Naira Redesign, monetary policy will reduce inflation, boost growth – Emefiele

Emefiele however reiterated the availability of an appropriate amount of currency (redesigned N200, N500, and N1,000 denominations and current N100, N50, N20, N10 and N5 denominations) to support economic activities.

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Godwin Emefiele, CBN Governor

The Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele has assured Nigerians and the diplomatic community that the Naira redesign and new monetary policy will ultimately lead to tremendous benefits for the citizenry including the reduction of inflation, which is already being recorded, and creating an atmosphere for a more vibrant economy.

Emefiele said: “The accompanying decline in money supply will thus slow the pace of inflation. As you can see, we have started to witness inflation trending downwards, following general price stability in almost all genres of markets including for goods and financial products.”

Emefiele however reiterated the availability of an appropriate amount of currency (redesigned N200, N500, and N1,000 denominations and current N100, N50, N20, N10 and N5 denominations) to support economic activities.

The CBN Governor, however, alleged that the palpable tension and elevated agitations that have trailed the redesigned Naira notes and swap policy and the countdown to the deadline for the old Naira notes are unfortunately being orchestrated and exacerbated by leaders who he said should rather try to calm frayed nerves.

Emefiele made these observations Tuesday while briefing the Diplomatic Community in Abuja on the recent Monetary policy of the CBN

The CBN Governor said: “We believe that a large proportion of these agitations are staged and sponsored propaganda or an exaggeration of reality. No doubt that there are pockets of pressure in some areas, the CBN is working hard to shift resources to those areas in order to ease the tension. The situation is substantially calming down since the commencement of the Over-the-Counter payments to complement ATM disbursements and the use of super agents.”

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Speaking further, Emefiele admitted that long queues have been noticed at some bank ATMs and banking halls, saying that whilst “some of these withdrawal requests are genuine, some are simply the reprehensible activities of miscreants who do not have the genuine intention of making a withdrawal but are seeking quick-earnings by queuing up just to sell their spaces to make money”.

He alleged: “The CBN has also noticed that some politicians are buying the new notes and storing them for political purposes.

“We have also noticed that some Nigerians are capitalizing on the transition to charge exorbitant fees or demand cash payment on the false pretext that PoSs don’t work, especially at petrol stations. These selfish actions for personal monetary gain are creating hardship for Nigerians and may come at the expense of fellow citizens’ lives and livelihood”.

He claimed that The Bank was collaborating with the entire financial ecosystem DMBs, OFIs, MMOs, Super Agents, MFBs Payment System Providers and EFCC, ICPC and other law enforcement to ensure that Nigerians have a variety of options for financial transactions either through electronic channels or in exceptional circumstances, cash.

“We are mindful of the challenges some citizens have faced and are addressing them. There have been reports of occasional failures in e-channel platforms. Our monitoring suggests that whilst there has been an expected surge in electronic transactions, these have not risen to unprecedented levels and the payment system is well equipped to handle even higher transaction volumes. Whilst transaction failures are bound to occasionally occur, the public is encouraged to have full confidence in Nigeria’s globally recognized payment system infrastructure. Banks have also been instructed to ensure 24/7 service availability and promptly address any customer refunds arising from such service failures.

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“The CBN remains committed to ensuring a seamless, inclusive and equitable implementation of this exercise for the overall benefit of the people, financial system and Nigerian economy as a whole” Emefiele stressed.

Earlier, CBN Governor disclosed that the aim of the policy was to make “our Monetary Policy decisions more efficacious and like you can see; we have started to see inflation trending downwards and exchange rates relatively stable.

“Secondly, we aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the Military are making good progress in this important task.

“Available data at the Central Bank of Nigeria showed that in 2015, currency in circulation was only N1.4trillion. As of October 2022, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the Banking System and N2.7 trillion held in people’s homes.

“These indicate that, so far, we have held excessive amounts of currencies in our hands rather than in banks or in cashless platforms. Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN.

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”It should also be noted that the Notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth.

“Our in-house analysis of the pre-policy currency adequacy indicated not only that currency outside banks was excessive but also that the quantum of currency in circulation was suboptimal.

“Exhaustive simulation and model-based analysis founded on the drive to achieve a 20% – 40% cashless economy indicate that the optimal value of currency in circulation for the Nigerian economy is only N700 billion. This is just a fraction of the hitherto currency supplied to the economy and could explain, in part, the excess demand we have witnessed in foreign exchange market and to some extent the goods market”.

With respect to the benefit of the policy, Emefiele said redesign policies are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties. Chiefly, adding that it was expected to reduce the amount of cash in the underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market.

“By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation.

”The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth” said Emefiele.