March 20, 2023

CBN’s cash swap scheme: An introspection



In line with the global best practice, the Constitution of the Federal Republic of Nigeria 1999, as amended, the Central Bank of Nigeria, CBN, Act 2007, among other extant laws, Nigeria’s apex bank in December 2022 announced the large scale implementation of the cashless policy effective February 2023. Announcing the policy, the CBN Governor, Dr Godwin Emefiele, specifically said the N1000, N500 and N200 notes would cease to be legal tender in the country on January 31, 2023.

Although, this position has since been varied first by President Muhammadu Buhari following hiccups in its implementation, and later the Supreme Court, which extended the deadline for the use of the old notes to December 31, 2023, it is pertinent to observe that the CBN has so far carried an extensive and comprehensive implementation of the cashless/cash swap programme, with huge successes.

As part of efforts to facilitate the circulation of its new naira notes, the CBN on January 23, 2023, launched a cash swap programme across local government areas in Nigeria. The cash swap programme, in partnership with super agents and deposit money banks, DMBs, at different parts of the country, was to enable the underserved banking population to exchange the old N1000, N500, and N200 notes for the newly redesigned notes and the existing lower denominations (N100, N50 and N20, etc) which remain legal tender. Super agents refer to companies licensed by the CBN to recruit for the purpose of agency banking.

The CBN also launched sensitisation campaigns in markets across Nigeria to educate citizens on the new notes. “The agent shall exchange a maximum of N10,000 per person. Amounts above N10,000 may be treated as cash-in deposit into wallets or bank accounts in line with the cashless policy. BVN, NIN, or voter’s card details of the customers should be captured as much as possible.

“To promote financial inclusion, this service is also available to anybody without a bank account. Agents may, on request, instantly open a wallet or account, leveraging the CBN Tiered KYC Framework. This will ensure that this category of the populace are able to exchange or deposit their cash seamlessly without taking unnecessary risk or incurring undue cost,” the bank said. The bank also said that agents will sensitise customers on opening wallets, bank accounts and the various channels for conducting electronic transactions.

To ensure the success of the cash swap programme, the apex bank deployed 30,000 super agents to the hinterlands, rural areas and regions underserved by banks in the country. The deployment of the 30,000 super agents was also to ensure that the weak and vulnerable persons are able to take their monies to the banks before the expiration of the deadline.

While providing updates on the implementation of the currency redesign project, after a meeting with President Buhari, Emefiele disclosed that since the commencement of the programme, the apex bank had collected about N1.9 trillion, indicating a 75 per cent success rate when compared with the N2.7 trillion that was outside the vaults of deposit money banks.

He added that about N900 billion was still being expected in the banking system. He said Nigerians in the rural areas, villages, the aged and vulnerable have the opportunity to swap their old notes, leveraging the Agent Naira swap initiative as well as the CBN senior staff nationwide sensitisation team exercise.

He said aside from those holding illicit/stolen naira in their homes for speculative purposes, the CBN remained determined to give all Nigerians, that have naira legitimately earned and trapped, the opportunity to deposit their trapped monies at the CBN for exchange.

Emefiele, appealed to Nigerians to work with the bank to ensure a hitch-free process for the implementation of the naira redesign programme, adding that the CBN staff are currently on mass mobilisation and monitoring together with officials of the EFCC and ICPC to achieve the desired objectives of the exercise.

Emefiele said: “From the onset of this currency redesign programme, we made it clear that for 19 years, the CBN hasn’t been able to conduct this important aspect of its mandate; whereas, this should normally have been done within five to eight years window.”

He said the central bank’s aim was mainly to make its monetary policy decisions more efficacious, adding that as a result of the recent policy interventions including the currency redesign and cashless policy, “we’ve started to see inflation trending downwards and exchange rates relatively stable.”

The CBN governor also pointed out that the apex bank aims to support the efforts of security agencies in combating banditry and ransom-taking in Nigeria through the currency redesign project, stressing that the military is making good progress in this regard.

Emefiele thanked Buhari for giving the CBN the approval to embark on the currency redesign exercise which the bank has not had the opportunity to undertake in the past 19 years. He said: “Indeed, let me emphasise that only an incorruptible leader of the President’s stature can give such approval to the CBN.”

In a national broadcast on the policy, President Buhari had emphasised the need to restore the statutory ability of the CBN to keep a firm control over money in circulation. He disclosed that in 2015 when his administration commenced its first term, Currency-in-Circulation was only N1.4trillion.“The proportion of currency outside banks grew from 78 per cent in 2015 to 85 per cent in 2022. As of October 2022, therefore, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the banking system, while N2.7 trillion remained permanently outside the system, thereby distorting the financial policy and efficient management of inflation.

“The huge volume of Bank Notes outside the banking system has proven to be practically unavailable for economic activities and by implication, retard the attainment of potential economic growth. Economic growth projections make it imperative for government to aim at expanding financial inclusion in the country by reducing the number of the unbanked population.

 “Notwithstanding the initial setbacks experienced, the evaluation and feedback mechanism set up has revealed that gains have emerged from the policy initiative. I have been reliably informed that since the commencement of this programme, about N2.1 trillion out of the banknotes previously held outside the banking system, had been successfully retrieved,” he said.

It is, therefore, incumbent on Nigerians to understand and appreciate the dynamics of the naira redesign and cash swap policy of the CBN as the panacea for the multifaceted problems bedeviling the nation. There is the compelling need for all hands to be on deck to make the policy work for the good of the country and the citizens.

Danjuma, a public affairs commentator, wrote from Abuja