Regulators have said January 31 is the deadline for old notes to either be used or deposited at banks.
Nigeria has launched newly designed currency notes, a move that the West African nation’s central bank says will help curb inflation and money laundering.
Experts, however, are sceptical about such results in a country that has battled chronic corruption for decades, with government officials known to loot public funds causing more hardship for the many struggling with poverty.
Launched on Wednesday, the new denominations of 200 ($0.46), 500 ($1.15) and 1,000 naira ($2.30) are the first time Nigeria’s currency has been redesigned in 19 years. The banknotes will be in circulation by mid-December.
The naira is “long overdue for a new look,” Nigerian President Muhammadu Buhari said at the launch. The new paper notes designed in Nigeria and featuring enhanced security “will help the central bank to design and implement better monetary policy objectives”.
More than 80 percent of the 3.2 trillion naira ($7.2bn) in circulation in Nigeria are outside the vaults of commercial banks and in private hands, said Godwin Emefiele, the governor of the Central Bank of Nigeria.
With inflation at a 17-year high of 21.09 percent that is driven by soaring food prices, he said the new notes “will bring the hoarded currencies back into the banking system” and help the central bank regain control of the money being used in the country.
Regulators last month announced a January 31 deadline for old notes to either be used or deposited at banks.
“The currency redesign will also assist in the fight against corruption as the exercise will reign in the higher denomination used for corruption and the movement of such funds from the banking system could be tracked easily,” Emefiele said.
Analysts, however, say the new notes would yield little or no results in managing inflation or in the fight against corruption in the absence of institutional reforms.
“If you want to curb money laundering, your financial system needs to be better; if you want to curb ransom payment, security needs to be better; if you want to curb inflation, the level at which the total money supply in the economy is growing has to slow down — so it is not about cash,” said Adedayo Bakare, an analyst with Lagos-based Money Africa.
The newly designed denominations would also drive financial inclusion and economic growth, the central bank chief said.
But Bakare said the move by Nigeria’s central bank is at best an “expensive process that will cost the public a lot of pain because of the short period” required to either use or deposit cash in circulation.
At least 133 million people, or 63 percent of Nigeria’s citizens, are multidimensionally poor, according to government statistics.
“It could potentially slow down the economy if people do not have cash and people cannot exchange their cash for new notes at a fast pace,” he said. “You can’t phase out cash without fixing financial inclusion or electronic payment and even at that.”