CBN says January 31st deadline for old naira notes stays, raises rates to 17.5%

CBB's Governor, Emiefele

By Akinola Ajibade

The Central Bank of Nigeria (CBN) yesterday (Tuesday) said that the January 31 deadline for the withdrawal of old Naira notes from circulation is sacrosanct, implies that it remains unchanged.

This happens as the apex banking regulatory authority, raised  its benchmark lending rate by 100 per cent basis points to 17.5 per cent, with a view to rein inflation without choking off lending rates to the private sector. 

Its Governor, Godwin Emefiele, who stated this at the end of bank's  Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, said that enough time has been given to Nigerians to swap old naira notes to new ones, adding that the authority would not extend the deadline further.

Kidnapping,  ransom-taking and other untoward practices, the Governor said, have have reduced since the three banknotes were redesigned.

The CBN governor said, “I must say here that unfortunately, I don’t have good news for those who feel that we should shift the deadline. My apologies. The reason is because, just like the President has said on more than two occasions and even to people privately, for us, 90 days, in fact, we feel it is 100 days, that it is enough for anyone who has money or the old currency to deposit it in the bank. And we took every measure to ensure all the banks remain open to receive all old currencies.

“100 days we believe is more than adequate. We called on the banks, not only are we requesting you to extend your banking hours so that you can receive old currencies, but we are also asking you to keep your doors open on Saturdays, ladies and gentlemen, the banks did not even have any reasons to even keep their banking halls open on Saturdays neither did they see the kind of rush that they anticipated.

The apex bank on Tuesday raised its benchmark lending rate by 100 basis points (bps) to 17.5%, as monetary authorities seek to rein in inflation without choking off lending to the private sector.

The central bank’s decision came after inflation dipped for the first time in 11 months in December to 21.34%, compared with 21.47% in November.

The central bank’s decision came after inflation dipped for the first time in 11 months in December to 21.34%, compared with 21.47% in November.

But Central Bank of Nigeria Governor Godwin Emefiele said members of the monetary policy committee did not think the decline was big enough to justify either holding, or cutting the rate.

“For us it is not time to celebrate yet. The issue was to what extent should we tighten,” Emefiele told a news conference.

Some analysts had expected the central bank to hold rates steady, after it raised them by 500 basis points last year to combat inflation, which is at its highest in nearly two decades.

“Our immediate read on this is that the CBN is showing more anti-inflation resolve, and preparing the way – perhaps – for an eventual FX policy liberalisation that will require a reset to higher market rates,” said Razia Khan, Standard Chartered managing director and chief economist, Africa and Middle East.

Buhari’s administration has sought to keep the naira currency strong as a matter of national pride, but that became unsustainable during an oil price crash in 2016. To avoid a devaluation, parallel exchange rates were introduced, but many economists have been calling for the complex system to be ditched.

The central bank has set a Jan. 31 deadline to withdraw high value naira bank notes, part of measures to tighten money supply and rein in inflation.

Around 1.3 trillion naira ($2.9 billion) had been deposited into the central bank by last week ahead of the deadline when the old currency notes cease to be legal tender, said Emefiele.

Emefiele projected the economy will grow at a subdued rate of 2.88% this year, lower than government’s forecast. He said exchange rate pressure, widespread insecurity, intermittent fuel shortages and high energy prices were key sources of shocks to Africa’s biggest economy.

Meanwhile, the Senate has again asked the Central Bank of Nigeria (CBN) to extend the deadline for the stoppage of the use of old naira notes from January 31 till July 31, 2023.

Recall that the Senate has called on CBN to extend deadline for the withdrawal of old notes from circulation, weeks to January 31st deadline.

The Senate premised its argument for extension of the deadline on the hardship, which the policy has brought to Nigerians, especially in the area of long queues at the banks where depositors are struggling to change the old notes to new ones.

Coupled with this is the fact the Senate has  concurred with the House of Representatives, which had earlier called for an extension of the policy and compel the CBN Governor, Godwin Emefiele to extend the deadline.

The calls by the legislators coincided with a statement by the CBN governor who on Tuesday at the end of Monetary Policy Committee (MPC) meeting in Abuja said the apex bank’s January 31, 2023 deadline for the validity of the old N200, N500, and N1,000 notes remains.