A former deputy governor of the Central Bank of Nigeria, CBN, and presidential aspirant of the African Democratic Congress, Kingsley Moghalu, has expressed fears that the redesigning of the naira notes might lead to the free fall of the naira as those with huge cache of naira notes will go to the forex market to exchange them for hard currency, thus worsening the forex crisis in the country.
The former presidential aspirant who made this known in a series of tweets on his social media handle, however, agreed that the move by the CBN would bring about 80% of the bank notes back into the banking system, adding that efforts must be made to force these notes back into the banking system.
“This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation. The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go into the parallel forex market to buy hard currency, putting further downward pressure on the value of the Naira as too much Naira will be chasing too few dollars.
“I doubt it will solve inflation because there also are other major reasons for inflation such as the forex crisis, which this new move could exacerbate, as well the impact of the security crisis on food price inflation. But overall it is a necessary step, “ Moghalu said,
He tweeted: “I fully support the @cenbank redesign of the Naira. If 80% of banknotes in circulation are outside the banks, that’s troubling. The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender to get new ones or else it becomes illegal tender after January 31 2023.
“I just think the time window for its implementation is rather short. This will put a lot of operational pressure on commercial banks and the financial system in general. A 90 day window would have been better, but one can understand the need to avoid interfering with the elections,”