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World Bank, IMF begs Buhari to extend deadline for use of old naira notes

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The World Bank and International Monetary Fund(IMF) have voiced their voices to the growing number of institutions and individuals asking for the extension of the deadline for the transition of old naira notes to new ones.

The two Bretton Woods institutions said the period allowed for Nigerians to switch from old to the redesigned notes was short.

The World Bank said it was concerned about the “scarcity of new notes and the potential adverse economic and social impacts should the shortage of cash persist.”

It said: “The World Bank, therefore, remains concerned about the short timeframe and would encourage the authorities to consider allowing a longer period for the redesign.

“Periodic currency redesigns and demonetisation of older notes are normal internationally. However, they usually involve transition periods of one year or longer so as to minimise economic disruption.

”After the Central Bank of Nigeria announced the naira redesign on October 26, 2022, with a short implementation timeframe through January 31, 2023 (now extended for a short additional period until February 10, 2023), the World Bank expressed concern about the timing and short transition period (see Nigeria Development Update, NDU, December 2022).”

It added that “this concern is based on international experience which suggests that rapid demonetisations can generate significant short-term costs, with small-scale businesses, and poor and vulnerable households, including in rural areas, being particularly affected as they are liquidity-constrained and rely heavily on day-to-day cash transactions.”

On alternative payment channels, the bank said: “It is highly unlikely that digital payments can increase quickly enough to compensate for the shortage of new notes.

“According to the latest available data (from before this policy), only 45 percent of Nigerian adults had a bank account, 34 percent reported paying or receiving money digitally over the past year, and only nine percent made an in-store payment by digital means.

”Digitisation is a structural challenge that will take time and require a systematic approach, especially to address inclusion challenges.”   

On timing, the global institution noted that “households and firms already faced elevated financial pressures from prolonged high inflation, recently compounded by external food and fuel price shocks and the phasing out of existing naira notes over a short time period may add to their challenges.”

The IMF, in a statement by Laraba Bonet, said:

“In light of hardships caused by disruptions to trade and payments due to the shortage of new banknotes available to the public, in spite of measures introduced by the CBN to mitigate the challenges in the banknote swap process, the IMF encourages the CBN to consider extending the deadline should problems persist in the next few days leading up to the February 10, 2023 deadline.”

A member of the Monetary Policy Committee (MPC) yesterday described the Supreme Court’s interim directive on the naira swap deadline as “unfortunate.”

“It’s a retrogressive decision and sad development,” the member, who did not want his name in print, added.

He described the judgment as an “attempt to subvert the effectiveness of monetary policy in ensuring price and monetary stability.”

The member said, “people will turn around to blame the monetary authority for inability to control inflation.”

”Politicians want to use the old notes that they have stock-piled to undermine the credibility of the elections through vote buying,” he claimed.

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