E-Financial
CBN Made Critical Mistakes that Doomed its Currency Redesign
By Stephen Onyeiwu
Nigeria has successfully introduced new banknotes on about 10 occasions since independence in 1960. So why has the latest attempt been so controversial and traumatic? And what measures need to be taken to avoid a future debacle?
Godwin Emefiele
Nigeria’s central bank announced the introduction of new banknotes last November, with the changeover to new notes scheduled for mid-December.
The rollout of the policy disintegrated into chaos, amid mounting anger among ordinary Nigerians.
The rollout of the currency change was disastrous. The fallout included:
- Severe shortages of the new banknotes.
- Precipitous declines in business transactions (especially in the informal sector).
- Long queues at bank premises and overcrowded banking halls
- Attacks on bank staff and destruction of bank property, including ATMs that failed to dispense cash.
The policy also led to lawsuits by some state governors against the Central Bank of Nigeria and the Federal Government.
I have identified five factors that marred the redesign policy, most of which could have been avoided by the Central Bank of Nigeria.
Litany of errors
Cost-benefit: An egregious error committed by the central bank was its violation of the principle of cost-benefit analysis. This is a simple rule in economics that implores policy makers to undertake an initiative only when the benefits exceed the costs. One should ask: What were the benefits of introducing the policy? What were the potential costs at the time of implementation?
The central bank justified the redesign policy as follows: to rein in counterfeiting, promote a cashless economy by limiting the amount of the new banknotes that can be withdrawn, reduce the large quantity of dirty notes circulating in the economy, discourage hoarding, curb crimes like kidnapping and terrorism, and head off illicit financial transactions.
It also saw the policy as a way of addressing the huge amount of currency outside the formal financial sector; 85% of banknotes circulate outside the banking system, largely because of hoarding and illicit financial transactions.
And the cost? If indeed the central bank considered the cost, it obviously underestimated it. How would anyone ignore the large-scale disruptions in the economy and loss of productivity that the policy caused, not to speak of the stress and anxiety inflicted on Nigerians?
Communication: Of all the pitfalls that doomed the currency redesign policy, at least as conceived originally, the lack of effective communication about the overarching goals and modus operandi of the exercise was the most devastating.
Nigeria’s central bank threw a basic element of strategic planning and communication to the winds when it failed woefully to communicate and educate the public about expectations, prior to launching the policy. According to strategic planners, a major policy initiative that is not well communicated, from the top of the strategy planning pyramid to the bottom, is bound to fail.
The central bank should have sought the buy-in of major stakeholders, especially the National Economic Council and the National Assembly. The central bank would have had a better chance of avoiding the ferocious push-back it got.
The central bank finally began rolling out a communication plan by late December 2022. But this was too little too late. By then Nigerians had already characterised the policy as decidedly punitive. The narrative that had gained ground was that the change was designed to curtail the ability of politicians to buy votes during the 2023 elections.
This inevitably raised the question of why millions of Nigerians should suffer because of politicians?
The central bank’s mishandling of communication was also manifested in the fact that it failed to issue policy guidelines to commercial banks and the public days after the Supreme Court nullified the bank’s earlier deadline. This has exacerbated the confusion associated with the policy, as merchants and businesses continue to reject the old notes, despite the court’s rulings.
Inappropriate timeframe: The timeframe for implementation was unrealistic and impracticable. By setting a very short timeframe for phasing out the old notes, the Central Bank of Nigeria appeared to have adopted textbook assumptions about how the Nigerian banking system works.
Anyone who has been to a typical commercial bank in Nigeria would know it would have been impossible for the banks to undertake the monumental task of collecting old notes and dispensing the new ones within the one-and-a-half month window originally allowed by the central bank. Overcrowding, chaos, excruciatingly slow service and unnecessary bureaucratic red tape are quite common during normal banking hours. It is not uncommon to observe people with “connection” circumvent queues and obtain preferential access to bank staff. Although Nigerian banks pride themselves as being digitised, a lot of paper-pushing still goes on within the banking system.
The central bank should have considered this fact and allowed for a longer timeframe for implementation.
There was also no persuasive rationale for the rushed implementation of the policy. Neither was the central bank able to explain why the old and new notes could not coexist, a measure the Supreme Court has now mandated the bank to implement.
