#PoliThinks: The Politics of change in Naira notes
Ordinarily, a currency redesign should not cause rancor. It is supposed to be one of those duties of the central bank that is expected to be routine and done without…
●1st November 2022
On its official twitter handle, the Central Bank of Nigeria (CBN) on the 26th of October, 2022 announced its readiness to redesign the ₦100, ₦200, ₦500 and ₦1,000 notes. The CBN said the redesign of the currency is important because it will help curb the rate at which the ₦500 and ₦1,000 notes are being counterfeited. The CBN Governor had said that “The integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank,” thus the need for the redesign of the naira. The CBN governor also lamented that about 80% of the currency in circulation are outside the banking system, thus further necessitating the redesign, which will prompt people holding the soon-to-become obsolete notes to take them to the bank.
Ordinarily, a currency redesign should not cause rancor. It is supposed to be one of those duties of the central bank that is expected to be routine and done without a lot of noise. For example, to celebrate Nigeria’s Centenary in 2014 and 50th Independence anniversary, the Central Bank of Nigeria (CBN) issued N100 Commemorative banknote on 19th December 2014 and ₦50 Commemorative polymer banknote on 29th September 2010 respectively.
Countries redesign their currencies for several reasons. Some of them include:
a. To add additional features so as to minimize counterfeiting.
b. To draw out criminals who may have stacked the old currencies into the financial system seeking to bank the old note, and hopefully get them arrested.
So, why should this seemingly routine exercise become political? Well, it will get political because the currency of countries bear important landmarks, and figures who represent the most identifiable marks of the country. Bank note redesign controversy is seen in other countries of the world; of note is the Untied States. ln the US, bank note redesign had once sparked political controversy. In the work of Catherine Squires and Aisha Upton on Obama’s proposed redesign of the $20 notes, “the Obama administration’s proposed redesign of the US $20 bill to include abolitionist Harriet Tubman along with President Andrew Jackson sparked much controversy over the role of historical iconography in public life”. The argument here was not about the economics of the dollar redesigning, but the politics of the appropriateness of the faces that will be on the redesigned note.
In Nigeria, one of the naughty issues on the naira note is the Arabic inscriptions on it. The appropriateness of the inscription has been contested several times in the past. There are those who feel it is not constitutional to be there, given that Arabic is not an official language in Nigeria, while there are others who believe it should remain to serve its originally intended purpose. The Arabic inscription is called the “Ajami”, and it represents the Hausa language written in Arabic script. It is there to help users who do not understand the English language to identify the currencies. Currently, the Ajami is found in the ₦200, ₦500 and ₦1,000 notes; these notes are part of the notes to be redesigned, and in some quarters, there are fears that the Ajami will be removed as part of the redesigning, like it was removed in the lower denomination notes in 2007.
Furthermore, the redesigning of the naira note is coming at a time when Nigerians are preparing for the 2023 general elections. Elections in Nigeria are big money businesses. This is the time when politicians stack wads of cash with the intent of using it to buy votes and voters before and during election. The move by the CBN will force these politicians to make deposits in banks, and may be an avenue to track unexplained cash. There are people who think that this move by the CBN will make the 2023 elections less influenced by cash, as cash becomes more expensive.
Whatever the case may be, the economics of the redesigning of the naira note – lowering counterfeits, and increasing banking liquidity, especially for potential borrowers (given that more money will now be deposited in banks)– should gain as much traction (if not more traction) than the politics of the redesigning.