*Muktar Muhammed, a financial expert and investment banker, applauds the Naira redesign policy, but frowns on its ‘lacklustre implementation’, urging the Central Bank of Nigeria to address the limited circulation of Naira notes in the country

Isola Moses | ConsumerConnect

Against the backdrop of the the continued scarcity of banknotes in circulation in the economy, Mr. Muktar Muhammed,

a financial expert, has urged the Central Bank of Nigeria (CBN) to urgently address the obvious shortage of Naira notes.

Old Naira notes

Muhammed, who also an investment banker, made the call Sunday, March 19, 2023, in Abuja, FCT, in a chat with the News Agency of Nigeria.

The expert noted the CBN’s alleged refusal to obey a Supreme Court order legalising the old Naira notes on time is partly responsible for the current scarcity of Naira notes.

According to Muhammed, inadequate circulation of the redesigned Naira notes is also an indication that the Nigeria Security Printing and Minting Company (NSPMC) PLC has limited capacity to produce the required quantity of currency notes for the country.

He further stated: “The CBN was not ready to obey the Supreme Court order until the presidency made a pronouncement.

“Even after that, the circulation is inadequate and we see more of the old notes than the new ones.

“This implies that the NSPMC lacks capacity to print the required quantity of naira notes within a specified period.”

The professional said though the Naira redesign policy has enormous economic advantages, its lacklustre implementation made it problematic.

The expert said that the fact that the policy was driven by some other factors that were not strictly economic also created problems.

He explained “the policy had to do with fighting inflation. One of the tools to fight inflation is to mop up liquidity.

“It is a good policy but poorly implemented because we did not take into consideration the Nigerian factor.”

Muhammed also stressed “it was not driven entirely by economic considerations.

“We had to contend with political considerations as it relates to vote-buying and we had the security consideration.”

Implications of Naira scarcity on economy

Muhammed as well said that the Naira redesign policy had done great harm to the informal sector of the economy.

He described the sector as the driver of the economy, which mainly does cash transactions.

He noted: “That sector suffered during this period because of the scarcity of cash, and even the digital platforms that were created did not have capacity to handle a lot of transactions from the informal sector.

“The CBN should have collaborated with the Bankers Committee to build a strong infrastructure that can accommodate the cashless policy and the naira redesign robustly.

“They should have come together to build the Nigeria Interbank Settlement that would make digital transactions seamless for Nigerians.”

Muhammed observed that several Nigerian youths have become jobless because of the Naira redesign policy and the scarcity of banknotes in circulation.

The policy, he stated, has also not worked well in checking rising inflation because of its negative effect on the informal sector, which is integral to checking inflation.

Benefits of Naira policy to Nigerian economy  -Muhammed

In spite of identified challenges of implementation of the Naira redesign policy of CBN, Muhammed, said despite the difficulties that the policy had inflicted on Nigerian consumers, it also recorded some gains.

He acknowledged that a lot of Nigerians have now moved into the digital space, especially small businesses.

“Some of the small businesses have started to open bank accounts because they realised that it is the only way they can do business.

“It has also helped in stabilising the exchange rate, from between N800 to N900 to the dollar to around N750 to the dollar.

“That is still not good enough, but it is better considering where we are coming from,’’ the investment banker said.

Muhammed noted the Naira redesign policy has also helped to improve government’s revenue generation in the West African country.

The expert also disclosed that the Value Added Tax (VAT) for instance, has improved within the last few months.

Muhammed added: “The Federal Government said it recorded 160 percent increase in VAT collection for the month of January 2023.”