Conflicting goals and lack of prioritisation: Policy targeting is a major precondition for success. The focus on one unambiguous objective in past redesign policies enabled the central bank to conduct a seamless and less dramatic exercise.
The current redesign policy had too many goals, and it was unclear which one was the target goal.
Identifying target goals enables policy makers to select appropriate instruments for achieving those goals. But when there are too many goals, the danger is that an instrument designed for one goal may undermine another goal.
For instance, the goal of reining in money laundering and illicit financial transactions meant that the Central Bank of Nigeria needed to deliberately restrict access to the new banknotes. But this inflicted unintended hardships on innocent Nigerians who simply wanted to access their hard-earned money.
The central bank should have focused on one major goal. If the goal was to phase out old notes, as the bank is statutorily mandated to do, then the old and new notes could have circulated alongside each other until the old notes were phased out.
A casual announcement that new notes would be circulating from a given date would have been all that was needed. People would not have panicked and rushed to the banks to withdraw money.
Economic headwinds: It is very difficult to implement a major policy initiative that negatively affects people during a period of macroeconomic instability. The central bank policy came at a bad time. Nigeria’s economy is in a shambles, with a 22% inflation rate, 33% unemployment rate – 43% among young Nigerians – and a growth rate of 3%.
These economic challenges have been compounded by a 17.5% interest rate, steep declines in the value of the Naira, and widespread poverty.
Nigerians’ tolerance for economic shocks was already at its limit when the redesign policy was launched. The policy and the confusion that accompanied it tipped them over the edge.
The challenge of credibility
The central bank needs to reestablish its credibility as the “people’s bank,” to reverse a self-inflicted image of an organisation that’s partisan.
The bank has a fiduciary responsibility of catering to the interests of its main “shareholder,” the Nigerian people. But the perception is that the bank lacks independence. To effectively discharge its statutory duties, the Central Bank of Nigeria should initiate a process of re-asserting its independence and regaining the people’s trust and confidence.
Stephen Onyeiwu is professor of Economics & Business, Allegheny College
This article is republished from The Conversation Read the original article.
Securities and Exchange Commission (SEC) has warned the public against investing in unregistered investment schemes, including Silverkuun Investment Cooperative Society/Silverkuun Limited.
In a circular issued in Abuja, yesterday, the commission said its attention had been drawn to the activities of these entities, which falsely present themselves as investment advisers and fund managers in the Nigerian capital market.
“The attention of the Securities and Exchange Commission has been drawn to the activities of Silverkuun Investment Cooperative Society/Silverkuun Limited which holds itself out as an Investment Adviser/Fund Manager.
“The Commission hereby informs the public that Silverkuun Investment Cooperative Society/Silverkuun Limited is not registered to operate in any capacity in the Nigerian Capital Market.”
SEC advised the public to refrain from engaging with Silverkuun Investment Cooperative Society/Silverkuun Limited or its representatives in respect of any business in the Nigerian capital market.
“The Commission uses this medium to reiterate that transacting in the Nigerian Capital Market with unregistered and unregulated entities exposes investors to financial risk including fraud and potential loss of investment.
“The investing public is therefore reminded to verify the status of companies and entities offering investment opportunities on the Commission’s portal before transacting with them,” the SEC added.
Dr. Emomotimi Agama, director-general of the SEC, recently warned that the Commission would not hesitate to shut down the operations of such unregistered entities while also ensuring that the promoters are made to face the full weight of the law.
Agama said, “we will shut down their operations and the promoters will be made to face the full weight of the law.
“In a major reform, ISA 2025 officially brings digital assets under the SEC’s regulatory purview, defining them as securities and mandating registration for all virtual asset service providers (VASPs) and digital asset exchanges. This development aims to close the regulatory vacuum that has allowed many Ponzi-style platforms to thrive under the guise of cryptocurrency and digital finance.”
Agama also emphasized the Commission’s education-focused strategy to combat fraud through podcasts, digital campaigns, and the introduction of capital market literacy in schools and universities, the SEC aims to equip Nigerians with the knowledge to detect and avoid dubious investments.
Africa’s cross-border payments market is on track to hit $1 trillion by 2035, according to a new report by venture capital firm Oui Capital. Titled “Africa’s Cross-Border Payment Landscape—a deep dive into the systems, players, and shifts shaping Africa’s cross-border payment flows,” the report states that the market is currently valued at $329 billion and growing at a compound annual growth rate of 12%.
