30th October, 2022
Kingsley Moghalu, a former deputy governor of Nigeria’s apex bank, has praised the Central Bank of Nigeria for its ongoing effort to redesign the N200, N500, and N1000 notes.
His commendation is contained in a statement issued on Saturday.
Although Moghalu supported the process, he advocated a 90-day window for implementation.
According to him, the plan is necessary for national security, but the window for implementation is too short.
He said: “I fully support the Central Bank of Nigeria in redesigning of the Naira. If 80 per cent of banknotes in circulation are outside the banks, that is troubling.
“The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender them to get new ones or else it becomes illegal tender after Jan. 31 2023.
“This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation.
“The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go to the parallel forex market to buy hard currency, putting further downward pressure on the value of the Naira as too much Naira will be chasing too few dollars.”
“This will put a lot of operational pressure on commercial banks and the financial system in general. A 90-day window would have been better, but one can understand the need to avoid interfering with the elections.
However, Moghalu expressed doubt that the step would solve inflation.
“Because there also are other major reasons for inflation such as the forex crisis, which this new move can exacerbate, as well as the impact of the security crisis on food price inflation.”