it will have much impact. Our inflation is structural.”

He added, “There are a lot of things that are not legalised. Normally, in economics, monetary and fiscal policy must coordinate for the good of the country. So, even if you don’t need to talk to anybody, you should let the Minister of Finance know what you are doing.

The Lagos Chamber of Commerce and Industry also expressed its displeasure with the CBN’s decision, stating that revamping the nation’s banknotes was a waste of time and resources.

In a statement issued by its Director-General, Dr. Chinyere Almona, the chamber stated that the organised private sector was already experiencing significant disruptions in local foreign exchange availability, exchange rate, and interest rate fluctuations.

The statement read in part, “Information published in the annual report of the Currency Operations Department of the CBN reveals that the number of pieces of notes in circulation has exploded from 3.2 billion pieces in 2006, following the phased introduction of N100 to N1000 notes from December 1999 to December 2005, to more than 10 billion pieces of all notes as of 2020. More than five billion pieces of these were N100 to N1000 notes.

“Therefore, the CBN is proposing to redesign and replace five billion pieces of the highest four denomination notes, when the appropriate action to take is to coin N100 to N500 notes and replace them with about a billion pieces of larger denomination Naira notes to cut the monumental waste implicit in continuing to print pieces of low-value notes with a short lifespan.”JAMB Result

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