The disturbing scenes of Nigerians struggling to access cash in banking halls and the long existential queues at Automated Teller Machines (ATMs) across the country is scandalous and depressing.
Nigerians who had deposited their old N200, N500 and N1000 notes in commercial banks as directed by the Central Bank of Nigeria (CBN) have found it extremely difficult to access the new notes due to acute shortages. The severe cash crunch in turn has triggered economic chaos. Even at the few Point-of-Sale (POS) service providers where Nigerians have found solace, they are forced to pay outrageous charges to get cash. Credible reports in the Nigerian media indicate that at some border communities in northern Nigeria, traders unable to access Naira now trade in CFA Franc!
Frantic efforts by the CBN led by its Governor, Godwin Emefiele to ameliorate the unpleasant cash crisis, including the extension of the deadline for the old notes as legal tender, have largely failed. The ensuing widespread individual excruciating suffering, is hampering the operations of Small Medium Enterprises (SMEs) and accelerating the further crippling of commerce in Nigeria. In the rural areas, where the majority of unbanked Nigerians reside, the cash crunch is biting harder as alternative payment systems are either unavailable or unacceptable to trading counterparties. This gradual shutdown of the economy has heightened tension in parts of the country leading to protests and violence in Ibadan, Benin, Warri, Ore, Uyo and Abeokuta.
The National Association of Seadogs (Pyrates Confraternity) sympathises with Nigerians and unequivocally discourages violence over the demeaning inconvenience they have been subjected to as fallout of the naira scarcity.
We acknowledge that the Central Bank of Nigeria, in line with the CBN Act of 2007- Section 2(b), section 18(a), section 19, sub-sections (a) and (b), has the power to issue the country’s legal tender, manage, design, print and control its circulation among other monetary policies. Specifically section 20(3) stipulates that the CBN “shall have power, if directed to do so by the President and after giving reasonable notice in that behalf, to call in any of its notes or coins on payment of the face value thereof and any note or coin with respect to which a notice has been given under this subsection, shall , on the expiration of the notice, cease to be legal tender, but, subject to section 22 of this Act, shall be redeemed by the Bank upon demand.”
We have also noted the reasons advanced by the CBN for the currency redesign which includes curbing currency fraud by people who have hoarded the Naira at home and planning to use it to buy votes; stop the spate of kidnapping for ransom; control the money in circulation by checking counterfeiting, include more people in the financial sector, encourage cashless economy, remove damaged banknotes, and lower inflation rate.
However, as genuine as the intention of the Federal Government and the CBN may be, the National Association of Seadogs (Pyrates Confraternity) views the shambolic implementation of the new currency policy as disappointing and unacceptable. For a fact, the three-month window given by the CBN to mop up old notes, we opine,is potentially a gross violation of Section 20(3) which stipulates that “reasonable notice” should be given. The argument by the CBN and Federal Government officials that the three-month window was enough is unreasonable and is not validated by any factual calculation or consideration.
Currency redesign is a road well travelled and many other countries have executed efficient templates for its implementation. Our apex bank, therefore, ought to be aware of the infrastructural and strategic planning requirements for making a success of this exercise. For instance, reliable and interconnected electronic payment systems, efficient digital platforms, wide accessibility to end-users, general awareness and technical expertise, and efficient error remediation systems are important steps for making such a currency redesign project a success. There is no evidence that the CBN had ensured that these steps were in place before embarking on this ambitious programme and preventing the trauma and hardship that have been unleashed on Nigerians nationwide.
In the Philippines, its Central Bank (Bangko Sentra ng Pilipinas) in April 2022, changed the P1000 from paper to polymer, and gave a timeline of one year window for implementation. Also the Bank of England on December 20, 2022 unveiled the redesigned £5, £10, £20 and £50 banknotes with the portrait of King Charles III to replace that of Queen Elizabeth and has disclosed that the new notes would be introduced in 2024. In these cases, reasonable timelines were set; and this was what Nigerians expected from the CBN, not the hasty implementation of the new currency policy which has caused severe difficulties for Nigerians.
