World Bank Faults The CBN’s Transition Time For Naira Redesign 

According to the World Bank, the scarcity of the new notes does not imply a rise in digital payments.

By Omotayo Olutekunbi

The World Bank has encouraged the Central Bank of Nigeria to increase the time restriction for naira notes swaps, claiming that the policy’s transition period is too short.

The global banking organization stated that periodic currency redesigns are typical for countries, but the changeover process should take around a year.

Mansir Nasir, the World Bank’s Senior External Affairs Officer for Nigeria, announced this in an email to The Punch on Wednesday, February 8, 2023.

The World Bank’s view is consistent with the Supreme Court’s decision, which directed the Federal Government and the CBN to abandon the February 20, 2023 deadline for the cash exchange scheme.

The bank said, “Periodic currency redesigns and demonetization of older notes are normal internationally. However, they usually involve transition periods of one year or longer so as to minimize economic disruption.

“After the Central Bank of Nigeria announced the naira redesign on October 26, 2022, with a short implementation timeframe through January 31, 2023, the World Bank expressed concern about the timing and short transition period”.

The bank also said the CBN’s rapid demonetization could be costly to small businesses and poor and vulnerable households, adding that the scarcity of the new notes does not automatically translate to an increase in digital payments.

“This concern is based on international experience which suggests that rapid demonetizations can generate significant short-term costs, with small-scale businesses, and poor and vulnerable households, including in rural areas, being particularly affected as they are liquidity-constrained and rely heavily on day-to-day cash transactions”

“It is highly unlikely that digital payments can increase quickly enough to compensate for the shortage of new notes; according to the latest available data (from before this policy), only 45 percent of Nigerian adults had a bank account, 34 percent reported paying or receiving money digitally over the past year, and only 9 percent made an in-store payment by digital means, the bank said.

According to the bank, digitization is a structural problem that will take time and a methodical approach.

“In view of the apparent ongoing scarcity of new notes and the potential adverse economic and social impacts should the shortage of cash persist, the World Bank remains concerned about the short timeframe and would encourage the authorities to consider allowing a longer period for the redesign,” the bank said.

Meanwhile, after the Supreme Court’s decision on Wednesday, President Muhammadu Buhari and Central Bank Governor Godwin Emefiele met at the State House in Abuja.

However, the discussion’s specifics remain unknown since Emefiele declined to talk with the press following the meeting.