President Muhammadu Buhari addressed Nigerians on the state of the nation, providing an update on the efforts of his administration to sustain and strengthen the economy, enhance the fight against corruption, and sustain gains in the fight against terrorism and insecurity.
During his speech, he highlighted the need for Nigerians to endure and abide by new monetary policies aimed at boosting the economy and tightening loopholes associated with money laundering.
The President identified himself as a democratically elected leader who sympathizes with the difficulties that Nigerians are experiencing during the implementation of these new monetary policies. He reassured Nigerians that strengthening the economy, enhancing security, and blocking leakages associated with illicit financial flows remain top priorities of his administration. He reiterated his commitment to his oath of protecting and advancing the interests of Nigerians and the nation at all times.
The President informed Nigerians that in the last quarter of 2022, he authorized the Central Bank of Nigeria (CBN) to redesign the N200, N500, and N1000 Nigerian banknotes. In order to ensure a smooth transition, he approved that the redesigned banknotes should circulate concurrently with the old banknotes until January 31, 2023, before the old notes cease to be legal tender.
However, due to the systemic and human difficulties encountered during implementation and in response to the appeal of all citizens, the President authorized an extension of ten days until February 10, 2023, for the completion of the process.
The President emphasized that all these activities are being carried out within the ambit of the Constitution, the relevant law under the CBN Act 2007, and in line with global best practices.
The President explained that the policy decision to redesign the banknotes was based on several critical points, including the need to restore the statutory ability of the CBN to keep a firm control over money in circulation. In 2015, when his administration commenced its first term, currency-in-circulation was only N1.4 trillion.
The proportion of currency outside banks grew from 78% in 2015 to 85% in 2022, and as of October 2022, 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. This distorted financial policy and efficient management of inflation.
The President pointed out that the huge volume of banknotes outside the banking system has proven to be practically unavailable for economic activities and, by implication, retards the attainment of potential economic growth. He stated that economic growth projections make it imperative for the government to aim at expanding financial inclusion in the country by reducing the number of the unbanked population.
Additionally, given the prevailing security situation across the country, which keeps improving, it also becomes compelling for the government to deepen its continuing support for security agencies to successfully combat banditry and ransom-taking in Nigeria.
The President acknowledged the initial setbacks experienced, but the evaluation and feedback mechanism set up has revealed that gains have emerged from the policy initiative. He was reliably informed that since the commencement of this program, about N2.1 trillion out of the banknotes previously held outside the banking system had been successfully retrieved. This represents about 80% of such funds.
In the short to medium and long terms, therefore, it is expected that there would be a strengthening of macroeconomic parameters, a reduction of broad money supply leading to a deceleration of the velocity of money in the economy, which should result in less pressure on domestic prices, a lowering of inflation as a result of the accompanying decline in money supply that will slow the pace of inflation, a collapse of illegal economic activities which