“Please be advised that the Central Bank of Nigeria [CBN] is on a drive to promote a clean note policy and ensure fit for purpose bank notes are in circulation.
As a result, you are required to deposit all over-circulated and mutilated / damaged Naira notes at any of our branches by 30 August 2019.
These banknotes must fall within the descriptions below:
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An over-circulated banknote (Naira) is one that tends to disintegrate when passed through processing machines, as such rendering handling and processing difficult.
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A mutilated banknote is a currency note (Naira) that has been partially or permanently damaged by fire, flood or soaked, dyed, torn or destroyed by natural disaster and is clearly more than one half of the original size of the banknote and may require special examination to determine its value.”
Some months ago, I received the above notification from my bank that over-circulated and mutilated money should be brought to the bank for exchange to new ones with August 31st, 2019 as the deadline and I thought that by this day, the quantity of those monies should have reduced in circulation. Alas! I still find them all around till today.
In my last article “quantum denomination” I wrote that the mistake Nigerian government often make when implementing the acceptance or non-acceptance of the naira currency is that it always uses the medium of the monetary sector only.
This we have known to always be slow in effectiveness because of the non-synchronization between the fiscal and the monetary sector in the Nigerian economy. What that means is that, whenever the monetary authority issues a circular, it does not always have that ‘fast’ effect on the economy because both the fiscal policy makers and the monetary policy makers are not always working together.
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Secondly, the time lag between the execution of fiscal policy and the impact is short compared to the monetary policy because the fiscal policy is directly proportional to the level and activities of the economy while the monetary policy has to work through the deposit money bank (DMB) to have any effect. The question lies in the fact that how Nigerians transact through these banks or does the activity of these banks have any effect on the Nigerian economy? I’m still yet to find the answer within the Nigerian context.
The Nigerian market is still largely informal and any economic policy has to come to that level. This is the reason we see fiscal policy having its impact quickly than the monetary policy in Nigeria.
Come to imagine that the federal government declared that no mutilated note should be spent from 31st August 2019, that the spender will be arrested and be fined xxx amount or be imprisoned for xxx years. I can categorically tell you that the message will sink into the ears of an average Nigerian. That is just an example though it is backed by force.
Other democratic means can be used such as the use of incentives, rebates, tax payment to banks etc.
That concludes my take that for any monetary policy to have any ground in Nigeria, all government agencies must be involved.