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CBN to revert to paper banknotes before June 2014

By BusinessNews Staff on November 28, 2013

The Central Bank of Nigeria (CBN) has announced that the country will revert to paper banknotes before June 2014.

The move has been described as a policy switch that bucks the growing trend around the world for tougher polymer-based currency.
The central bank however said the policy would not be a drain on the country’s finance and would be gradual.

“Polymer has been on a test run since 2007. This explains why we did not go the whole hog by printing all the notes in polymer,” the Director of Communication, CBN, Mr. Ugochukwu Okoroafor, told AFP.
“We only used polymer for N5, N10, N20 and N50, while N100, N200, N500 and N1, 000 are in paper form. We soon discovered that the polymer notes easily fade out because of our peculiar hot climate in Nigeria making them look tattered when in use over time,” he added.
The CBN signed a deal in 2006 with Australia’s Securency International to print lower more-circulated units of the naira in polymer, while higher denominations were kept in paper form.

But six years down the line and after an allegation that the manufacturer bribed foreign officials to secure contracts, including in Nigeria, the CBN said it was being forced to reverse the policy.
“What we have decided is to switch over to paper notes when we next want to print naira notes,” Okoroafor said.
“When the polymer notes in circulation become tattered and ready to be disposed of, we will start the printing of paper notes.”
The new paper banknotes would be printed locally by the Nigerian Security Printing and Minting Company rather than abroad, he added.
Experiment showed the polymer-based notes, which are in use in 23 countries around the world, including Australia, could last longer than traditional cotton-paper notes.
But the CBN said there had been a public outcry about the poorer quality of some of the new currency in circulation.
Securency International was reported to have supplied 1.9 billion of its Guardian brand polymer-based notes to Nigeria between 2006 and 2008. In the wake of the bribery claims, the Reserve Bank of Australia sold its 50 per cent stake in the firm.
Innovia Security, which bought out Securency International earlier this year, said it did not comment on clients or their business but added that a number of countries with hot and humid climates used their product.
“We have had no issues of premature ink wear or colour fading in these markets,” a spokesperson said in an emailed statement.
However, there are concerns that switching back to paper notes is a sign of a lack of a coherent policy.
“My concern is that Nigeria is fond of policy somersaults,” said a former banker, Moruf Akamo.
Akamo added: “What becomes of the initial investment in the polymer technology, considering that the notes have been in circulation for only six years after their adoption in 2007?”
Akamo said the CBN should have done more research to ascertain the feasibility of polymer notes before starting the project.
“Why is Nigeria going back and forth? It’s time our policy makers got their acts together and do what is right for this country,” he said.
Yemi Adegbola advised the central bank against spending money to print paper notes, which can degrade quickly with daily handling and the tropical climate.
“I can’t see any logic in going back to paper notes,” said Adegbola, a treasury manager at a commercial bank in Lagos.
“The trend worldwide is to embrace polymer. I wonder why Nigeria’s case is different?” he added, claiming that polymer was less susceptible to forgery.
“It’s not easy to fake polymer notes like paper notes,” he said.
a business administration student, Ufoma Okeke, said the CBN should not waste scarce resources on paper banknotes.