World Bank faults CBN’s transition period for naira redesign
The World Bank says the scarcity of the new notes does not automatically translate to an increase in digital payments.
The World Bank has advised the Central Bank of Nigeria to extend its time limit for naira notes swap, saying the transition period for the policy is too short.
The global financial institution said it is normal for countries to have a periodic currency redesign but the transition process should take about a year.
The World Bank’s Senior External Affairs Officer for Nigeria, Mansir Nasir stated this in an email response to The Punch on Wednesday, February 8, 2023.
The World Bank’s position is in line with Supreme Court’s judgement that asked the Federal Government and the CBN to discontinue the February 20, 2023 deadline for the cash swap.
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 demonetisation 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.
The bank submitted that digitisation is a structural challenge that will take time and require a systematic 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, following the Supreme Court judgement yesterday, President Muhammadu Buhari and the Governor of the Central Bank, Godwin Emefiele at the State House, Abuja.
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