By Temitope E. Samuel And Bukola F. Adesokan

The current legal framework within which the Central Bank of Nigeria (CBN) operates is the CBN Act of 2007, which repealed the CBN Act of 1991 and all its amendments. The Act widened the objects of the CBN to include ensuring monetary and price stability, as well as rendering economic advice to the Federal Government. As such, it provides that the CBN should be an autonomous body in fulfilling its functions under both this Act and the Banks and Other Financial Institutions Act (BOFIA), with the objective of promoting stability and continuity in economic management.

It is noteworthy to mention that Section 17 (3) of the CBN Act confers on the CBN the sole right to issue currency notes and coins through out Nigeria. The section provides thus;

the Bank shall have the sole right of issuing currency notes and coins throughout Nigeria and neither the Federal Government nor any State Government, Local Government, other person or authority shall issue currency notes, bank notes or coins or any documents or tokens payable to bearer on demand being document or token which are likely to pass as legal tender.

Similarly, Section 20(3) of the CBN Act grants the CBN the power, upon direction from the President, to redesign or change the face of the naira notes. However, the section imposes a duty on the CBN to give ‘reasonable notice’ of the intended redesign to Nigerians, and only upon the expiration of the notice shall the old notes cease to be legal tender.

Further to its power under Section 17(3) and Section 20(3), the CBN on October 2022, announced the redesigning of the N200, N500, and N1,000 notes and gave directives that Nigerians deposit their old notes before January 31, 2023 giving Nigerians a few months to deposit all old notes in their possession to the bank and then a full circulation of the redesigned new naira notes across the country within the same timeline.

The directive to deposit old notes and accept only the redesigned new naira notes as the appropriate legal tender led to a lot of controversies across the country. The notice given by the CBN for the cash swap seemed inadequate considering the cash shortage and agitations that followed right after. The notice was obviously a short one in the light of the many peculiarities of Nigeria that is the fact that about 40% percent are unbanked and there is only about 4.5 bank branches for 100,000 adults among other factors.[1]

Due to the agitations across the country over the scarcity of the new naira notes, on 16th February 2023, President Muhammadu Buhari extended the validity of the old N200 notes until 10th April 2023, increasing the notice given by a month; however, this still seemed to not be enough. The cash shortage led some state governors to bring an action against the Federal Government and the CBN, demanding that the old naira notes remain legal tender and the suspension of the CBN’s policy. The Supreme Court of Nigeria issued an order for the suspension of the policy; however, the CBN refused to comply with it, claiming that the issue was outside the scope of the Supreme Court.

The situation of cash scarcity continued within the country with CBN reinforcing its position of the old 200 naira note ceasing to be a legal tender by 10th April 2023 in line with the directive of President Buhari. Following this, more governors joined forces and instituted another suit before the Supreme Court of Nigeria against the CBN and on 3rd March 2023, the Supreme Court ordered that the CBN to extend the use of the old 1000, 500 and 200 naira notes till 31st December, 2023 due to the hardships caused by a shortfall in circulation of the new naira notes.

Following the decision of the Supreme Court and in line with Section 20(3) of the CBN Act, the CBN declared on 14th March 2023 that old naira notes remain legal tender until 31st December 2023, in line with the decision of the Supreme Court.

In conclusion, it is noteworthy to mention that although the CBN Act does not define what amounts to ‘reasonable notice’ as mentioned in Section 20(3) of the CBN Act, the CBN should have considered the peculiarities of the Nigerian situation, such as the accessibility of the populace to bank branches, the number of citizens who have accounts in banks, and other cogent factors in determining a ‘reasonable notice’ period. We are of the opinion that such notice should not be one that will cause hardship on the populace, lead to chaos, or force businesses to struggle to stay afloat due to inaccessibility to cash. It is however commendable that the Central Bank of Nigeria (CBN) eventually adhered to the directives of the Supreme Court to extend the validity of the old naira notes till 31st

December, 2023. This way, the new naira notes can be adequately circulated, allowing ample time for the transition from the old naira notes to the new ones, thus reducing the negative impact on the populace and the economy of the country.

CONTRIBUTORS:

Temitope E. Samuel And Bukola F. Adesokan

[1] Ananya Bhattacharya ‘Nigeria Awaits a Supreme Court Determining whether Old BankNotes should Remain Legal Tender for Longer’ available at; accessed 17th March 2023.