However, the success of startups is often influenced by various external factors, including government policies. 

During President Muhammadu Buhari’s administration, several government policies have had a substantial impact on startups, with one of the most notable being the cryptocurrency ban imposed by the Central Bank of Nigeria (CBN). 

Taking a retrospective look at the positive and negative impact of these policies that have shaped the startup landscape in Nigeria, let’s do a quick review:

1. Cryptocurrency Ban

In February 2021, the Central Bank of Nigeria (CBN) issued a directive banning regulated financial institutions from providing services to cryptocurrency exchanges. The ban affected the cryptocurrency market in Nigeria and raised concerns within the startup ecosystem. 

Many startups operating in the crypto space had to adjust their business models or explore alternative solutions. The long-term impact of this policy on startups and the overall cryptocurrency ecosystem is still unfolding.

The ban limited the ability for Nigerian startups and individuals involved in the cryptocurrency ecosystem, to access banking services and affected their ability to conduct business effectively.

2. Foreign Exchange (FX) Restriction

The CBN also implemented various policies to restrict access to foreign exchange. These policies aim to preserve the country’s foreign reserves, but they have negatively impacted startups that rely on imports or require foreign currency for business operations. 

Limited access to foreign exchange has led to increased costs, supply chain disruptions, and reduced competitiveness for Nigerian startups.

3. Cashless Policy and Naira Redesign

The CBN introduced a cashless policy to encourage electronic transactions and reduce the use of cash in the economy. 

While this policy promotes transparency and financial inclusion, it has posed challenges for startups, particularly those operating in rural areas with limited access to digital payment infrastructure. Some startups have had to invest in costly payment systems or adapt their business models to cater to cash-based transactions.

On the other hand, the redesign of the Nigerian naira currency had a direct impact on startups and individuals generally. 

The new currency design, aimed to enhance security features, improve durability, and increase naira value. While the redesign itself did not have a significant effect on startups, the broader economic factors surrounding the currency, such as inflation and exchange rate fluctuations, directly impacted startups’ operations. 

4. High Interest Rates

The CBN has maintained high-interest rates in an attempt to control inflation and stabilize the Nigerian currency. However, these high rates make it more difficult for startups to access affordable credit, limiting their growth and investment opportunities.

5. Multiple Exchange Rates

Nigeria operates multiple exchange rates, including the official exchange rate, the parallel market rate, and the Investors’ and Exporters’ (I&E) window rate. 

This creates uncertainty and a lack of transparency in the foreign exchange market, making it challenging for startups to plan and manage their finances effectively.

6. Loan-to-Deposit Ratio (LDR) Policy

The CBN implemented the LDR policy, which requires banks to maintain a minimum loan-to-deposit ratio. While this policy aims to stimulate lending to the real sector, it has led to increased lending to low-risk sectors, such as government securities, rather than startups and small businesses. This has limited access to financing for startups in need of capital.

7. Tax Incentives and Support Programs

The Nigerian government recognized the importance of startups in driving economic growth and job creation, leading to the implementation of tax incentives and support programs. 

In recent years, initiatives such as the Pioneer Status Incentive (PSI) have provided tax holidays and exemptions for qualifying startups, reducing their financial burden during the early stages. These incentives have encouraged investment and fostered an environment conducive to startup growth.

8. Ease of Doing Business Reforms

In an effort to enhance the ease of doing business in Nigeria, the government introduced several reforms that aimed to simplify bureaucratic processes and reduce regulatory bottlenecks. 

Initiatives like the Presidential Enabling Business Environment Council (PEBEC) set up by President Muhammadu Buhari in 2016 and the introduction of the Nigerian Single Window for Trade have streamlined procedures, making it easier for startups to register their businesses, obtain licenses, and access necessary permits. 

These reforms have positively impacted the overall startup ecosystem by reducing red tape and improving efficiency.

9. Intellectual Property Rights Protection

Protection of intellectual property (IP) rights is crucial for startups that heavily rely on innovation and technological advancements. 

The Nigerian government has taken steps to strengthen IP protection through legislation and improved enforcement. 

