The International Monetary Fund (IMF) has advised Nigeria to be careful in its plan to redesign and replace the naira.
The Central Bank of Nigeria on Wednesday announced its plans to redesign the N100, N200, N500 and N1000 to take control of currency in circulation, control inflation and tackle counterfeiting. He also said the move will help the bank combat money laundering and insecurity.
The bank’s governor, Godwin Emefiele, said the plan would allow it to absorb 2.73 trillion naira of the 3.23 trillion naira in circulation outside commercial bank vaults.
The bank has asked Nigerians to exchange their old bills for the new ones which will start circulating on December 15. They have until January 31 to do so, since the old ones will cease to be legal tender as of that date.
The plan has drawn criticism for its limited time for the exchange. Analysts say the move may further increase pressure on the naira as illicit money holders struggle to change their cash into dollars further pushing up the exchange rate.
A former CBN deputy governor, Kingsley Moghalu, said the duration allowed by the bank is short and “could create a lot of operational pressure on banks and some merchants may prematurely reject existing notes once new ones come into circulation.”
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However, he said “the move is a necessary step to restrict the money supply and combat high inflation.”
According to Bloomberg, the IMF advised Nigeria to take precautions to avoid any missteps that could undermine confidence in the financial system.
The Fund’s resident representative, Ari Aisen, in an email response to questions from the newspaper, said that the IMF had contacted the CBN for more information on the plan that was announced on Wednesday.
“We are ready to provide any assistance that is necessary,” the official said.