World Bank Warns CBN Against Redesigned Naira...Says It Will Affect Poor Nigerians

The World Bank has warned Central Bank of Nigeria !CBN) against  the introduction of the newly redesigned naira which went into circulation last week , saying the new banknotes may have negative effect on economic activity, especially among poor Nigerians

It will be recalled that CBN just last week, 15th of December, 2022  unveiled the new N,1000, N500 and N200 notes as part of measures to mop up excess cash in circulation, put at over N3trillion which according to the bank ,are outside the banking system 

But the apex global financial institution in its new report titled, “Nigeria Development Update,” described the timing and transition period of the implementation of the new monetary policy as too short

The  report of the Washington-based bank was coming  amid the mixed reactions already trailing the newly redesigned notes.

The bank in its report, expressed concern that the new policy would negatively affect small businesses, especially those whose commercial activities involve daily cash transactions.

The report further reads in part, “While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have been redesigned for two decades, the timing of and short transition period for this demonetization may have negative impacts on economic activity, in particular for the poorest households"

“International experience suggests that rapid demonetizations can generate significant short-term costs, with small-scale businesses, and poor and vulnerable households, potentially being particularly affected due to being liquidity-constrained and heavily reliant on day-to-day cash transactions.

“At present, households and firms already face elevated financial pressures from prolonged, high inflation, recently compounded by external food and fuel price shocks, and the severe floods, and phasing out existing naira notes over a short time period may add to their challenges.”

The President of the Bank Customers Association of Nigeria, Dr Uju Ogunbunka and the Lagos State Chairman of the Nigerian Association of Small and Medium Enterprise, Dr Adebayo Adams had also expressed worry over the timing of implementation of the monetary policy by the apex bank in the country

Ogunbunka who described the objectives of the cashless policy as understandable, quickly noted that the execution and timing were not right.

His words,“From the cashless policy point of view, we should appreciate that, as much as possible, the government is trying to limit the use of cash for transactions, more so, now that they are redesigning the currency. “The second thing is that the government wants to drive the use of online banking, which is good for our economy.  Unfortunately, there have been so many complaints about failed transactions.”

“There is hardly any week without complaints in the banking hall. You will see people shouting with regard to transfer failures. Have we put enough structure to take care of some of these things? The answer is, we are yet to, we are making progress, yes, but we should give enough room and time for some of these things to play out rather than short-circuit the system.”

Similarly Adams from the Nigerian Association of Small and Medium Enterprise,  said the policy would hit businesses and the MSMEs with negative effect on the economy