Naira Redesign: Controversies, fears as CBN takes drastic step to save currency

By Adeleye Kunle

In the face of a record inflation rate, the Central Bank of Nigeria, CBN, within the week, announced the redesigning of Naira’s higher denominations in a bid to take control of money in circulation.

The apex bank set January 31st as the deadline to phase out the existing N200, N500, and N1,000 notes out of circulation and replace them with new notes.

The CBN governor, Godwin Emefiele, while announcing the new policy, said over 85% of Naira notes are outside the vaults of the commercial banks. The CBN governor said specifically, out of the N3.23 trillion in circulation, over N2.27 are out of the vaults of the commercial 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,” he said.

This situation takes away the power of the CBN to regulate money in circulation through monetary policy.

It would be recalled that the bank had raised the Cash Reserve Ratio from 22.5% to 32.5% in order to reduce money in circulation and curb inflation.

To curb inflation, the CBN uses monetary policies to regulate total money in circulation. By reducing the quantity of money in circulation, it helps to curb demand-push inflation, which is derived from the “more money chasing fewer goods” principle