Expert Lists 10 Lessons Nigerians Can Learn From India As CBN Deadline for Old Notes Ends in Hours

Expert Lists 10 Lessons Nigerians Can Learn From India As CBN Deadline for Old Notes Ends in Hours

  • CBN governor, Godwin Emefiele has consistently hinted that the decision to redesign the higher denomination of new naira notes is a global practice
  • One of the countries always mention is India in its bid to promote a cashless economy withdrew 1000 and 500 rupees from the economy
  • An expert, Taiwo Oyedele has provided insight into lessons Nigeria can draw from the India exercise

The Central Bank of Nigeria's move to redesign the higher denomination of Nigerian currency(1000, 500, 200) has divided opinions among those in government, experts, and even citizens.

The Federal government and also the CBN believes it would strike a major blow against corruption and counterfeiting and also kick-start for real the transition into a digital, cashless world which was first introduced in 2012.

Financial experts are however divided in their opinion, while in some quarters the naira redesign is seen as a masterstroke others feel it was unnecessary given the lack of infrastructure.

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India Nigeria new naira policu
India also in 2016 withdrew its 1000. 500 rupees Photo credit: presidency
Source: Facebook

For Citizens, it is the government depriving them access to money they have worked so hard for over the years.

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Protests have erupted in various parts of the country, with reports of lives lost and commercial banks' property also being targeted.

Taiwo Oyedele West Africa Tax Leader at PwC Nigeria in a tweet provided a detailed explanation of some of the lessons from the Indian government's similar decision in 2016.

Here is a breakdown of 10 lessons for Nigeria from India’s demonetization policy

  1. In 2016, the Indian government made a surprise announcement of the withdrawal of the country’s two highest denominations (Rs 500 & Rs 1,000)
  2. The major aim was to tackle black money especially counterfeiting, corruption and tax evasion. Also, the policy was meant to facilitate India’s transition to digital, cashless world at a time when over 190m adults had no bank accounts many of whom are illiterate
  3. The withdrawn notes amounted to US$320b, over 45 times Nigeria’s total currency in circulation of N3.2tn (about $7bn).
  4. There was a rush to banks & ATMs with very long queues. Many poor people suffered resulting in dozens of reported deaths, and the economy experienced huge financial losses while GDP growth slowed.
  5. Sectors that rely heavily on cash such as farming, informal trade, micro & SMEs suffered most with estimated 1.5m jobs lost
  6. A couple of years later, the policy did not achieve much to justify the pain. The black economy remained. Many people with illicit funds acquired assets especially real estate while those who had cash sold them at discounted rates to money laundering intermediaries who deposited the notes into the banking system. Also, counterfeits of the newly printed notes surfaced within a month.
  7. The currency-to-GDP ratio grew from 8.8% to 10.9% while the cost of printing lower denomination notes and managing the demonetization policy cost the central bank more than 50% of its dividends to the government
  8. There was an increase in tax collection, but it was difficult to tell how much of the increase was due to the currency policy rather than GST and tax administration reform
  9. Some progress was made towards digital payments, with companies like Paytm onboarding people with no bank accounts for e-payments
  10. The gains made could have been achieved through other less drastic means. Addressing issues such as poor e-payment infrastructure, improving access for the people without bank accounts or smartphones as is the case with Kenya’s Mpesa is a more effective policy.

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Naira record loss

Meanwhile, had earlier reported that Naira recorded its first loss in 2023, as the foreign exchange market resumes full activities.

The Nigerian currency drop in value was recorded across official and black market foreign exchange markets.

Naira experienced significant losses in 2022, and experts have shared their predictions for 2023.


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