As Naira loses trajectory, expect the government to panic especially in this election season; this policy could be frozen. This line has an unbelievable implication: “The CBN said that it is worrisome that 85 percent of the currency in circulation is being hoarded by Nigerians.” If that data is true, the implication is that we will witness an unprecedented “liquidity” which our financial system is not designed to support in the next 2 months. If the banks are holding just 15% of cash in circulation, if you bring the other 85% into the system, do you think the banks will have the capacity to do the needful in just two months?

The central bank is fixated on a full-play cashless playbook as the digital age arrives. With this redesigning of Naira and planned card issuance scheme, riding on e-Naira, the apex bank will have a clear picture of Nigerians’ financial states. Even taxation will become more efficient.

Yet, the pressure on the poor Naira will be huge as that 85% begins to emerge from underground vaults, political store rooms, criminal estates, bandits’ hideouts, etc. The US dollar will score many easy goals here. Yet, what the apex bank wants to do is noble and a good reset. The challenge is that many pains will be distributed before the light could be seen at the end of the tunnel.

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Comment 1: Ndubuisi Ekekwe, the truth of the matter is that the monetary authority – Central Bank and the fiscal authority – Finance Ministry roles are complementary. The CBN manages the macroeconomic policy of currency stability through low / raised interest rate to helm inflation, drive higher investment, productivity, and employment as well as promote export trade and earn foreign exchange income. The Ministry of finance as the tax policy authority drives same policy objectives and goals through taxation policy. Each of these two important macroeconomic policy management authorities ought to key into the overall macroeconomic policy objectives of the Central Government to drive the GDP.

Unfortunately, in Nigeria, there is no strategic policy direction developed by this government led by qualified and competent economic team and no strategic Vision, Mission, Objectives and Goals for which these two critical macroeconomic management authorities ought to be prominent players. The Nigerian state suffers because of leadership that places politics above economics which defines the ideology/foundation and government and prioritize religion, tribe, connection over merit, competence, and capacity.

Comment 2: The CBN must march on with its naira redesign project, and under no circumstance should the government pause the operation. What is being reported is artificial collapse of the naira, so if it’s meant to bully the state into submission, the state must never back down.

The CBN in collaboration with Intelligence agencies and law enforcers must work at unprecedented level to track the movement of naira. There’s no way N20 billion will enter financial system without being noticed, let alone trillions of naira. What I see most times is that people wish that bad guys succeed while the government fails. It’s warped way of thinking and living, but it’s very real. But you cannot wish for a decent society and still expect evil to win over good, only evil creatures think that way.

I don’t know exactly what is in the mind of the CBN and FG, but we can use this latest event to press a reset button. People don’t suddenly become wealthy, so if the state goes deeper to trace sources of riches and ownership of properties, confessions and recoveries will abound. The judiciary will be very instrumental in this war, but it’s a good war, and surrendering should never be an option.

State powers are almost infinite, individuals cannot defeat a state.

Comment 3: This shows that the alleged hoarders are going straight to the Abokis instead of the banks.

The ambition is huge and its vision is nice, but that’s about the only thing that’s looking nice about this.

The problem is not the objective itself but the fact that the government and its agencies have demonstrated time and again that they lack the competence and capability to achieve their objectives.

NIN Registration was and is still a fiasco, National ID Card issuance is a fiasco, PVC registration and issuance, fiasco, eNaira is not forthcoming, etc. The government is good at initiating outlandish projects but never really delivering them with efficiency. How is this going to be any different? We may see the deadline adjusted since banks don’t have the capacity to absorb the excess liquidity efficiently.

Obviously the government expected that the alleged hoarders would be running back to the financial system via the banks, but ?800/1$ indicates a sudden spike in the demand for dollar.

So if the hoarders are cashing out anyway, doesn’t this defeat the purpose of the initiative after all?

The initiative is necessary, however, given the concussed state of the Nigerian Economy, is this the right moment to be doing this?

Naira Falls to N800/$1 Following CBN’s Move to Redesign the Currency Notes

The sudden decision of the Central Bank of Nigeria (CBN) to redesign naira notes, which has generated a lot of interest in the country, appears to be pushing the embattled currency further down.

On Saturday, the naira spiraled to its lowest fall, hitting N800/$1 in the parallel market – a development attributed to spike in naira to dollar exchange by those who have naira stockpiles.

The CBN announced on Wednesday that it has redesigned N200, N500 and N1,000 notes, adding that all existing currencies will cease to be legal tender from January 2023.

The move, which was quietly carried out, is understood to be a plan by the federal government to deny terrorists, kidnappers and corrupt public office holders the opportunity to spend their illicit funds stockpiled outside the banks.

The Economic and Financial Crimes Commission (EFCC), which described the move as “a well-considered and timely response”, has been urged to work with banks to arrest and prosecute those who will deposit huge funds they can’t defend within the period stipulated by the CBN for the old naira notes to be returned to banks.

However, while the move has been applauded by a large section of Nigerians, there is concern that it will further stoke inflation as those caught in the trap will continue to run to Bureau De Change (BDC) operators to buy dollars with their ill-gotten naira.

Reports indicate that politicians are approaching BDC operators, offering them mouth-watering deals, to convert their stockpiled naira to foreign currencies before the six-week window given by the CBN closes. This means that Nigeria’s FX market is going to experience more strains that will push the naira spiraling downwards.

The central bank governor, Godwin Emefiele, who expressed optimism that the redesign of the naira notes will help tame inflation, said on Wednesday that much of the currency in circulation is outside the banks.

“To be more specific, as at the end of September 2022, available data at the CBN indicate that N2.73 Trillion out of the N3.23 trillion currency in circulation, was outside the vaults of commercial banks across the country, and supposedly held by the public. Evidently, currency in circulation has more than doubled since 2015; rising fromN1.46 trillion in December 2015 to N3.23 trillion in September 2022,” he said.

Against this backdrop, the naira has kept weakening against the dollar, pushing inflation, which stood at 20.7% as at September, further up. The CBN’s attempt to tame it with the naira’s redesign is backfiring.

On Friday, soon after the central bank announced that President Muhammadu Buhari had approved the plan to redesign the naira notes, the currency crashed to N785 against the dollar. Falling further to N800/$1 on Saturday indicates that the naira redesign may cause more harm than good for Nigeria’s economy.

The International Monetary Fund (IMF), on Friday urged Nigeria to apply caution in its plan to redesign and replace naira notes as missteps will undermine confidence in the financial system.