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A former presidential aspirant of the African Democratic Congress, Kingsley Moghalu, Friday, said crisis may hit the forex market and pressure mount on commercial banks as Central Bank of Nigeria set to redesign the naira notes.
Although former deputy govenor of the CBN commended the apex bank for the move. He however identified major effects of the policy.
PLATFORM TIMES reports that Moghalu made this comment in a series of tweets on Friday.
He said redesigning Naira will force the back 80% of bank notes that are not in circulation, adding it will also tightened the money supply.
He however added that the new development will not solve the inflation rate in the country.
He tweeted, “I fully support the CBN redesign of the Naira. If 80% of bank notes in circulation are outside the banks, that’s troubling. The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender to get new ones or else it becomes illegal tender after January 31 2023.
“This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation. The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go the parallel forex market to buy hard currency, putting further downward pressure on the value of the Naira as too much Naira will be chasing too few dollars.
“I doubt it will solve inflation because there also are other major reasons for inflation such as the forex crisis, which this new move could exacerbate, as well the impact of the security crisis on food price inflation.But overall it is a necessary step.
“I just think the time window for its implementation is rather short. This will put a lot of operational pressure on commercial banks and the financial system in general. A 90 day window would have been better, but one can understand the need to avoid interfering with the elections”, Moghalu said.
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