The introduction of the Trademarks Act and the Copyright Act amendments has provided startups with legal frameworks to safeguard their innovations and creative works, fostering an environment that encourages innovation and investment.

10. Access to Funding and Investment

Access to funding remains a significant challenge for startups in Nigeria. Recognizing this, the government has initiated various programs to address the funding gap. The establishment of the Development Bank of Nigeria (DBN), and the creation of intervention funds for sectors like agriculture and technology have increased the availability of financing options for startups. Additionally, government-backed investment platforms like the Nigerian Investment Promotion Commission (NIPC) have attracted foreign direct investment (FDI) into the startup ecosystem, providing startups with additional funding opportunities.

11. Nigeria Startup Act

On October 11, 2022, the President, Muhammadu Buhari signed into Law, the Nigeria Startup Bill (NSB), developed by the administration to provide stable legal framework and incentives for technology innovation. 

The NSA was an Executive Bill, initiated by both the Office of the Chief of Staff and the Office of the Minister of Communications & Digital Economy. 

The development aims to reduce bureaucratic and funding barriers and has been long-awaited by the burgeoning tech startup ecosystem. 

According to the Nigerian Startup Ecosystem Report 2022, there were at least 481 active startups with 19,334 employees across the country by August 2022.   

An interesting fact is that 173 (36%) of these startups are in fintech. Other sectors presented include e-commerce & retail, e-health, ed-tech, mobility & logistics, recruitment & HR, agritech, entertainment, marketing, energy, prop-tech, legal-tech, waste management, auto-tech, events and printing.

Expert believe that with the Nigeria Startup Act Nigeria is headed in the right direction as a nation

Mohammed Ibrahim Jega, Founder, of Startup Arewa, told TechEconomy:

“The Act tends to focus on providing more access to startups to grow and scale”. 

He said the sections that describe the Startup Portal, Incentives, Regulatory Support from NITDA, etc., clearly indicate a forward-thinking approach to regulation in Nigeria.

12. National Blockchain Policy

In a bid to fast track the adoption and utilise the gains of emerging technologies, the Federal Government of Nigeria, few weeks back, launched a National Policy on Blockchain Technology and inaugurated Implementation & Steering Committee to oversee its implementation.

The policy, which was launched by the Minister of Communications and Digital Economy, Professor Isa Ali Ibrahim (Pantami), is to promote the adoption of blockchain technology in Nigeria and to position the country as a leading player in the global blockchain ecosystem.

While launching the Policy on behalf of Federal Government of Nigeria, Professor Pantami recalled that the journey of Blockchain Technology officially started in Nigeria on 28th November, 2019 at the International Conference Centre, Abuja where President Muhammadu Buhari unveiled and launched the National Digital Economy Policy & Strategy (NDEPS) for a Digital Nigeria.

Conclusion

Government policies play a critical role in shaping the startup ecosystem in Nigeria. While several policies have positively impacted startups by providing tax incentives, streamlining processes, and enhancing IP protection, challenges related to funding, infrastructure, and power supply persist. 

Continuous collaboration between the government, private sector, and startups is essential to address these challenges, ensuring a conducive environment for entrepreneurial growth and innovation. By implementing targeted policies, Nigeria can further accelerate the development of its startup ecosystem, fueling economic progress and job creation.

While some government policies and regulations are aimed at maintaining financial stability and promoting economic growth, the impact on startups in Nigeria has been mixed. 

The cryptocurrency bans and other CBN policies, such as foreign exchange restrictions and high-interest rates, have created significant challenges for startups. 

The post Buhari’s Administration: A Review of 12 Policies that Impacted Startups appeared first on Tech | Business | Economy.

Mr Bolaji Ojo, Managing Editor & Publisher, The Ojo-Yoshida Report, who gave the advice while speaking Tuesday at the Technology Times Digital Transformation Thought Leadership Series says that Nigeria needs to invest in its infrastructure to power the digital economy by ensuring stable, reliable, and affordable electricity; while telecommunication network must also be strengthened to foster digitalization that are essential to achieving a cash-free system.

