THE Central Bank of Nigeria’s reissuance of currency notes has run into stormy waters. When on October 26, Godwin Emefiele, the CBN Governor, announced that the newly redesigned N200, N500 and N1,000 notes would be introduced beginning December 15, and the old notes cease to be legal tender by January 31, 2023, it was obvious that logistics challenges and other problems would arise in its implementation. They have, and conflated with the older cashless policy and subterranean political brinksmanship to turn the exercise into a melee.
Four broad reasons were given by the apex lender for the redesign: to neutralise currency fraudsters/money launderers, and thieves; to deny kidnappers-for-ransom their thriving easy access to ransom cash; to combat inflation; and related to this, to control the quantum of money in circulation. Additionally, it is expected to significantly enhance the decade-old cashless policy by mobilising more cash into the formal banking system.
As The PUNCH noted then, though justifiable, the move was bound to run into hitches because of its tight timing, and most importantly, because of the institutional weaknesses of the Nigerian state in general, and of the CBN in particular. A policy of that nature coming so close to an election cycle, with a tight time frame, and a weak regulatory and infrastructural operating environment, faces daunting challenges. Time allowed may prove too short to print enough new notes to meet the demand. These factors are already playing out.
Nigeria’s politics is highly monetised, and it is cash, mostly physical, that oils the machinery. Infrastructure, public and private, is patchy, often unreliable; ICT systems are wobbly, and customers suffer greatly from incomplete transactions, with many losing money through the banks’ inefficiencies and fraud. Regulation is weak to the point of outright complicity by the CBN in the routine fleecing of customers by the money deposit banks.
The banks flout laws and regulations with impunity. On the occasions that the regulator moves, the sanctions imposed are not severe enough to deter the offenders or others.
The inherent systemic weaknesses manifested as soon as the CBN released the first tranche of the new notes. Only a few customers were given; hoarding is rampant and bank tellers and ATMs continue to dispense the old notes. It was also immediately obvious that unlike in previous currency reissuance exercises, public enlightenment has been inadequate. Instances of traders refusing to accept the new notes are rife, a consequence of the short time frame and poor publicity.
Emefiele did not carry the Finance Minister along. True, the CBN’s autonomy grants it full powers over monetary policy and strictly, the law does not require him to do so. But given the policy’s expected impact on the economy, it would have been better to inform the fiscal policy managers and secure their buy-in.
The currency redesign has since necessitated adjustments to the cashless policy. Bowing to public pressure, the CBN has raised the weekly cash withdrawal limit for individuals from N100,000 to N500,000 across all channels, while corporate bodies can withdraw up to N5 million weekly. These will not attract penalties even if withdrawn at once, a departure from the existing regime of charges on the amount above the limit.
Politics and elite brinksmanship have also collided with the policy. Protests for and against it, believed to be sponsored, have been staged. Prominent political actors have assailed the redesign and in turn attracted accusations that they are motivated by selfish interests; namely that they have hoarded vast amounts of cash with which to influence the elections.
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Further muddying the waters, Emefiele himself is allegedly being sought for arrest by the State Security Service that accuses him of financial acts that threaten national security. His supporters and other members of the public allege a conspiracy to get him out of the way and truncate the naira redesign time frame. The truth is yet to be unravelled.
Having plunged headlong, however, the reissuance should be made to succeed. The CBN must closely monitor the banks and ensure that they comply strictly with all directives and regulations, with zero tolerance for deviance. Severe sanctions should be imposed on banks and bankers for infractions.
The CBN should partner strongly with other agencies – the police, other security agencies, the Ministry of Finance, the Customs and Immigration services and state governments. The President, Major General Muhammadu Buhari (retd.), has a crucial role to play; he should match his openly stated support for the programme by mobilising every relevant federal agency to back it. So far, it is only the anti-graft agencies that have lent their full support.
While respecting the autonomy of agencies to do their job without undue interference, Buhari should request a full security report and advice on the SSS-Emefiele saga, and act accordingly. Too often, agencies work at cross-purposes on his watch.
The CBN must address genuine public concerns: these include credible fears, including from the IMF, that the rural communities might be further impoverished due to shortage of bank branches and lack of information, checkmating fraudsters capitalising on the short time and increased online transactions, the malpractices of the banks, and the timing.
Similar redesigns in Nigeria in the past gave ample time. Redesigned £5, £10, £20, and £50 notes unveiled by the United Kingdom’s Bank of England last week will enter circulation in 18 months’ time –mid-2024.
Yes, laudably, the CBN aims to mop up N2.73 trillion of the N3.23 trillion currency in circulation outside the banking system to tighten money supply and tame inflation; frustrate money launderers, and neutralise kidnappers-for-ransom, and above all, bring many more persons into the banking system, and encourage cashless transactions. It therefore believes the short time is crucial.
Without derailing these objectives or coinciding with the polling days, the CBN should consider a short extension. The National Assembly should weigh all sides carefully and review its motions calling for a halt to the exercise. Lawmakers should be guided above all by overriding national interest. They should not allow vested interests to dictate or upturn monetary policies. ,
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