Nigeria: Supreme Court orders old ₦200, ₦500 & ₦1000 banknotes to stay legal tender till December 31st

Nigeria's Supreme Court has nullified the ban on the use of the old 200, 500, and 1000 Naira banknotes as legal tenders, ordering that they remain in circulation until December 31st. The decision comes as a relief to many in the country, especially small and medium-sized enterprises (SMEs), who have been grappling with Naira scarcity and high costs associated with accessing cash. Ayodejepo, Managing Director of Optimus by Afrinvest, shared insights on the implications of this verdict on CNBC Africa. The Supreme Court's ruling to keep the old banknotes in circulation until the end of the year signals a positive development for the economy. The decision provides relief to businesses, particularly SMEs, as it allows for smoother planning and transition. The restriction on the old banknotes had previously led to Naira scarcity, impacting business activities and causing costs to surge by up to 40% at times. By extending the timeline for the usage of the old notes, the Supreme Court decision eases the pressure on businesses and offers them more flexibility in managing their finances. Despite this positive outcome, concerns have been raised about the implications of the decision on the Central Bank of Nigeria's (CBN) efforts to regulate the amount of money in circulation. The IMF predicts that the currency outside the bank vaults could increase significantly by the end of the year, counteracting the CBN's measures to reduce excess liquidity. Ayodejepo acknowledged that the Supreme Court's ruling could pose a challenge to the CBN's targets but emphasized the need to balance economic stability and liquidity control. In terms of bank assets, there has been a notable rise in total bank assets volume, recording a 24% increase to approximately 73 trillion Naira. However, concerns linger about the sustainability of this growth trajectory and the impact of recent events such as the Naira scarcity on bank assets. The fluctuation in exchange rates has influenced the valuation of assets, especially in dollar terms, potentially masking the actual growth in loans and investments. Looking ahead, Ayodejepo expressed optimism that as the political environment stabilizes and policies become clearer, there could be a resurgence in economic activities. He highlighted the importance of continued policy implementation and confidence-building measures for banks to expand their lending activities. The path towards sustained growth in bank assets will depend on a combination of regulatory stability, market conditions, and strategic decision-making within the banking sector. The Supreme Court's ruling on the old banknotes not only addresses immediate concerns around Naira scarcity but also raises broader questions about monetary policy, economic stability, and regulatory challenges. As Nigeria navigates through these dynamics, stakeholders will need to collaborate closely to ensure a balanced and resilient financial ecosystem.