More than 80% of the 3.2 trillion naira ($7.2 billion) in circulation in Nigeria are outside the vaults of commercial banks and in private hands, Emefiele said. Regulators last month announced a Jan. 31 deadline for old notes to either be used or deposited at banks.
With inflation at a 17-year high of 21.09% that is driven by soaring food prices, Emefiele 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.
“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,” the central bank chief said.
Analysts, however, say that the newly designed 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.
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% 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.”
This story was first published on Nov. 23, 2022. It was updated on Nov. 24, 2022, to correct that 200 Nigerian naira amount to 45 U.S. cents, not 5 cents.