Kingsley Moghalu, a former African Democratic Congress presidential candidate, has claimed that the redesign of naira notes may not be effective in reducing inflation in Nigeria.
According to Moghalu, the redesign of the naira notes could make Nigeria’s currency problem worse.
The former presidential contender, however, supported the Central Bank of Nigeria’s (CBN) decision to redesign the naira in a series of tweets.
The fact that 80 percent of the Nigerian currency in circulation is not held by banks, according to Moghalu, is alarming.
To drive these currencies back into the banking system, he claimed, the top bank must be resolute.
He tweeted: “I fully support the @cenbank redesign of the Naira. If 80% of banknotes in circulation are outside the banks, that’s troubling. The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender to get new ones or else it becomes illegal tender after January 31 2023.
“This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation. The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go into the parallel forex market to buy hard currency, putting further downward pressure on the value of the Naira as too much Naira will be chasing too few dollars.
“I doubt it will solve inflation because there also are other major reasons for inflation such as the forex crisis, which this new move could exacerbate, as well the impact of the security crisis on food price inflation. But overall it is a necessary step.
“I just think the time window for its implementation is rather short. This will put a lot of operational pressure on commercial banks and the financial system in general. A 90 day window would have been better, but one can understand the need to avoid interfering with the elections.”
