With the recent compliance of the CBN with the Supreme Court’s verdict, banks have been instructed to make the old naira notes available to Nigerians; however, there is still a low level of currency circulation, and the queues at the banks still persist, Justice Godfrey Okamgba writes.
A few weeks ago, hopes were high as Nigerians waited for Godwin Emefiele, the CBN governor, to possibly comply with the Supreme Court judgment on the use of old naira notes. After the CBN eventually directed the deposit banks to start giving out old naira notes (N500 and N1000), the cash crunch syndrome in Africa’s largest economy has continued to persist.
The Supreme Court ruled on March 3, 2023, that the implementation of the currency redesign policy was ill-timed. It ordered the apex bank to extend the use of old 1,000, 500, and 200 naira notes until December 31, 2023. It took the CBN Governor 11 days to issue the directive to the banks.
Because of congestion, digital platforms are functioning sub-optimally; physical cash is unavailable because the CBN has drained away over 70% of the cash in the economy, and the anticipated relief from the Supreme Court judgment has not come to fruition. As a result, the citizens are in a quandary.
Moreso, queues at the bank haven’t significantly reduced as a result. The average Nigerian spends at least two hours at the bank just to get access to cash.
POS Operators
POS operators constitute and play an integral role in the banking sector. Many of the players had resorted to taking advantage of Nigerians with exorbitant charges. Although, the CBN a few weeks ago threatened to withdraw their license if they continued to charge Nigerians high fees on cash withdrawals.
As of the date of this report, TechEconomy checks show that more than 70 percent of POS operators at the Mushin-Ilasamaja axis have either closed permanently or temporarily, while those still operating have little or no cash to give out to customers.
Temitope Ventures, a POS operator, told TechEconomy that cash withdrawals are usually not more than N2K (charges N200) due to the limited cash available.
“Even though we are partners with the banks, it has not been rosy in terms of accessing these funds from them.” “The N2Ks I give out to customers are not given out often due to the cash crunch.”
According to the Chairman, the Association of Mobile Money and Bank Agents in Nigeria, State of Osun Chapter, Comrade Alli Akeem, the POS business, which was almost saturated, was on the verge of total collapse.
“The cash crunch has badly hit our business.” The Central Bank of Nigeria does not get this policy right because it does not carry the necessary segment of the financial society along. Most of our agents are not operating now because they have no access to cash.
“The CBN needs to come up with a plan on how to be providing the Association of Mobile Money and Bank Agents with cash for transactions because these agents are the ones supplying cash to the hinterlands.
“As I am talking to you, 95 per cents of agents in Osun are not operating due to the cash crunch. We don’t have access to cash and that has crippled our business. The people are lamenting too.
Genesis of Nigeria’s Cash Crunch
Nigeria’s ambitious move to kickstart a cashless economy is inseparable from the ongoing naira scarcity in the country.
The CBN’s cashless policy aims to increase financial inclusion while decreasing cases of armed robbery, kidnapping, terrorism financing, advance fee fraud, graft, ransom payments, extortion, and other crimes.
On October 26, 2022, Godwin Emefiele, Governor of the Central Bank of Nigeria, officially confirmed the bank’s willingness to redesign the country’s currency.
He premised the central bank’s judgment on the authority granted to it by Section 2(b) of the CBN Act 2007.
The CBN’s currency management has been fraught with difficulties for some time. This contains major hoarding of banknotes by the general public, with statistics indicating that more than 85 percent of the circulating currency is outside commercial bank vaults.
At the close of September 2022, data available from the CBN clearly indicated that N2.73 trillion of the N3.23 trillion in circulation was allegedly held by the public outside the vaults of commercial banks all over Nigeria.
Backlashes
Analysts described the policy’s erroneous implementation as resulting in widespread hardship, anger, and economic loss for Nigerians.
“First, the 90 days-deadline, which I warned was too short to be effectively executed. Second, the timing is so close to the elections. But, as later became clear, there was a haphazard and incoherent communication of the purposes of the policy, said Kingsley Moghalu, a Nigerian political economist.
“In one breath, it was said to be to reduce the money supply and help tame inflation (after the bank had created and lent N23 trillion to the Federal Government, illegally because that was way beyond approved limits under the CBN Act of 2007).
“Next, it was promoted as a national security measure to halt kidnapping, Naira hoarding, and other crimes.
According to the Center for the Promotion of Private Enterprise (CPPE), Nigeria’s economy has lost an estimated N20 trillion to the current naira scarcity.
It said the protracted acute cash shortage has not only crippled economic activities in the country but has also become a significant risk to the livelihoods of most Nigerians.
“Millions of citizens have slipped into penury and destitution as a result of the disruptions and tribulations perpetrated by the currency redesign policy, especially the mopping up of over 70 percent of cash in the economy.” Nigerians have not been this traumatized in recent history.”
“The economy is gradually grinding to a halt because of the collapse of payment systems across all platforms.”
