The Central Bank of Nigeria is expected to have destroyed over N6tn worth of mutilated and old banknotes when the regime of the President, Major General Muhammadu Buhari, (retd) expires in May 2023, an analysis by The PUNCH has shown.
Already, data obtained from the annual reports of the currency operations department of the CBN between 2016 and 2020 showed that the apex bank destroyed mutilated banknotes worth N4.1tn during the five-year period. Our correspondent could not readily obtain data on the amount of mutilated banknotes disposed off by the central bank in 2021 and 2022 as of press time on Sunday.
However, the central bank is expected to destroy over 80 per cent of the N3.23tn banknotes currently in circulation as a result of its decision to redesign N100, N200, N500, and N1, 000 bills.
The move will bring the total amount of naira notes destroyed by the current administration to at least N6tn.
The CBN Governor, Godwin Emefiele, announced on Wednesday that the bank would release re-designed naira notes by December 15, 2022.
Emefiele made this announcement during a special press briefing in Abuja where he gave reasons for the move.
According to the CBN governor, the move is aimed at controlling currency-in-circulation as well as curbing counterfeit currency and ransom payments to kidnappers and terrorists.
Meanwhile, a breakdown of the CBN data for the 2016-2020 period showed that in 2016, the apex bank destroyed the sum of N829.94bn in mutilated notes. In 2017, the sum of N977.23bn in mutilated banknotes was again destroyed by the CBN. The years 2018, 2019 and 2020 saw the destruction of N814.59bn, N814.44bn and N698.59bn banknotes, respectively.
Destruction gulps N3.88bn
In a related development, further findings showed that N3.88bn was spent by the CBN to destroy the N4.1tn mutilated banknotes disposed off between 2016 and 2020.
This followed an expenditure of N1.43bn spent on currency disposal in 2016, while the succeeding years of 2017, 2018, 2019 and 2020 witnessed currency disposal costs of N594.6m, N662.2m, N647.8m and N538.5m, respectively.
The development came as some stakeholders continue to criticise the CBN over the plan to redesign the naira notes.
However, experts are divided over the move with some saying the action would worsen inflation.
Speaking on the amount of money spent by the apex bank to destroy old notes as well as the potential cost of printing the new naira notes that will take effect by December 15, 2022, a former Assistant Head of Research at the CBN, Professor Jonathan Aremu, faulted the decision of his former employers.
He said, “Changing of currency notes is not an essential monetary policy tool. Our CBN is part of politicians, so people may read this intention as political geometry for hidden reasons. I am yet to be convinced of the basis for this. Buhari did this in 1985 under his military regime, to do the same again under democratic governance is not clear.
“Some people have said it is part of monetary recklessness and prodigality since it will give opportunity for huge contract and expansion of money supply amid an inflation crisis being faced by the country.”
Similarly, an economic expert and a former member of the CBN’s Monetary Policy Committee, Professor Akpan Ekpo, described the move by the apex bank as ill-timed and one that would further fritter away the much-needed funds from the nation’s coffers.
According to him, the time constraint that will be involved in flushing out the currency-in-circulation will cause untold hardship to Nigerians living in rural communities with no access to banking facilities.
Ekpo said, “The cost will be very high. They are trying to mop up liquidity to curb inflation. The poor people in the villages, and the farmers will suffer because they don’t have access to banks. They will face a lot of hardship to go to the bank and queue up.
“There are elections coming up. The timing is not good. I don’t think it will have much impact. Our inflation is structural.”
Ekpo also slammed Emefiele for insisting that there was no legal obligation for him to consult anyone before taking the decision.
He added, “There are a lot of things that are not legalised. Normally, in economics, monetary and fiscal policy must coordinate for the good of the country. So, even if you don’t need to talk to anybody, you should let the Minister of Finance know what you are doing.
LCCI slams CBN
Also registering its dissatisfaction with the move by the CBN, the Lagos Chamber of Commerce and Industry said redesigning the banknotes, which it said should not be a priority now, was a waste of the nation’s time and resources.
In a statement signed by its Director-General, Dr Chinyere Almona, the chamber said the organised private sector was already enduring a lot of disruptions in local forex supply, exchange rate, and interest rate shocks.
The statement read in part, “Information published in the annual report of the Currency Operations Department of the CBN reveals that the number of pieces of notes in circulation has exploded from 3.2 billion pieces in 2006, following the phased introduction of N100 to N1000 notes from December 1999 to December 2005, to more than 10 billion pieces of all notes as of 2020. More than five billion pieces of these were N100 to N1000 notes.
“Therefore, the CBN is proposing to redesign and replace five billion pieces of the highest four denomination notes, when the appropriate action to take is to coin N100 to N500 notes and replace them with about a billion pieces of larger denomination Naira notes to cut the monumental waste implicit in continuing to print pieces of low-value notes with a short lifespan.”