February 1, 2023/CSL Research

Despite reiterating severally that there would be no extension to the January 31 deadline for the validity of the old 200, 500, and 1,000 Naira notes, the Central Bank of Nigeria (CBN) bowed to pressure, extending the deadline for swapping old Naira notes with the redesigned ones till February 10, 2023. The CBN noted that the 10-day extension of the deadline from 31 January 2023 to0 10 February 2023 is to allow for the collection of more old notes legitimately held by Nigerians and achieve more success with the cash swap in rural communities after which all old notes outside the CBN loses their legal tender status. In compliance with sections 20(3) and 22 of the CBN Act, the CBN also noted that there would be a seven-day grace period, beginning from 10 February to 17 February 2023, allowing Nigerians to deposit their old notes at the Central Bank after the February deadline when the old currency would have lost its legal tender status.

Reducing the amount of money in circulation outside the banking system, thereby enhancing the pass through effects of monetary policies was a major driver of the CBN’s decision to redesign the Naira notes and the CBN Governor, Godwin Emefiele, stated that about 75% of the N2.7tn held outside the banking system has been recovered. He also noted that people in rural areas, villages, the aged, and the vulnerable have had the opportunity to swap their old notes; leveraging the Agent Naira Swap initiative as well as the Naira redesign nationwide sensitization team exercise which is currently ongoing. That said, the roll-out of the redesigned notes, with the scarcity that has come with it, is having a devastating effect on Nigerians. Businesses across the country have started rejecting the old notes as the deadline fast approaches.

In our previous reports, we noted that this policy will adversely affect people in rural areas, given the low number of bank branches in such areas. Many residents of rural areas are experiencing difficulties swapping old notes, mainly because of the exorbitant fees charged by POS operators for the service. This has caused panic as many traders are rejecting the old notes. In trying to come to the aid of citizens, the senate and house of representatives had requested that the CBN extend the deadline for the withdrawal of old Naira notes from circulation by 6 months. They noted that Banks and POS outlets are struggling with a shortage of the redesigned new Naira notes, noting that the old Naira notes should be phased out and not forced out. The house of representatives have rejected the 10 day extension given by the CBN, insisting the CBN Governor must obey section 20 of the CBN Act or risk a warrant of arrest.