February 17, 2023/CSL Research
President Muhammadu Buhari in a nationwide broadcast on Thursday, approved the release of the old N200 note back into circulation for the next 60 days from February 10, 2023 to April 10 2023 when the old N200 notes will cease to be legal tender. The President also approved that all existing old N1000 and N500 notes remain redeemable at the CBN and designated points, in line with Section 20(3) of the CBN Act 2007. He assured Nigerians that his administration will ensure the CBN makes new notes become more available and accessible to citizens through the banks. The President’s broadcast follows fatal violent attacks on banks and bankers across major cities in Nigeria.
Violent protests erupted in some areas ofNigeria over the scarcity of the new Naira notes and the rejection of the old notes by merchants and traders. On Wednesday, protesters destroyed Automated Teller Machines (ATM) and bank branches in three cities. Several people were reported dead. Currently, banks in the country have limited access to cash and ATM withdrawals due to the scarcity of new notes. Some businesses have been refusing to accept the old notes causing huge queues at cash points and disrupting businesses. This has not only led to frustrations but also threatens the successful conduct of the forthcoming elections.
The Central Bank of Nigeria (CBN) had extended the deadline for swapping old Naira notes with the redesigned notes to 10 February 2023. The 10-day extension of the deadline from 31 January 2023 to 10 February 2023 was 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 lose their legal tender status. The CBN Governor, Godwin Emefiele, stated that about 75% of the N2.7tn held outside the banking system has been recovered. That said, the scarcity of the redesigned notes has brought hardship on many Nigerians and has also heightened tensions in the country as we have witnessed long queues in banks.
We reiterate that the objectives of reducing the significant amount of cash outside the banking system to ensure monetary policy effectiveness, curtail criminal activities and promote financial inclusion amongst others are strongly desirable. We however believe the timing and implementation process are flawed particularly with regards to the availability of the new notes. As things stand, Nigerians pay as much as 25% of desired cash at PoS terminals to get money, as ATM machines only dispense minimal cash and have very long queues. Also, the electronic banking channels have had increased transaction failures particularly at the PoS terminals.