Mr Ojo, the former Managing Director, EMEA, and Global Editor-in-Chief, AspenCore, where he was responsible for editorial globally and supervised sales, marketing, and product development in EMEA at the global technology media organisation, says that based on his experience across the developed markets of Europe and America, Nigeria’s banking industry has has taken giant leaps over several developed economies.

“In fact,” Mr Ojo says, “what I would say is that Nigeria is pioneering certain actions that other economies are going to be forced to take. So aside from the impact, so far, the negative impact on people in general, Nigeria is actually taking a leap forward ahead of some developed economies that are still primarily cash-based. And I can list quite a few of them. In terms of developing economies globally, Nigeria is also advancing things that others are going to have to take steps towards. The cash-based economy is an anomaly today. It’s going to go away whether we like it or not.”

According to him, Nigeria can learn from other economies that have already achieved a cash-free system, and should take advantage of the experiences of countries such as the UK and Switzerland, that have made significant progress towards a cash-free system without promulgating a decree or a force of law.

According to him, “a key question is how do you implement it in such a gradual way that it doesn’t negatively impact people the way this one has been done. And you’re right. There are technology tools that can be used. But first, let’s start with the most basic things. You go to some economies, and you find that those economies have already achieved what Nigeria has achieved. So we asked the question what made it possible for them to do this without necessarily promulgating a decree or a force of law to say, ‘this is where we are headed.”

The Managing Editor & Publisher, The Ojo-Yoshida Report, says that infrastructure is essential to a successful transition to a cash-free economy. Digitalization of the global economy, he says, is accelerating, and semiconductors are in everything nowadays. A reliable telecommunication network and stable electricity are fundamental to everything, including the financial technology industry.

“However, in order for that to happen, you need to have power. If I’m returning to an old topic for Nigerians, it is because that is something that is fundamental to anything that we want to do in the economy. We need to have stable, reliable and I would say, affordable electricity. That is fundamental. That has to be a priority to the Nigeria system. It doesn’t matter whether we are talking about financial technology or the rest of the economy, industrial or whatever it is that we are talking about. That underpins everything. In order for you to have a cash-free or reduced cash system, you need to be able to have the infrastructure in place,” Mr Ojo says.

He explains further that, “you need to also have the telecommunications network in place to foster that. In most developed economies where they have moved towards these goals, those are the underpinnings, the fundamentals that they had in place that allowed them to do that. When you have spotty coverage,  when you spend 10, 20, 30 minutes just trying to send messages across, or to access the app for your banking, you are not going to be able to have what we are desirous of if we don’t solve that problem.”

To find sustainable solutions, he advocates that public-private partnership is essential to the transition to a cash-free economy that will involve all levels of government working together to achieve the goal.

“In essence,” Mr Ojo says, “this goes beyond the Central Bank. It cuts across the economy. It involves the Federal Government; it involves State Government; it involves Local Governments. We tend to load most of these on one arm of the Government. The Federal Government should provide electricity. They should do this, they should do that. It has to be a public-private partnership. Local Government, if empowered, can also be involved. There are Local Governments elsewhere in the world that actually offer wireless, Wi-Fi services to their citizens in precisely defined areas. When you have that, when you have the backbone in place, you can do what we are talking about. The infrastructure has to be in place, that is key.”

Mr Ojo, who is also a member of Swiss Fintech, a leading industry organisation that supports and promotes the growth of the fintech sector in Switzerland says that compared to the Swiss and other developed economies including the U.K. and U.S., Nigeria has leapfrogged the old technology of banking.

According to him, “in Switzerland, if I wanted to pay somebody, there are still too many obstacles on the way which Nigeria has removed. One of the examples I was giving was that if I wanted to pay somebody, let’s say you and I had a transaction and you say this is how much it’s going to cost. Personal or business transaction, then I decide I’m going to do a wire transfer, which Nigerians do via apps. Right?

And I go into my app, and in my bank app and I do it, the money will only show, it’s not going to show up immediately in your account. It’s going to show up in three or four days later. This is in Switzerland.