It is instructive to point out that India in 2016 carried out a hasty currency change of the 500 and 1000 Indian rupee and within a six- month period suffered colossal damage. Bloomberg, writing about the policy in 2018, stated that it “froze agriculture and small businesses with a liquidity shock, put people through unnecessary hardship, disrupted supply chains and destroyed demand for everything, from autos to property.” The International Monetary Fund in a report titled “Article IV Consultation Report on India” stated that the “the disruption caused by cash shortages dampened consumer and business sentiments” led to the poor performance of the Indian currency change policy.
According to statistics from the World Bank and the International Monetary Fund, 80.4 per cent of employment in Nigeria is in the informal sector. This sector thrives on cash transactions, thus introducing a cashless policy will spell doom. The required infrastructure to facilitate cashless transactions in Nigeria is still evolving. Several incidents of incomplete bank transfer and aborted ATM transactions abound which suggests that transformation to a cashless economy by fiat would only breed the current confusion we have now. A July 2022 report by Enhancing Financial Innovation Access (EFInA), a financial sector deepening organisation, stated that there are no bank branches, agents or ATMs in over 60% of rural areas in Nigeria. Any monetary policy that does not provide for these sets of people is an invitation to disaster.
A direr implication of the extant economic crisis if it persists is the effect on the February 25 and March 11 elections. A World Bank document exclusively reported by Nigeria’s investigative newspaper, Premium Times, has painted the image of unimaginable disorder as Nigeria inches closer to the elections. The document states: “There is a clear risk that cash shortages cause hardship and frustration which could escalate social tensions, especially in a febrile political environment ahead of elections on February 25 (presidential and parliamentary) and March 11 (gubernatorial).
Unfortunately, Mr. Emefiele’s status as a card carrying member of the All Progressive Congress (APC) and recent presidential aspiration has not helped matters. His obvious partisan leaning has dented his professional credentials and provided ammunition to discredit the policy. There are justifiable concerns that the rushed implementation of the policy has political motives to scuttle the general elections. This has invariably cast doubt on its altruistic motive which in itself is saddening.
The National Association of Seadogs (Pyrates Confraternity) advises the Nigerian government to seriously consider the following immediate actions:
- The CBN should debunk the allegations that it printed only N300 billion new notes by pumping enough new notes into the banking system to make the new currency available to Nigerians. It can no longer afford to wait for old notes to be brought in . It should go beyond mere threat and deal with banks violating its instructions on the disbursement of cash to ordinary Nigerians. .
- A coordinated public campaign by the CBN and Finance Ministry to enlighten the public about the specifics of these arrangements and the legitimate expectations of the average citizens from our financial institutions.
- A wholesale review of the cashless policy with a view to identifying lacunae in the enabling infrastructure and technical expertise especially in liaison with Fintech companies to mitigate hardship on Nigerians.
- We encourage state governments to emulate Governors Babajide Sanwo- Olu of Lagos and Babagana Zulum of Borno, both who have taken steps to ameliorate the sufferings of citizens. Sanwo-Olu had slashed by 50 per cent, fares of all state-owned transportation companies, while Zulum had visited Rann, headquarters of Kala- Balge Local Government Area to supervise the distribution of the redesigned naira notes to 12,000 residents.
- Specific, time-sensitive plans to address the identified infrastructural deficits and measurable feedback and accountability from operators.
- We welcome the reassurance by Mr Emefiele that there are no sinister plans behind this exercise. We urge the CBN to go a step further and ensure all the concessions for availability of cash to pay service providers, requested by the Chairman of the Independent National Electoral Commission (INEC), Prof Mahmood Yakubu are granted to ensure a hitch-free general election.
- The anti-graft agencies – Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices and Related Offences Commission, (ICPC) and the Nigerian Financial Intelligence Unit (NFIU) should step up their operations and fish out those hoarding and selling the notes. Those arrested already should be put on trial immediately to serve as a deterrent. In this regard, ICPC should be commended for the actions taken so far.
The past few weeks have been traumatic for Nigerians, many who can no longer bear the severe difficulties encountered due to the scarcity of naira . It is the responsibility of the Federal Government to cater for the well being of Nigerians, now is the time for effective action that indicates thoughtful and informed leadership. .