Written by: Chioma Ezekwem
Currency redesign is an activity of a sovereign nation, to either change or modify the existing currency in a country. This can be done for several reasons like; improving the security features of the new currency, reducing the money supply, reducing inflation, investigating incomes from nefarious sources and many other economic indicators that affect the financial status of a nation.
Historical Evolutions of the Nigerian Naira
The name "Naira" was coined from the word "Nigeria" by Obafemi Awolowo. During the pre-colonial era, different cultures used a variety of items as means of exchange. These included cowries, manila, beads, bottles and salt amongst others. The first major currency issue in Nigeria was undertaken following the colonial ordinance of 1880 which introduced the Shillings and Pence as the legal tender currency in British West Africa. The units of coins managed by the Bank of England were one shilling, one penny, 1/2 penny and 1/10 penny and were distributed by a private bank, the Bank for British West Africa till 1912.
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| Specimen of Old Nigerian currencies, image credit: bbc.com |
From 1912 to 1959, the West African Currency Board (WACB) issued the first set of banknotes (insert hyperlink) and coins in Nigeria, Ghana, Sierra Leone and the Gambia. The highest banknote denomination was one pound, while the one shilling coin was the highest coin denomination. On 1st July 1959, the Central Bank of Nigeria (CBN) issued Nigerian currency banknotes, while the WACB-issued banknotes and coins were withdrawn. It was not until 1st July 1962 that the currency was changed to reflect the country’s republican status. The banknotes which bore the inscription, Federation of Nigeria, now had, the Federal Republic of Nigeria, inscribed at the top.
The notes were again changed in 1968 following the misuse of currency banknotes during the civil war. Sequel to the decision by the government to change from metric to decimal, the name of the Nigerian currency was changed in January 1973. The major unit of currency which used to be £1 ceased to exist and the one naira which was equivalent to ten shillings became the major unit, while the minor unit was called the kobo; a hundred of which made one naira.
On 11th February 1977, a new banknote with the value of twenty naira (₦20) was issued. It was the highest denomination introduced at the time as a result of the growth of the economy; the preference for cash transactions and the need for convenience. The banknote was the first in Nigeria to bear the portrait of a prominent Nigerian citizen, the late Head of State, General Murtala Ramat Muhammed (1938-1976) who was the torch bearer of the Nigerian Revolution in July 1975. The note was issued on the 1st anniversary of his assassination as a fitting tribute to a most illustrious son of Nigeria. He was declared a national hero on 1st October 1978.
On 2nd July 1979, new currency banknotes of three denominations, namely ₦1, ₦5 and ₦10 were introduced. These notes were of the same size i.e. 151 X 78 mm as the ₦20 note issued on 11th February 1977. In order to facilitate identification, distinctive colours were used for the various denominations. The notes bore the portraits of three eminent Nigerians, who were declared national heroes on 1st October 1978. The engravings at the back of the notes reflected various cultural aspects of the country. In April 1984, the colours of all the banknotes in circulation were changed with the exception of the 50 Kobo banknote to arrest the currency trafficking prevalent at the time.
In 1991, the 50K and ₦1 were both coined. In response to the expansion in economic activities and to facilitate an efficient payments system, the ₦100, ₦200, ₦500 and ₦1000 banknotes were introduced in December 1999, November 2000, April 2001 and October 2005 respectively.
On 28th February 2007, as part of the economic reforms, ₦20 was issued for the first time in a polymer substrate, while the ₦50, ₦10 and ₦5 banknotes; as well as ₦1 and 50K coins were reissued in new designs, and the ₦2 coin was introduced. On 30th September 2009 the redesigned ₦50, ₦10 and ₦5 banknotes were converted to polymer substrate following the successful performance of the ₦20 (polymer) banknote. Thus, all lower denomination banknotes were now printed in the polymer substrate.
Finally, the CBN, as part of its contribution towards the celebration of the nation’s 50th anniversary of Nigeria’s Independence and 100 years of its existence as a nation, issued the ₦50 Commemorative polymer banknote on 29th September 2010; and the N100 Commemorative banknote on 19th December 2014 respectively. On Wednesday, October 26, 2022, Nigeria’s apex bank, the Central Bank of Nigeria (CBN), announced that it will redesign some new naira notes.
Issues Leading to Naira Redesign:
1. Speaking on the development, Godwin Emefiele, CBN governor, stated that the move to introduce newly designed notes became imperative following the abnormalities bedevilling Nigerian financial, monetary and security systems.
2. The Naira note was redesigned to address the issue of individuals who have made currency fraud their main source of income. People who have hidden money they have stolen, for instance, would either find a way to change it by taking the money out or would not need it given the change in the value of the Naira.
3. The currency change also aims to deal a fatal blow to the growing kidnapping and ransom industry.
4. The change in the notes is also said to aid in lowering the rate of inflation.
5. The change in the Naira notes is also intended to control the amount of money in circulation.
Downsides of Naira Redesign:
1. People holding huge amounts of cash outside the banking system for nefarious reasons will go to the parallel FOREX market to buy hard currency, putting further downward pressure on the naira value, as too much naira will be chasing a few dollars.
2. The naira redesign will further increase inflation because of FOREX Crisis, thus food price
inflation occurs.
3. Similarities in colours of 500 and 200 Naira can cause a loss of funds during financial transactions in low-power supply areas.
4. More security features were not added to the redesigned naira. Thus, Editors can easily duplicate the naira, since the major change in the currency was only the colour.
5. Counterfeits will be highly circulated in the economy because the redesigned naira can be massively duplicated in colour, which makes it hard to easily detect counterfeits.
6. As long as a Parallel Market exists, one of the goals of the Naira redesign to fight inflation is dead on arrival.
Recommended Solutions for Naira Redesign.
1. Crucial economic investigation should be carried out by the federal government regarding foreign trade and FORM A payments to international students and manufacturers overseas, because some individuals are using foreign trade as an avenue to flip FOREX prices between the CBN rate and Black market rate, thereby making excessive gains, devaluing the naira and causing imported inflation.
2. Counterfeits will be highly circulated in the economy because the redesigned naira can be massively duplicated in colour, which makes it hard to easily detect counterfeits. The CBN should add more security features to the redesigned naira.
3. As long as a Parallel Market exists, one of the goals of the Naira redesign to fight inflation is dead on arrival. The Parallel Market (black market) should be banned.
4. Strict measures should be placed on the deadline for old naira notes circulation, so as to enable the CBN to identify funds from nefarious sources and reduce crime in society.
5. Strict measures should be taken on vote buying during the 2023 elections, as this will affect the goal of reducing the money supply in the economy to beat inflation
References- History of Naira Redesign by Guardian Nigeria: https://editor.guardian.ng/opinion/the-history-of-currency-introduction-and-redesign-in-nigeria/
- 4 reasons CBN redesigned naira notes by Ada Osadebe: https://www.vanguardngr.com/2022/11/4-reasons-cbn-redesigned-naira-notes/
- Moghalu identifies the advantages and disadvantages of naira redesign: https://phenomenal.com.ng/2022/10/moghalu-identifies-advantages-disadvantage-of-naira-redesigning/
- Rambling on redesigning the naira by Nasir Aminu: https://www.thecable.ng/rambling-on-redesigning-the-naira
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