Nigeria gets rid of old banknotes
2023.02.08 13:56
Nigeria gets rid of old banknotes
By Ray Johnson
Budrigannews.com – Following moves to replace the old banknotes with new ones, the government, through the central bank, was prevented by the Supreme Court of Nigeria on Wednesday from terminating their legal tender status on Friday.
The decision came shortly after the International Monetary Fund said that Nigeria should think about extending the deadline for exchanging old banknotes because a lack of new notes would disrupt trade and payments.
The central bank of Nigeria made the decision last year to begin issuing new 200, 500, and 1,000 naira notes. At first, people were given until January 31 to get rid of their old notes, which would cease to be legal tender after that date.
In order to better manage liquidity, reduce inflation, and move toward a cashless economy, the bank stated that it wanted to cut back on the amount of cash in circulation.
To have their old banknotes credited to their accounts, customers who had accounts were required to bring them to a bank branch.
It was anticipated that millions of Nigerians without bank accounts, particularly in rural areas, would exchange their old notes for new ones at banking agents.
The central bank extended the deadline until February 10 at the end of January to allow more people in rural areas to exchange their old notes.
The cash in circulation of 3.23 trillion naira ($7.18 billion) was held outside of banks by almost 85% of the population. The central bank stated in January that since October, approximately 1.3 trillion naira had been deposited into banks. In order to achieve its goal of reducing liquidity, the central bank stated that it would limit bank account holders’ weekly cash withdrawals to 100,000 naira beginning in January.
The central bank claims that the new notes’ security features will make them harder to counterfeit, which is another stated goal of the changeover.
Many Nigerians complained that the deadline was too short for people who worked in informal markets or in rural areas.
Politically, the plan came at a delicate time because elections for state governors, local officials, the president, and seats in the National Assembly are coming up in late February and early March.
The plan was criticized as being too severe by politicians, who typically use hard-to-trace funds for campaign contributions.
Analysts questioned whether the operation would help the central bank achieve its stated objective of controlling inflation and the money supply, given that cash only accounts for 6% of Nigeria’s total money supply of 50 trillion naira.
