Amid the chaos around Nigeria’s currency redesign before the 2023 presidential elections, we share our first-hand insight into the status quo. Redesigning the currency of a sovereign country is not news. The U.S. currency is redesigned from time to time to stay ahead of counterfeiting threats and keep counterfeiting levels low. Any sovereign nation can decide to redesign its currency. Now that we agree on that, let us debate some further issues like the timing, the theories and perception of the masses, its current impact and what entrepreneurs should look out for in the future.
You should know the following:
According to the CBN information, Naira notes and coins are printed/minted by the Nigeria Security Printing and Minting (NSPM) Plc and sometimes, other overseas companies and issued by the CBN.
The New Policy For Nigeria’s Currency Redesign
On October 26th 2022, the CBN announced the introduction of redesigned 200, 500, and 1,000 naira notes into the financial system. The currency was later launched in November, and the new notes went into circulation on December 15th 2022.
Major CBN’s Reasons For Nigeria’s Currency Redesign
- Prevent currency forgery.
- Combat inflation
- Stave-off cash hoarding
- Promote a cash-less economy
A cashless society means less cash will be in circulation; all payments and transactions will be carried out digitally. The Central Bank of Nigeria wants to transition Nigeria into a cashless society. This idea has many advantages but also opens up questions like data protection.
The CBN To Promote A Cashless Society
Unless legislation is put in place and implemented to prevent/regulate them, Governing bodies and others with interest would theoretically have access to enormous amounts of consumer data. Such consumer data would include these entities knowing what you purchase, consume, pay for and so on. With this knowledge, you can be prompted into specific consumer/citizen behaviours.
Access to financial infrastructure and technology literacy is essential now.
On a positive note, going cashless brings about more efficient accounting as you can go back and track your expenses and income. Accountants can use world-class tools to get their job done. Many services can be streamlined, and so on. However, for a cashless society to function, people in rural areas and less accessible parts of the country must have access to the needed financial infrastructure, including technology literacy.
Since the development of cashless payment methods, traders do not need to transport cash bulk when travelling to purchase goods. This has significantly reduced armed robbery rates on the expressway and travel routes.
But about 45% of Nigerian Adults still need to own a bank account.
Who Suffers The dilemma Of The Nigerian Currency Redesign?
For those that live in financially serviced areas like Victoria Island, Lekki in Lagos and such areas around the country, the Nigerian currency redesign is less impactful. Banks are around the corner, and the network is often good enough for cashless payments if they do not dispense cash. Also, residents can pay for essentials using cashless methods since many businesses in that area all have these options. Unlike those living in areas with poor financial services.
Let us explain so that you clearly understand what is happening to many. The issue is not poverty. Years before this current Nigeria currency redesign, many areas needed a physical bank. This is usual since Nigeria must leap-frog development like many African countries. This approach is necessary to catch up with the global space. Investments in physical banks were suppressed for investments in digital technology to propel FinTech. Many banks have apps. So you can transfer and make payments. But here is the catch.
You need internet data and you have to be literate enough to access these Bank apps/smartphones. That aside, for those who want to buy a handful of tomatoes or snacks for school quickly, you do not expect them to pay cashless, do you? The market woman and hawkers do not have a POS; if they did, it might only work sometimes due to network issues.
Thwarting the chances of vote-buying
There have been so many speculations as to why the government chose to redesign the currency prior to the upcoming presidential and state elections, February and March 2023. Some say the timing was wrong, but others feel it is good to purge corruption and forecasted vote-buying since a high amount of cash has been hoarded over the years.
Current issues before the Nigerian presidential election
- People cannot withdraw cash due to mismanagements around the Nigeria currency redesign.
- Payments and transfers are not always accessible or functional. Payment may delay up to 30 minutes; therefore, more time is spent on the mundane activity.
- Massive hike in the prices of fuels and fuel scarcity has resulted in very long queues.
- There is confusion amongst buyers and sellers as many are unsure when to stop accepting or paying with the old currency.
- People are unable to make petty purchases due to payment limitations. Many are forced to make bulk purchases, creating an artificial hoarding.
- The country also faces a foreign exchange shortage, making it difficult for businesses to import essential goods (*In the first place, essential goods should not be imported).
Nigeria is facing a number of serious crises that are affecting the country in multiple ways. Addressing these challenges will require a coordinated and sustained effort by the government, civil society, and the international community.
4 Major New Development To Get Ready For
As an entrepreneurship platform, we do not hear “problems” and fall down flat, overwhelmed. We think of solutions. Look at Nigeria’s current issues and the potential solutions you can create. Let us highlight a few areas to focus on in the future:
- Nigeria will be compelled to make its telecom and internet infrastructure function.
- Many people will be mobilised to join the financial technology ecosystem with more people owning bank accounts and digital payment accounts.
- With the Telecom infrastructure grounded, more digital services will emerge in health, education and many other sectors.
- With the emergence of these new services, a new kind of education to make users fit for the cashless and digital ecosystem must also be developed.
These are already massive sectors where you, as an entrepreneur, can start developing solutions. In the interview, Tunde Obadero from Zitra Investment advocates that the Nigerian financial landscape needs to be made more democratic, and the time is now!
The Supreme Court has suspended the banknote deadline. Please keep yourself updated.
Management, planning And Accountability Are Vital.
We should know that the cashier at the entrance or at the desk does not have the decisive power to disseminate funds. The problem must be addressed from the top, which is the CBN which is to be considered a parastatal of the Nigerian government. But remember, the EFCC caught banks hoarding the new notes in vaults rather than dispersing them into ATMs.
In conclusion, for whatever reason that has led to the redesign of the currency, one thing remains a fact and clear. The government authorities responsible had demonstrated incapability to manage the transition to a new currency design. With a nation of over 210 million people, poor infrastructure and a communication system, authorities cannot expect the change to happen within 2 months.
Every entrepreneur venturing into the Nigerian market must consider the impact of failed management on the proposed venture and ways to mitigate these. These extraordinary opportunities available in the Nigerian ecosystem only come when proper planning, administration and accountability exist.
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