There Central Bank of Nigeria has reenacted a currency redesign policy for a long while now and Nigerians already know what the new currency looks like, but the problem here is that these new currencies are still now even 20% into circulation and there's a deadline for January 31st for the old currencies to stop being considered a legal tender, this isn't even the problem alone. Some monetary policies came in with these redesign policies and it's massively going to create scarcity and a huge demand for the Nigerian naira.
We know that in recent years, the Nigerian currency has been bastardized, it has constantly lost value due to the lack of adequate monetary policies to check it from falling against the dollar and the CBN deems that the best way to do this is to actually reduce the money in circulation by placing a threshold on withdrawals through POS and ATM. However, I feel that spending billions of naira to redesign a new note and create demand for the Nigeria naira, isn't going to give any value to the naira, it's just like robbing Peter to pay Paul. Firstly, redesigning a new note costs a lot of money.
The personnel in charge of redesigning these notes, will mismanage government funds and one of the reasons why they'll do so is because there's the mentality that government resources can be wasted, the people working government jobs feel that since the money isn't theirs, they can waste these resources, forgetting that some of the money that's being used by the Nigerian government to run the state are federal loans that are being collected from China. The country is generating enough money to run the government, but because we do not have professionals in the right financial sectors, most financial policies and government-funded projects are aimed towards embezzlement, creating ghost projects with real-time funds from the government's pockets.
Now, I wouldn't really say that the central bank governor is wrong, I just feel that he's acting according to his capacity. Firstly, changing notes isn't bad, I think that creating a deadline for the old notes to stop being used and not putting the new notes in circulation is a bit diabolical. Now the deadline for the old notes to cease being legal tender is in five days and the commercial banks are currently hoarding the new notes, holding them in other to create an artificial demand for the Naira. What this has done is that it has created a lot of Chaos lately. Some businesses require business owners to keep cash, and because of the new redesign policies, these people are now left trying to beat the deadline.
Commercial banks are still giving old notes to people who are depositing the old notes. The Nigerian banks are back to having crowds like in the COVID era. I believe that creating a deadline is crazy, they could have easily fazed out all the old notes since people are constantly withdrawing and depositing money on a daily. However, the central bank governor wants to create a huge demand for the new notes that's why he placed a deadline on the old notes, now, he knows that the rush will be there for people to deposit the old notes through the commercial banks.
The goal is to limit the Nigerian naira in circulation, maybe even encourage people to hold naira instead of dollars, while this is currently not bad, these policies would not by any means help the Naira that's currently plummeting in value against the dollar. Nigeria does not have a functional regulatory system. The central bank governor thinks it's about the currency itself, but this isn't true. The market system in Nigeria creates artificial inflation through the scarcity of goods and services.
There are people who are there to bend the system for the purpose of profiteering. Because there are no laws to keep these people in check, it'll be really difficult to control prices or regulate the bodies who are in charge. This is to say that the monetary policies should target the problems of the unregulated market at the grassroots while working to curb the power of those in government when it comes to bodies like the central bank of Nigeria. However, politicians in Nigeria are above the law, whatever policies they make do not affect them, and this one one of the reasons why they do not get adequate feedback as to whether the laws they make are functional or even good enough.
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