The chairman and founder of AACS, a management consulting and policy formulation firm, Dr. Ayo Abina, has said that the Central Bank of Nigeria (CBN) should have modelled its currency redesign exchange period from 90 days to 45 days for all amounts in excess of N500,000, and also to allow retail exchanges and the significant number of people who are depositing below N500,000 to run for an extended period of a minimum of 120 days.
This, Abina claimed, will help to reduce the disruption to the exchange rate and support the ideals of the policy, which he described as, “good and necessary.”
He said: “It mops up the huge amount of cash that is out of the banking system, currently estimated at N2.73 trillion or about 85 per cent of the total cash in circulation. This is totally bad for monetary stability. This policy rids the economy of a lot of ‘black money’, and helps to improve the health of the system and strengthen security, as regulators can monitor funds flow better. It deepens financial inclusion by getting most people into the banking system, a sine qua non to improving credit in the system, and expanding productive activities. It will usher improved cashless policy, and tighten the money supply, which combats inflation.”
He, however, noted that though the policy would be of immense benefit to the country in the long run, “there are short term unintended ugly consequences, chief of which is now manifesting in the depreciating value of the naira, as the unbanked excess cash in the system chases scarce dollars. Parallel markets at the weekend hovered around N820 and N850, close to a 20 per cent depreciation within one week, and the prognosis is that this would continue in the short run.”
The former banking industry top shot then stated that “The CBN could have managed the policy better by reducing the time frame of the old notes exchange from 90 to 45 days for all amounts in excess of N500k, to ensure that black money does not distrupt the polity and allow exchange of retail amounts of less than N500k to run for 120 days.
