Currency management is a key function of the Central Bank of Nigeria as enshrined in Section 2(b) of the Central Bank of Nigeria Act 2007. Based on this function, the governor of the Central Bank of Nigeria, Godwin Emefiele, at a press briefing on Wednesday, October 26, 2022, announced that they have redesigned all major Naira notes. The affected denominations are N100, N200, N500, and N1000. Explaining this decision, the governor said that while global best practices dictate that the process should be done every five to eight years, the naira had not been redesigned in the last 20 years. He further mentioned other reasons for the change, which include: the hoarding of notes by Nigerians, the growing risk of counterfeiting, and the shortage of clean and fit banknotes. He added that the new currency will begin circulation on Thursday, December 15, 2022, while the old currency will cease to be a legal tender after January 31, 2022.

It is without a doubt that the integrity of a local legal tender and the efficacy in the conduct of monetary policy are some of the hallmarks of a great central bank. Yet, the decision has drawn both positive and negative reactions from Nigerians. While some laud the move, others see it as unnecessary considering the cost expended. The Central Bank of Nigeria had said it spent N58.618 billion to print Naira notes, valued at N1.06 trillion in 2020.

Mada Yusuf, Chief Executive Officer, of the Centre for the Promotion of Private Enterprise (CPPE), said that “the cost of such an action would be outrageous and disproportionate compared to the expected benefits advanced by the CBN… At a time when the government is grappling with high fiscal deficit, debt crisis and underfunding of many government projects and programmes, it is most inappropriate to embark on such a profligate exercise. Currency as a percentage of money supply is less than seven percent. The exercise, therefore, has not monetary policy significance.”^[1]

The Environmental Cost

Our perceptions change as we view from various perspectives. Just as the old adage which says, “money does not grow on trees” proves false when viewed from the ecological perspective. This is because paper banknotes are byproducts of trees. According to World Wildlife Fund, every year, around 405 million tonnes of paper and paperboard are produced, totalling roughly 13-15% of total wood consumption.^[2] Therefore, there is no gainsaying the fact that paper, and by extension banknotes, contribute substantively to deforestation and emissions of greenhouse gas. As legal tender, banknotes are damaged during circulation, requiring authorities to take them out and print new ones. Therefore, they carry a sizable environmental impact and result in unsustainable practices and consequences.

Analysis of the environmental costs of banknotes in the United States amounts to $0.26 annually per note based on resources used and CO2 released.^[3] This cost borders around three stages: the production stage, operation stage, and end-of-life stage. The production stage covers material inputs and transportation costs. The operation stage covers transportation (getting money to ATMs, branches, and retailers, and then depositing it back to the banks), detecting and separating authentic from counterfeit, physical handling by suppliers (packaging, etc.), theft, criminal use, underground cash-based economies, and so on.^[4] Ultimately, end-of-life covers transportation, destroying unfit notes, and recycling (where there is one). Unfortunately, in Nigeria there is no recycling. The major concern here is the cost of waste delivery from the disposal of unfit notes and the energy with which to burn them at high temperatures. This is to ensure that the metal compounds in the notes are broken down. Yet, no one considers recycling these banknotes. The environmental cost of cash in Nigeria far exceeds the environmental cost of cash in the United States.

The Way Forward

1. Transition to producing banknotes with a combination of recycled, low-quality waste fibre, cotton, linen and paper. This will reduce the harvesting of raw materials required to make paper money.
2. Unfit banknotes can be recycled; after all, paper is easily recycled.
3. The choice of authentic features like colour, inks (closely guarded recipes in most cases), and borders should be sustainable. One, two, or more colours will make the printing costs vary considerably.
4. Consideration of alternatives like coins, cryptocurrency, and cards (debit, credit, gift, and discount cards).
   • Though the cost of the coin medium is usually the largest cost component (and that can vary depending on the fluctuating costs of metals), it has a much higher life expectancy than paper notes, and they are usually replaced less frequently.^[4]
   • Cards should be mostly virtual cards because they are worse than banknotes as they are made from polyvinyl chloride (PVC) plastic which is not recyclable. However, unlike paper money, plastic cards have a longer shelf-life—8years pending card expiration date. Besides, harvesting and cultivating cotton used for the production of paper money requires just as much energy as it would take to produce an equal amount of PVC.
   • Reevaluation of cryptocurrency; especially as it requires mining, where transactions for these cryptocurrencies are verified and added to the blockchain digital ledger. This mining requires large amounts of electricity and energy.^[5]

In conclusion, while we try to understand the costs of the currency so that we are aware of its value, while we express concerns in management, and while we research to be better informed in policy formulations, let us endeavour to accommodate ecological perspectives. “This is especially true when learning of various initiatives that would have us believe that a cashless society is less costly. This may not be true—I maintain that we do not yet understand holistically the true and total costs of cashless and therefore cannot categorically state that we need to eradicate cash from society as quickly as some would like,” says Brendan Burge, a career marketing and sales professional.^[4] For instance, crypto asset, using Bitcoin as the basis, totals $70s annually per coin in terms of CO2 released. However when considering all the US notes in circulation in the aggregate, and all the mined Bitcoin currently available, we find that the overall environmental impact of cash notes $12.9 billion far exceeds the environmental cost of BTC $1.3 billion.^[3] Ultimately, none of these concerns expressed by the governor of the Central Bank of Nigeria, Godwin Emefiele, underscores any of the sustainable development goals.

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