President Muhammadu Buhari is expected to unveil the newly redesigned N200, N500 and N1,000 banknotes at the presidential villa today, earlier than the December 15, 2022, date that was previously announced.
This was disclosed yesterday by the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, who thanked the president for backing the redesign project amidst criticisms from those who had opposed the move.
The release of the new naira denominations was originally scheduled for mid-December, but the CBN governor said Buhari had graciously accepted to unveil them today.
Emefiele, while addressing journalists at the end of the two-day meeting of the Monetary Policy Committee (MPC) of the bank, also ruled out any extension of the January 31, 2023, deadline for the return of the existing currency notes insisting they would lose their legal status at the expiration of the timeline.
He insisted the central bank would not shift the deadline, adding that the 100 days provided for people to deposit existing banknotes in commercial banks was adequate.
He also said Nigerians in the diaspora asking for an extension of the January 31 deadline so as to come and deposit their local currencies were not being sincere, wondering if what such person spend abroad was the naira.
These came as the apex bank further resolved to raise the Monetary Policy Rate (MPR), otherwise known as the benchmark interest rate by 100 basis points to 16.5 per cent from 15.5 per cent.
The MPR is the rate at which commercial banks borrow from the central bank, and often determines the cost of funds in the economy.
The central bank, however, retained banks’ Cash Reserve Requirement (CRR) at a minimum of 32.5 per cent as well as the Liquidity Ratio (LR) at 30 per cent.
Emefiele, who read the committee’s communique, said the decision to increase the benchmark rate was informed by the need to curtail inflationary pressures and stimulate economic growth.
He also said although the unprecedented flooding which submerged farmlands across the country was expected to impact on prices of food items, the CBN would in conjunction with the federal government draw from the National Strategic Grain Reserves to moderate commodity prices.
The CBN governor, also clarified that contrary to speculations, the apex bank does not intend to exit the Anchor Borrower Programme (ABP) which had recorded cumulative disbursements of N1.07 trillion to over 4.6 million smallholder farmers cultivating 21 commodities across the country.
In fact, Emefiele said, to further mitigate the impact of flooding on food prices, the CBN would under its development finance initiatives, embark on the dry season planting programme.
He said, “We are not promising that prices will not go up, but we will try to keep them down.”
Emefiele on October 26, had announced the central bank’s decision to redesign the naira, explaining that the move was only a routine exercise that seeks to address the prevailing currency counterfeiting, terrorism financing, and hoarding as well as mop up the huge amount of money in circulation among others.
He had said the bank’s resolve to redesign, produce, and circulate new series of banknotes including N200, N500, and N1,000 denominations followed the express approval by Buhari.
According to him, the exercise was necessitated by the need to control currency in circulation – with 80 per cent of money outside the vaults of commercial banks.
The CBN governor noted that as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks.
However, speaking yesterday, the CBN governor thanked security agencies, especially the EFCC and the Senate for supporting the currency redesign efforts despite undue pressures to jettison the task.
Nonetheless, Emefiele, citing data from the national bureau of Statistics (NBS), said the economy has sustained positive output growth for seven consecutive quarters, following the exit from the recession in 2020.
He said the consistent positive performance recorded was driven largely by the positive growth in the non-oil sector, particularly in the services and agricultural sub-sectors, complemented by continued policy support by the CBN.
He said CBN Staff projections showed that the economy was expected to remain on a path of sustained positive growth, given the expected strong performance in the fourth quarter of 2022 and a steady rebound in economic activities.
But, the central bank governor expressed concern over the persisting uptick in inflation for the ninth consecutive month with headline inflation (year-on-year) rising to 21.09 per cent in October 2022 from 20.77 per cent in September 2022, which is an increase of 0.32 percentage points.
He noted, however that month-on-month, headline inflation decelerated to 1.24 per cent in October 2022, from 1.36 per cent in the preceding month, an indication that price development is responding to the CBN’s recent policy rate hikes.
He said the persisting uptrend in energy prices and the prolonged period of scarcity of Premium Motor Spirit (PMS), contributed to a sharp rise in transportation, logistics and manufacturing costs, which fed through to consumer prices – as well as contributory legacy factors including the lingering insecurity across the country; perennial flooding in major food-producing states; critical deficit of infrastructure in the country; and poor road networks amongst others.
Emefiele, pointed out that the committee observed the decline in the external reserves position, as gross external reserves decreased by 1.34 per cent at end-October 2022 to $36.87 billion, from $37.39 billion at end-September 2022.
He said with indications of lower crude oil prices in the futures market, the MPC urged the bank to sustain its current policies to boost non-oil exports in order to shore up the external reserves.
He disclosed that between September and October 2022, under the Anchor Borrowers’ Programme (ABP), the Bank disbursed N41.02 billion to several agricultural projects, bringing the cumulative disbursement under the programme to N1.07 trillion to over 4.6 million smallholder farmers cultivating 21 commodities across the country.
According to him, the bank also disbursed N0.30 billion to finance large-scale agricultural projects under the Commercial Agriculture Credit Scheme (CACS), bringing total disbursement under the scheme for agro-production and agro-processing to N745.31 billion for 680 projects.
Emefiele also pointed out that the committee was concerned that the global inflationary pressures have continued to trend higher and financial markets were also facing challenges.
He added, “It observed that this was indeed the trend in Nigeria, with inflation attaining 21.09 per cent in October 2022. The Committee, however, seized the opportunity to appraise the efficacy of its decisions at the last couple of meetings, and came up with the conclusion that the decisions were beginning to yield the desired results, given that the rate of increase in inflation was beginning to moderate, in view of the month-on-month deceleration in prices presented by the Consumer Price Index.”
He said members also noted that though the global economy was progressively weakening due to the various headwinds derailing the recovery, domestic output growth remained positive as a result of the combined support from fiscal and monetary policy.
He added, “The MPC therefore urged both authorities to continue to harmonise their various policies to achieve the desired objectives of stable prices and steady growth.
“In reaching the decision of whether to loosen, hold or tighten the stance of policy, Committee felt that, given that all the causative factors, such as the Russia-Ukraine war, supply chain disruptions, slowdown in China, rising inflation in advanced economies and other headwinds were still dominant, a loosen option was not desirable at this meeting.
“The Committee also felt that, with the rising inflation, loosening the stance of policy would lead to a more aggressive rise in inflation and erode the gains already achieved through tightening.
“As regards whether to hold, MPC was of the view that a hold stance at a period close to December festive season and expected heavy spending during the 2023 general election at a time of high inflation would greatly jeopardise the gains of the previous policy rates hike and plunge the economy deeper into the inflation trap.”
According to him, the MPC therefore, decided to continue to tighten, but at a somewhat lower rate, noting that tightening the stance of policy would narrow the negative real effective interest margin and thus improve market sentiment and further restore investor confidence.
“MPC also felt that recent developments in terms of observed month-on-month deceleration in the rate of increase in inflation, suggests that the previous tightening policies were yielding the expected outcome. It, therefore, felt that sustaining the tightening would further consolidate the decline in inflation, albeit more significantly.”