INTENDING to create the impression that it listens, the Central Bank of Nigeria bowed to pressure on Sunday by extending the January 31 deadline to turn in the old naira banknotes. Saying that the President, Major General Muhammadu Buhari (retd.), consented to it, CBN Governor Godwin Emefiele rescheduled the deadline by 10 days to February 10, with a grace period of seven days. By deferring to the President, Emefiele reinforces the impression that the CBN is not an independent institution.
Despite the rescheduling, the sense of mistrust among the public over Emefiele’s policy to redesign the N200, N500 and N1,000 banknotes within four months is still substantial. The extensive queues in and outside banking halls, and the near empty ATMs nationwide in the past few weeks connote an image of chaos. As of last week, banks were still giving out the old notes at the counter. On Monday, only a few ATMs reportedly dispensed new notes. While genuine customers are lamenting, a viral video of people spraying the new notes at a party has deepened the notion of inefficiency of the CBN and the security agencies.
In plain language, the new notes are scarce. Therefore, the CBN, which insists that the new notes are available, is not truthful. A new polling by NOI Poll commencing on January 9 stated that over 40 per cent of adult Nigerians had not seen the new notes since they were first issued mid-December. Nigerians are being exploited by PoS operators, who are charging as high as N200 to withdraw N1,000!The policy is just compounding the suffering of the masses.
The chaos began in December when business owners started rejecting the old notes. The reaction of the CBN to this was to state that the new notes were available at the banks. This is difficult to believe as the ATMs had none. The faulty implementation, especially with the short time given to actualise it, is turning it into an organised confusion.
For now, the policy is breeding disorder. There were reports that some customers threatened physical assault against bank officials because they could not get cash. Not only that, crooked bank officials are exploiting the gaps as they allegedly sell the new notes to politicians at premium. Originally, the policy was targeted at preventing politicians from using money to buy votes and influence elections. The threats by Emefiele to sanction the banks for sabotaging the policy seem like an empty threat. So, the CBN needs to walk its talk.
In the rural areas, where financial exclusion is very high, the deadline might wreck more havoc on livelihoods. In December, the World Bank warned that the timing and short transition period of the policy could negatively affect small and medium-sized businesses and the poor, 133 million overall. NGO Inclusion for All Initiative said 54.4 per cent of the rural population might lose their savings to the policy.
There was significant doubt last October when Emefiele introduced the policy. His major agenda is to eradicate kidnapping-for-ransom and peg back inflation that hit 21.47 per cent in November before dropping to 21.34 per cent in December. It aims to curb counterfeiting and remove worn banknotes from circulation. In Nigeria, kidnapping has grown to a multibillion-naira industry. In one case, kidnappers reportedly collected over N6 billion in ransom after their abduction of the Kaduna-Abuja train passengers last March. Any sensible policy to curb this menace is welcome.
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The policy wants to recover the N2.73 trillion outside the banking system. As of October, currency in circulation was N3.23 trillion, the CBN says. Of that, only N500 billion was traceable in the banking system. That is a huge gap. Emefiele said, “So far and since the commencement of this programme, we have collected about N1.9 trillion, leaving us with about N900 billion.”
But in Nigeria, the informal sector sustains the economy. London-based World Economics says Nigeria’s informal economy is 57.7 per cent of GDP. World Bank data states that 80.4 per cent of all employments in Nigeria is in that sector.
Unfortunately, the economy is deteriorating. For the second time in three months, Moody’s, a global credit rating agency, downgraded Nigeria from (P)Caa1 to Caaa1 (junk) at the weekend. This is Nigeria’s lowest since 2006, a period of 17 years.
On these counts, the policy, which elevates cashless above cash transactions, is precipitate. It will constrain the economy further, as for now, the informal sector is still largely dependent on cash transactions.
Again, the cashless policy, good as it is, is evolving. In Nigeria, the available internet infrastructure cannot yet support a brisk online economy the CBN wants to build. Nigerians are losing money and time to incomplete ATM transactions, they are being debited for transfers that fail, even with the same bank. In this situation, the cashless policy should be implemented in phases.
Lessons from other jurisdictions support those who argue that the 10-day extension period is still too short. The Bangko Sentra ng Pilipinas, which launched a redesign of its P1,000 currency from paper to polymer in April 2022, has given a timeline of one year to fully implement the policy in the Philippines. In December, the Bank of England unveiled its redesigned £5, £10, £20, and £50 banknotes that will carry the portrait of King Charles III to replace that of Queen Elizabeth II. However, the BoE said the new notes would enter circulation mid-2024. There are no sensible arguments against these timelines.
Therefore, Emefiele should adopt a more pragmatic implementation of the new naira policy. The old and new notes should be legal tender concurrently for a longer period. In conjunction with the security agencies, the CBN should clamp down on naira abusers. It should make the banknotes available to the banks, mete severe sanctions on banks that hoard the banknotes and use technology to track the distribution of the currency.
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