It identifies Africa’s booming digital adoption, increasing intra-African trade, and a surge in mobile money usage as the key growth drivers.
Despite the impressive growth, the report highlights systemic inefficiencies.
“Legacy rails, double currency conversions, and fragmented regulations still siphon billions in hidden costs,” Oui Capital states, noting that the continent continues to have the highest global remittance costs, averaging 7–8%.
However, digital innovation is helping reshape the landscape. Mobile money is now a key channel, with 30% of Sub-Saharan remittances flowing through mobile wallets.
In 2022, Africa accounted for 66% of global mobile money transaction value, demonstrating the rapid formalisation of what was once a predominantly informal cash ecosystem.
Oui Capital sees significant investment potential in addressing these inefficiencies. “Infrastructure plays—interoperable API layers, decentralised FX liquidity pools, and PAPSS integrations—represent $10 billion-plus opportunities,” the report says.
The Pan-African Payment and Settlement System is one such initiative pushing for local currency settlements and reduced reliance on USD/EUR clearing, which presently adds around $5 billion in annual costs.
According to the report, cryptocurrencies and Stablecoins are emerging as promising alternatives, cutting remittance costs by up to 60% in markets with clear regulations.
“Fintech APIs are already pushing fees as low as 1.5–3%,” the report notes.
Still, the venture capital firm warns that challenges persist as only 55% of African jurisdictions allow full electronic KYC, limiting the scalability of fintech solutions.
The report urges founders to go beyond peer-to-peer transfers by embedding services like lending and insurance.
“Africa’s payments race is now a scale game. Those that solve for liquidity, compliance and cost will define the continent’s digital trade backbone over the next decade,” it concludes.
Chartered Institute of Bankers of Nigeria has expanded its Agency Banking Certification Programme through a tripartite collaboration between the Institute, FIC, and SANEF Limited.
This partnership according Prof. Pius Deji Olanrewaju, President/Chairman of Council the Chartered Institute of Bankers of Nigeria, CIBN, is timely and strategic, “as we aim to broaden the reach of the certification across Nigeria’s agent banking sector. With SANEF’s deep integration in the financial inclusion ecosystem and established relationships with leading super agents, we are confident that this collaboration will strengthen the quality and visibility of the programme.
“The goal is clear, to enhance professionalism among agent bankers, support the national financial inclusion strategy, and contribute to building trust and integrity within this growing segment of the financial services sector. This collaboration presents an excellent opportunity for further implementation of the competency framework for the banking industry in Nigeria”.
He noted that the collaboration among others is part of his LEGACY agenda which highlights the multifaceted role of financial institutions in shaping Nigeria’s economic future.
The letter C in the LEGACY agenda refers to Competence in the banking and Finance industry, which is a very crucial factor in the banking and finance sector. Competent individuals in this industry are equipped with the necessary knowledge and skills to effectively manage financial resources. Individuals with expertise in this field can contribute to the growth and stability of the economy.
Mrs. Uche Uzoebo, Managing Director/Chief Executive Officer, Shared Agency Network Expansion Facilities, SANEF, described the memorandum of Understanding, MoU, as a visionary partnership that seeks to expand Financial Inclusion through Agent banking training, Financial Literacy and knowledge impartation, an objective that forms a key pivot of what SANEF represents.
“Over the years, SANEF, in strong collaboration with our key stakeholders, Banks and Licenced Super-Agents/Mobile Money Operators and other Financial Service Providers, have continued to deepen the frontiers of Financial Inclusion and agent bank. Financial Literacy and training have remained a key part of this objective.
“This MOU ceremony is a fulfillment of a shared vision through the expansion of Agent Banking, Financial Literacy, capacity building, thought leadership, training and competency.
She further explained that the agreement provides a training structure with well-curated and knowledge filled training modules and materials that will deepen the knowledge and capacity in agent banking.
“It will go ahead to deepen and expand the knowledge and capacity of all participants that will take part in this training and we believe that with the quality and cooperation of all parties present, this very important objective of impartation of knowledge and thought leadership, grooming and training minds to be empowered and learned and contributing our quota to nation building and be a better place,” she added.
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