Author: Paul Ani Onuh | Published: 2025 | Journal: Review of African Political Economy, Volume 52, Issue 185 | DOI: 10.62191/ROAPE-2025-0024 | Open Access
Overview
This article examines the banknote redesign policy of Nigeria's Central Bank (CBN), focusing on its objectives, implementation, and the resulting social and economic fallout. The author reviews extant literature on currency redesign, presents an overview of the CBN's Naira redesign and cash withdrawal limit policy of 2022, examines conflicting directives around the currency redesign policy, analyses its implications for fiscal stability, and interrogates the structural challenges that undermine effective implementation.
The article's central argument is that while the currency redesign policy of 2022 is ostensibly an economic instrument, the politics surrounding its implementation rendered it a political tool used by rival factions of the political class — in particular in the lead-up to Nigeria's 2023 presidential election.
Background: The CBN's Policy Objectives
The Central Bank of Nigeria launched its currency redesign and cash withdrawal limit policy in late 2022. The stated objectives were:
- Promote price stability — reducing currency outside the banking system to curtail inflation
- Advance financial inclusion — pushing more citizens into formal banking through the cashless economy
- Promote a cashless economy — supported by the eNaira (Nigeria's central bank digital currency)
- Combat counterfeiting and fraud — new security features on redesigned notes
- Fight corruption and money laundering — reducing the volume of physical cash available for illegal transactions, including vote-buying
The CBN set a deadline for the old N200, N500, and N1,000 notes to be withdrawn from circulation. Simultaneously, it imposed strict limits on cash withdrawals — a maximum of N100,000 per week for individuals and N500,000 for businesses.
Conflicting Directives and Political Contestation
Almost immediately, the policy became a site of intense political contestation. President Muhammadu Buhari took a contradictory position. Some state governors openly defied the CBN's withdrawal deadline, keeping old notes in circulation and challenging the policy in court.
The Supreme Court ruled that the old notes should remain legal tender — effectively defying the CBN. This judicial intervention was perceived as politically motivated, reflecting the high stakes of cash availability in Nigerian electoral politics.
The CBN Governor's own presidential ambitions added a further layer of political entanglement. Emefiele was widely seen as using the cashless policy to weaken political opponents' ability to stockpile cash for vote-buying. Cash is a fundamental resource in Nigerian electoral patronage politics, and withdrawing it from circulation in the months before an election had clear partisan implications.
Socioeconomic Consequences
Cash Shortage Crisis
Poor communication of the policy's goals and inadequate supply of new banknotes led to severe shortages. Long queues at banks, disruptions in business transactions, and the inability of many Nigerians to access cash became defining features of early 2023. Productive activities and commercial transactions slowed sharply, contributing to economic instability.
Disproportionate Impact on the Poor
The policy's most devastating effects fell on those least able to adapt: poor Nigerians, rural populations, and those dependent on informal, cash-based small and medium enterprises (SMEs). These groups could not easily switch to digital transactions due to:
- Lack of smartphones or internet access
- Absence of bank accounts or insufficient digital literacy
- ATM/POS machine shortages in rural areas
- Unreliable mobile networks in many communities
The informal sector — which employs the vast majority of Nigerians — operates overwhelmingly on cash. A sudden, poorly managed withdrawal of cash from circulation hit this sector catastrophically.
Elite Protection and Structural Inequality
In sharp contrast, political and economic elites escaped the worst effects. Elite financial resources allowed them to maintain their lifestyles without relying on cash transactions. Political elites often escaped enforcement measures: while ordinary citizens faced penalties for non-compliance, there were no significant cases of high-profile individuals being investigated or prosecuted for hoarding cash. This disparity underscored systemic inequalities in the CBN's governance and eroded public trust.
Some Positive Employment Effects
On a more positive note, the policy spurred the growth of mobile banking agents and POS (Point of Sale) operators, which created some employment. These agents helped unbanked populations access banking services.
Structural Challenges to Implementation
- Inadequate digital infrastructure: Mobile networks are unreliable, ATM coverage is sparse in rural areas, and power outages frequently disable digital payment systems.
- High informal economy share: The majority of Nigeria's economy operates informally, in cash. Cashless policy cannot succeed without first addressing the structural conditions that keep most Nigerians outside the formal financial system.
- CBN independence compromised: When the President and state governors openly countermand monetary policy, the institutional integrity of the central bank is undermined.
- Poor policy communication: The CBN failed to adequately communicate the policy's goals, timeline, and procedures to the public.
- Inadequate new note supply: The CBN could not print and distribute sufficient quantities of the new notes to replace the withdrawn ones in time.
Key Arguments
- The economic/political duality: The currency redesign was simultaneously an economic instrument (with legitimate goals) and a political tool (weaponised by rival factions).
- Class asymmetry in policy impact: The policy's costs fell overwhelmingly on the poor and informally employed, while elites were largely insulated — a structural outcome, not an accident.
- Infrastructure preconditions unmet: The cashless economy agenda is structurally premature given Nigeria's current infrastructure, digital access, and financial inclusion landscape.
- Institutional damage: Direct political interference in CBN monetary policy has damaged the bank's credibility and independence.
- Electoral dimensions: Cash availability is a fundamental resource in Nigerian electoral patronage politics. The redesign policy was perceived and experienced as an electoral intervention.
Conclusion
The evidence indicates that the infrastructure required to implement a cashless economy is lacking, making the chances of achieving its stated objectives low. The politics surrounding the implementation exacerbated the vulnerability of the majority of the population — those who are poor, mostly live in rural areas, and depend significantly on cash-based transactions to conduct business in predominantly informal SMEs. The countering of CBN directives by political figures undermined the CBN's constitutionally protected role and its integrity as an independent body with fiscal responsibility. While the CBN insists the policy is an economic instrument, its perception and use as a political tool indicates the profound degree to which the CBN has been politicised, with damaging consequences for institutional credibility and economic outcomes.
This article summary is prepared by the IOCSS Journal Monitor. Available Open Access via ScienceOpen. Review of African Political Economy, Volume 52, Issue 185, 2025.