On October 26, 2022, the Central Bank of Nigeria (CBN) announced it would replace its three highest Each individual value in a series of banknotes or coins. More notes within four months. The redesign of the 200 Nairas (NGN, equivalent to USD0.43), NGN500 (USD 1.08), and NGN1,000 (USD 2.17) notes would “check counterfeiting, strengthen the economy, reduce the expenditure on Management and control of cash in circulation. More, promote A process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. While it is recognised that not all individuals need or want financial services, the goal of financial inclusion is to remove all barriers, both supply side and demand side. Supply side barriers stem from financial institutions themselves. They often indicate poor financial infrastructure, and include lack of ne... More, and enhance the CBN’s visibility of the From the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More supply,” according to a CBN brochure.
The CBN sought to reduce the Money in physical form such as banknotes and coins. More reserves hoarded by the public outside the financial system. The money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More in circulation has more than doubled in Nigeria since 2015 (see Graph 1). Currency outside Nigerian banks rose from NGN1.46 trillion in December 2015 to NGN 2.83 trillion in October 2022.
Graph 1. Nigeria: Currency in Circulation, January 2015-December 2022 (NGN trillions)
The new notes would help “entrench the cashless economy,” said Godwin Emefiele, the CBN governor. During the cash swap,
Most Nigerians use cash and have not adopted digital payments.
On January 23, 2023, citizens would get “newly redesigned notes and notes of lower denominations” by depositing their old banknotes at commercial banks without charges. The CBN instructed banks to “load new notes into their ATMs nationwide” of “denominations of “NGN200 and below only” and set up cash withdrawal limits (see Table 1). As of January 29, the CBN had collected about NGN1.9 trillion in old notes.
Table 1. Nigeria: Limits to Cash Withdrawals for Cash Swap (NGN)
The old Naira notes would lose Money that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More status on January 31. However, the CBN began supplying the new notes to banks only in December, leading to a cash shortage.
Some businesses have stopped accepting old notes. Nigerians make long lines to get new notes at ATMs, bank branches, and point-of-sale (POS) operators. Banks in Lagos and Abuja limit cash withdrawals to NGN10,000 (USD 21.71) per customer. Uber drivers cancel trips if passengers don’t pay in cash.
The cash crunch is causing widespread anger and social unrest, with rioters blocking roads in Ibadan, Benin City, and Warri.
The International Monetary Fund (IMF) advised Nigeria “to consider extending the deadline [to replace old notes], should problems persist.” On January 29, the CBN extended it until February 10, and Nigeria’s Supreme Court extended it until February 22.
The CBN insisted it is working “assiduously to increase the circulation of the new notes” and denied a shortage of printing materials caused the delay. While the CBN encourages Nigerians “to embrace and adopt other payment channels,” digital payments have been unable to mitigate the cash crunch:
The cash shortage has raised withdrawal commissions and created a black market for the new Naira notes at inflated prices. The CBN said the Police, tax, and financial authorities would prosecute those who “hawk, sell or otherwise trade in” the newly redesigned banknotes.
The cash shortage happened shortly before the presidential and parliamentary elections on February 25. “The new currency voids old banknotes stored by politicians to buy votes in the upcoming general elections,” said Rafiq Raji, a senior associate with the Africa program at the Center for Strategic and International Studies.