Regulators have said that January 31 is the deadline for old notes to be used or deposited in banks.
Nigeria has launched newly designed currency notes, a move the West African nation’s central bank says will help curb inflation and money laundering.
Experts, however, are skeptical about such results in a country that has battled chronic corruption for decades, where government officials have been known to loot public funds and cause further hardship for many struggling with poverty. .
Launched on Wednesday, the new denominations of 200 ($0.46), 500 ($1.15) and 1,000 naira ($2.30) mark the first time Nigeria’s currency has been redesigned in 19 years. The banknotes will be in circulation in mid-December.
The naira “is long overdue for a new look,” Nigerian President Muhammadu Buhari said at the launch. The new Nigerian-designed and more secure paper notes “will help the central bank design and implement better monetary policy objectives.”
More than 80 percent of the 3.2 trillion naira ($7.2 billion) in circulation in Nigeria is outside the vaults of commercial banks and in private hands, said Godwin Emefiele, governor of the Central Bank of Nigeria.
With inflation at 21.09 percent, the highest in 17 years, fueled by rising food prices, he said the new notes will “return hoarded currencies to the banking system” and help the central bank recover the control of the money used in the country.
Last month, regulators announced a January 31 deadline for old notes to be used or deposited at banks.
“The currency redesign will also help in the fight against corruption, as the exercise will reign in the highest denomination used for corruption and the movement of such funds from the banking system could be easily traced,” Emefiele said.
Analysts, however, say the new notes would produce little or no results in managing inflation or fighting corruption in the absence of institutional reforms.
“If you want to stop money laundering, your financial system has to improve; if you want to stop ransom payments, security needs to be improved; if you want to curb inflation, the level at which the total money supply in the economy grows has to decrease, so it’s not about cash,” said Adedayo Bakare, an analyst at Lagos-based Money Africa.
The newly designed denominations would also boost financial inclusion and economic growth, the central bank chief said.
But 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 use or deposit currency in circulation.
At least 133 million people, or 63 percent of Nigerian citizens, are multidimensionally poor, according to government statistics.
“It could potentially slow down the economy if people are short of cash and can’t exchange their cash for new notes at a fast rate,” he said. “You can’t phase out cash without fixing financial inclusion or electronic payment and not even that.”