Analysts Note: Is The CBN’s Naira Redesigning Yet Another Déjà Vu?

By Arthur Steven Asset Management


The news that greeted the public on the 26th of October, 2022 was that the Central Bank of Nigeria (CBN) wants to redesign the Naira.

Consequently, the proposal has become highly contentious on the grounds that the redesigning was not a priority for the country that has suffered grave erosion of the value of the Naira.

While many have viewed it as a welcome development, others think it is ill-timed and a cosmetic decision for the bank to save face.

Analysis of the press briefing released shows that the CBN has identified the three highest currency denominations: N200, N500 and N1,000 as the most susceptible to counterfeiting.

In the opinion of the central bank, to combat the myriad of issues that apex bank has identified to be the reason for currency depreciation the central bank with the approval of President Muhammadu Buhari will inject new notes into circulation on the 15th of December 2022.

In the same press release, the apex bank stated that the exchange of old notes for new notes will be ramped up in about six weeks which will end by the 31st of January, 2022.

In order to explore the pros and cons of this decision, we went down memory lane to 1984 when the incumbent president took the same decision and juxtaposed the expectations of the CBN with current reality and came up with our opinion on the subject matter.

Reasons for the decision

  • 85% of the currency notes in circulation are being hoarded and in naira terms this amounts to N2.73trn out of the N3.23trn in circulation as at the end of September 2022.
  • The currency in circulation has more than doubled since 2015; rising fromN1.46 trillion in December 2015 to N3.23 trillion in September 2022. Which the bank thinks it is worrisome and should be forestalled.
  • Worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability;
  • Rising ease and risk of counterfeiting evidenced by several security reports.
  • Adherence to global best practice. Central banks ought to redesign, produce and circulate new local legal tender every five to eight years but the current currency has been in use for 20 years.
  • The prevailing and evolving circumstances could impinge the optimal performance of the Naira.

Expectation of the CBN

The CBN governor believe that the redesign of the currency will achieve:

  • Deepening of the drive to entrench cashless economy as it will be complemented by increased minting of the eNaira.
  • Facilitation of the reining in of the currency outside the banking system into the banking system which will make monetary policy more


  • Combating the incidents of terrorism and as the large volume of money outside the banking system used as source of funds for ransom payments will begin to dry up.

Is the redesigning of the Naira yet another Déjà vu?

One thought running through the minds of Gen X and older generations after hearing the news about the redesigning of the Naira is a replay of the 1984 experience. History they say has a way of repeating itself and this can be said to be true of the decision to redesign the Naira notes.

In April 1984, the central bank of Nigeria under the Muhammed Buhari regime who coincidentally is the incumbent president of Nigeria changed the colors of all the banknotes in circulation with the exception of the 50 Kobo banknote to arrest currency trafficking prevalent at the time and which was to be achieved in under two weeks.

However, the intent of the change was not achieved as this created more disruption in the economy.

According to reports, there was trauma and suffering in the land. Land borders were sealed and everyone leaving the country by sea or air was searched for old bills, as Nigerians lined up at banks to deposit their money while waiting for the new notes.

The banks at that time had neither a sufficient quantity of new notes nor the capacity to distribute what they had to all their customers. People with money in the banks queued for days without success and could not feed their families because they could not access their own money.

As a result of the desperate times calls for desperate measures approach, the exchange rate had suffered instability ever since. In 1983, $/N was N0.894 and dropped to N4.02 to the dollar in 1984 currently the naira is exchanged at N438 and N735 to a dollar in the official market and the parallel market respectively.

How realistic are the expectations?

The 1984 experience remains a pointer to the fact that a fire brigade approach to solving an endemic problem yields less than expected results. However, the CBN has some quick wins with this approach some of which include:

  1. Difficulty for a sizable portion of ransoms to penetrate into the system as huge deposits will raise lots of suspicion which will render the monies useless.
  2. Individuals who have stockpiled Naira will have to present it for exchange which would aid the prosecution of corruption and money laundering.
  3. Considering the fact that election cycle is upon us, politicians who have stockpiled dollars would have to convert to Naira and this will be quicker than expected. Considering the short-time frame, the demand for Naira will go up easing the pressure on forex.

On the flip side however, some of the expectations of the CBN might not be achievable, considering the reality on ground and the fact that currency hoarders have become wiser than in 1984. Some salient point worthy of note include that fact that:

  1. Many of the currency hoarders will often than not stockpile hard currencies which the central bank has no control over. Invariably, the intent of curbing the unfavorable exchange rate might not be achieved.
  2. In order to circumvent the exposure to the authorities, individuals who have stockpiled naira might race to get them exchanged to dollars at the parallel market which might put upward pressure on the exchange rate.
  3. The fact that the financial inclusion rate in Nigeria as at 2022 is 64% does not translate into the digital literacy which could lead to a reduction in transactions as the adoption of the eNaira is still nascent.
  4. The limited time frame of 6 weeks to turn in the old note for new notes is too short which could make the unbanked rural population lose their money and further impoverish them. In other climes like in the United States of America both the old and new currency notes remain legal tender until the old ones are completely phased out.

In our opinion, the move by the central bank might curb the terrorism and kidnapping escapades in the short term but currency hoarders who have become smarter and refined in their approach and hold foreign currencies might escape the big stick wielded by the CBN.

In all the decision is a first step in a series of steps to salvage the Naira but it is ill-timed with the desire to hastily get results.


Arthur Stevens Asset

Management Ltd.


86, Raymond Njoku Street, S.W. Ikoyi, Lagos

WEBSITE: www.arthursteven. com


Tel: 09035996606;


Sign In


Reset Password

Please enter your username or email address, you will receive a link to create a new password via email.