Lessons For Nigeria as India Pulls Highest Denomination From Circulation
India says it will remove its highest currency, the Rs20,000, from circulation.
The Reserve Bank of India said it would phase out the currency as it is not commonly used in the country India’s move echoes Nigeria’s decision to demonetise its currencies, leading to widespread panic last year and early 2023.
India’s central bank, the Reserve Bank of India, is set to phase out the Rs2,000 bills by September 2023. The bank appealed for calm after it decided to pull its highest denomination from circulation, causing panic and fiscal instability. India to withdraw its highest currency from circulation.
Reserve bank gives reason for action On Friday, May 19, 2023, the apex bank announced that it would eradicate Rs2,000, which was exchanged for USD24, asking the public to exchange them at banks by the end of September.
It added that the notes would remain legal tender but failed to specify for how long. In 2016, Prime Minister Narendra Modi invalidated Rs500 and Rs1,000 notes overnight to crack down on illicit untaxed money, forcing people nationwide to rush to the banks to exchange their money. The country’s Reserve Bank Governor, Shaktikanta Das, on Monday, May 22, 2023, said he does not expect people to rush to the banks for exchanges. Reports say that the currency was introduced as a temporary measure to boost cash supplies after the 2016 demonetisation, and the Reserve Bank said it had stopped printing them, stating that the notes are not as commonly used as before.
Analysts said businesses and households would feel the ripple effect, and it may not affect the country’s economy.
India’s move is similar to Nigeria’s, with a difference. The apex bank did not mention corruption as a reason for the latest move, but experts believe it is an effort to rein cash outside the banking system. On October 26, 2022, Nigeria’s central bank announced plans to redesign three of the country’s highest currencies, citing hoarding, kidnapping, and general corruption as reasons. The announcement caused widespread panic as Nigerians rushed to exchange their money in the bank. Also, the decision led to a cash crunch which nearly crippled the economy.
The decision by India is a positive move as it may likely lead to stronger currency in the country. New naira notes scarcity: CBN may phase out newly redesigned notes, Nigerians say Legit.ng reported that Nigerians wonder what happened to the newly redesigned naira notes introduced on December 15, 2022. The scarcity of the new notes at ATMs and across the counter has left many speculating that the Central Bank of Nigeria (CBN) may be rethinking its purportedly poorly executed naira redesign policy.
The new notes began to steadily decline in circulation after the apex bank capitulated to a Supreme Court order which rendered the withdrawal of the old notes invalid.
Source: Legit.ng
