Regulators have said January 31 is the deadline for old notes to be used or deposited in banks.
Nigeria has launched newly designed banknotes, a measure that the West African country’s central bank says will help curb inflation and money laundering.
However, experts are skeptical of such results in a country that has battled chronic corruption for decades, with government officials known to loot public funds, creating more problems for the many struggling with poverty.
The new denominations of 200 ($0.46), 500 ($1.15) and 1,000 naira ($2.30) were launched on Wednesday, marking the first time the Nigerian currency has been redesigned in 19 years. The banknotes will be in circulation in mid-December.
The naira is “long overdue for a new look,” Nigerian President Muhammadu Buhari said at the launch. The new paper banknotes, designed in Nigeria and featuring enhanced security, “will help the central bank design and implement better monetary policy objectives.”
More than 80 percent of the 3.2 trillion naira ($7.2 billion) in circulation in Nigeria is outside commercial bank vaults and in private hands, said Godwin Emefiele, the governor of the Central Bank of Nigeria.
With inflation at 21.09 percent at a 17-year high, driven by rising food prices, he said the new banknotes will “bring hoarded currencies back into the banking system” and help the central bank regain control. get over the money used in the country.
Regulators last month announced a January 31 deadline for old notes to be used or deposited with banks.
“The currency redesign will also help in the fight against corruption as the exercise will be prevalent in the higher denominations used for corruption and the movement of such funds from the banking system can be easily tracked,” said Emefiele.
Analysts, however, say the new banknotes will yield little or no results in controlling inflation or fighting corruption if institutional reforms do not take place.
“If you want to reduce money laundering, your financial system needs to get better; if you want to limit ransom payments, security needs to be better; if you want to curb inflation, the level at which the overall money supply in the economy is growing has to slow – so it’s not about cash,” said Adedayo Bakare, an analyst with Lagos-based Money Africa.
The newly designed denominations would also boost 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 of time” it takes to use or deposit cash in circulation.
According to government statistics, at least 133 million people, or 63 percent of Nigerian citizens, are multidimensionally poor.
“It could slow down the economy if people don’t have cash and people can’t exchange their money for new notes at a rapid rate,” he said. “You can’t phase out cash without establishing financial inclusion or electronic payment and even then.”