Nigeria’s Supreme Court halts the use of new currency
To stop the government from ending the legal tender status of old banknotes, the Central Bank of Nigeria (CBN) has been handed a restraining order by the Nigerian Supreme Court. The decision was reached shortly after the International Monetary Fund (IMF) suggested that the government extend the deadline for exchanging old banknotes since the lack of new notes was causing problems with trade and payments.
Goal of the Central Bank: Lower Liquidity and Lower Counterfeit Levels
Last year, the CBN decided to start issuing newly created 200, 500, and 1,000 naira notes. The deadline for exchanging existing notes was originally set for January 31st. By lowering the quantity of currency in circulation, the aim was to manage liquidity, reduce inflation, and transition to a cashless economy.
Rural Community Impact
People with bank accounts were obliged to bring their old banknotes to a bank branch in order to have the matching amount credited to their accounts, which helped with the transition. Millions of Nigerians, especially those in rural regions, who lack bank accounts were expected to exchange their old notes for new ones at banking agents. The CBN extended the deadline in January till February 10th in order to accommodate more residents in remote areas who wanted to swap their old notes.
Limitations and Disputes
Since January, the CBN has restricted bank account users’ weekly cash withdrawals to 100,000 naira in an effort to reduce liquidity. Another intention to lessen fraud was the security characteristics of the new notes.
Governmental sensitivity was also shown toward the transition plan because elections for a number of political offices, including the presidency, were scheduled for late February and early March. Politicians attacked the measure as being too stringent since they frequently utilize untraceable cash for campaign donations. Analysts are also dubious about the operation’s capacity to regulate the country’s 50 trillion naira (or 6% of it) in total money supply and inflation.