The Central Bank of Nigeria’s (CBN) decision to redesign the higher denominations banknotes (Nigeria Politics & Security – 31.10.22) has put the Naira under pressure which has yet to abate more than a week after it was announced. It is also gradually becoming a topic of political and non-political discourse, with possible negative repercussions for the ruling All Progressives Congress (APC) in February 2023 It is yet one more issue that the party will have to justify on the campaign trail. 

Since the CBN’s 26 October announcement that it will replace the ₦200, ₦500, and ₦1,000 denomination notes, the Naira’s parallel market value has decreased by at least 13% and the current exchange rate is ₦868-₦900 per US$ depending on the location of exchange.

Last week, in an effort to halt this precipitous decline, the Economic and Financial Crime Commissions (EFCC) conducted raids at exchanges in Abuja and Lagos. This only exacerbated the Naira’s problems because many people abandoned it in favour of the dollar. Instead of calming concerns, the announcement has sparked alarm. People have interpreted it as evidence that the administration has run out of ideas to save the currency. Many are sceptical about the assertion that it will curb the hoarding of the Naira because many Nigerians who can afford it already keep their money in US$ or in real estate.

On 4 November, the prominent Redeemed Christian Church of God (RCCG) pastor, Enoch Adejare Adeboye, used a sermon to criticise the policy. He questioned why the CBN was redesigning a currency that is losing value daily and pointed out that the Naira is no longer worth the paper it is printed on. This critique is significant because Adeboye leads one of Nigeria’s largest congregations and many people hang on his every word. The criticism is obviously unfavourable for the APC at a time when it is fielding candidates deemed unfavourable to the Christian faith.

The Naira is expected to reach ₦1,000 per US$ by the end of the week. Even while the administration is attempting to portray the Naira’s troubles as evidence of the policy’s success it will be extremely harmful to its political standing. The decline is harming businesses and particularly tiny import-dependent enterprises. Inflation, which is currently running at over 21%, is anticipated to increase as a result of the weakened currency, which will further erode purchasing power and making life more challenging for manufacturers and small enterprises.

Things are likely to get even more problematic when the exchange of the existing higher denomination banknotes begins in mid-December which will lead to a slowdown in commercial activity in the Christmas holiday season when many enterprises had anticipated a boom. 

When the new banknotes enter circulation in mid-December, traders are likely to stop accepting the old ones which is likely to limit commerce at a crucial period. Finance Minister Zainab Ahmed opposes the new policy and so do a significant number of legislators. As the policy begins to bite deeper and exerts pressure on everything, including the electoral fortunes of the APC, resistance is expected to intensify.