Demonetisation in Nigeria! Central bank goes for a cashless economy to deal with corruption

In order to bring down the levels of corruption and make the nation move towards a cashless economy, the government of Nigeria has implemented demonetisation in the country. Demonetization is the process by which coins and notes are removed from circulation and are no longer accepted as legal tender. In October 2022, Nigeria’s central bank announced its decision to demonetise 200, 500, and 1,000-naira notes. The old Naira notes were to be surrendered and replaced with new notes within a set deadline.

The 1,000-naira bill, the biggest denomination available and valued around $2.13, and other outdated banknotes will be replaced, the central bank stated in an announcement made in October.

In an economy with a sizable informal sector where only 60% of households have access to a bank account, a scarcity of fresh notes has contributed to a cash shortage. Long queues are now typical at bank branches and ATMs despite the regulator extending a deadline to replace 200, 500, and 1,000 naira notes from the end of January to February 10.

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While letting the 200 naira banknotes continue in circulation until April 10, President Muhammadu Buhari has reportedly asked citizens to surrender the high-value notes to central bank offices and designated sites. Since then, people have been unable to obtain new notes after depositing their old denominations, resulting in a severe shortage of currency notes.

President Muhammadu Buhari is not contesting in the coming election, but the ruling party has put up Asiwaju Bola Ahmed Tinubu as the party candidate. As President Muhammadu Buhari approaches the conclusion of his current term, at least 10 state governors from the ruling All Progressives Congress have petitioned the Supreme Court to overturn the Central Bank of Nigeria’s demonetisation decision.

Until the Supreme Court determines on the governors’ complaint, an injunction issued on February 8 prevented the central bank from enforcing its policy. The matter is postponed until February 22. Whether the judges will make a verdict prior to the presidential and legislative elections on February 25 is unknown.

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President Muhammadu Buhari insists that the cashless policy and Naira swap by the Central Bank have short and long-term benefits for the country in dealing with insecurity and corruption, but agrees that the apex bank should take the recommendation of a parliamentary Committee to rectify identified problems. His comments came as the Central Bank Governor, Godwin Emefiele, had given an assurance that N200 currency notes taken out of circulation will be moved back from February 16.

Back in 2016, on November 8, the Indian government announced the demonetisation of all 500 and 1,000 rupee banknotes from the Mahatma Gandhi Series. Also, it declared that fresh 500 and 2,000 banknotes would be issued in place of the ones that were demonetised.