“In the U.S., I lived 22 years in the U.S., same thing. Except now, in the United States, they now have payment apps that you have to use; that your bank may have to ask you to use at a small fee. So it’s not directly through your bank. It is basically an app that is overlaid upon what your bank has. If I wanted to pay somebody from Bank of America, if I wanted to pay somebody at a different bank, for instance, then I have to go in and use something different inside my bank app. It’s not bank-to-bank. It’s not direct.”

On the other hand, Mr Ojo says that, “In Nigeria, with Access Bank or Sterling bank or Zenith Bank, I can do it in a flash, and the money is in your account within 20 seconds, if I have connections. Right? Nigerians have embraced it. That’s why I said we need to give Nigerians credit. And the Nigerians who have embraced it are not just the super educated, the folks in the major city. If you want to do it in the village, boom, it’s doable. We send airtime, we send data, we send money and we’ve embraced it because we leapfrogged over the old technologies.”

He advises the CBN to review its position on Nigeria’s unbanked population noting that, “when we are talking with regard to the unbanked, there are no unbanked people in Nigeria. There are only people that do not fit into our traditional view of what banking is supposed to be. There are no unbanked people. They bank the way they want, and the best service is for you to service people the way they want to be serviced, not the way you think you should service them.”

He explains that, “Nigerians want the cashless society. This is the thing that maybe the CBN doesn’t get. You don’t need to sell it. We already want it because it solves so much problems for us. I can take my phone and slap it against your phone, and the money that I need is immediately transferred.”

For the apex bank, CBN, Mr Ojo advises that, “it is not about focusing on the political objectives. Let’s also focus on the longer-term objectives that Nigerians are ready for. You asked okay, what are the financial tools that will help? They are already in place. They are being used by Nigerians. It is the way the CBN carried these out that got people hurt. People really got hurt bad. However, if we really want this cashless society, let’s go back to the fundamentals, let’s strengthen the institutions, and the systems that can help us achieve those goals. The societies that did, didn’t come up and say we wanted a cashless society.”

The post Naira Redesign: CBN Must Address Technology Fundamentals to Reduce Impact of Nigerians – Bolaji Ojo appeared first on Tech | Business | Economy.

There is a popular theory that Nigerians are resilient. The CBN naira redesign policy put that famous theory to the test in several ways.

People have been stretched in a myriad of directions in the scramble to overcome the scarcity of new naira notes. Banking halls, ATM points, and POS stations are packed out with people seeking cash to handle everyday transactions.

Every day over the last couple of weeks has been a nightmare for most Nigerians. Many have struggled to pay for the essentials including food not because they don’t have money but simply due to the challenge of accessing funds from the banks.

Banks have been vilified for this reason. Some have even called them ‘economic saboteurs’. This perception unfortunately led to attacks on bank branches including arson. Preventable.

There are other villains in this stodgy tale – the POS operators who overcharge to exchange cash, the bank staff who sell cash and the regulator of the financial sector, the CBN.

ALSO READ: Economist Predicts Naira Crisis Could Result in Monthly Loss of $18M in GDP

In my books, the CBN failed on two fronts. Number one, it was slow to wise up to the antics of the banks as they refuse to dispense the new naira notes all through December and the first three weeks in January. Also, the CBN hardly appeared to have had a communication strategy for the naira redesign policy.

My focus here is on communication shortcomings.

How many jingles were created and aired? Were there any billboards? How about television commercials?

It would appear that the CBN did not treat the whole exercise with the seriousness that it deserves, in terms of communication.

It makes one question whether the CBN has a communications unit. What role did public relations play to get the message out there? The CBN could have done more to communicate the naira redesign message. I’ll be quick to admit that because the whole process has politics written all other it, the CBN’s communications team was possibly hamstrung all through. This does not excuse the bank.

Now, when a central bank introduces new currency notes, it’s important to communicate the change to all citizens in the country. And it must do it effectively. The bank must take certain steps to get the message out there.

For instance, the central bank can issue public announcements through various media channels such as newspapers, radio, television, and social media platforms. The announcements should provide clear information about the new currency notes, including their design, security features, and the timeline for the introduction.

Aside from one or two advertisements in print newspapers and social media posts, how radio and television jingles did the CBN deploy?

How many persons reading this can remember any message about the naira redesign policy?

Please note that we are possibly the group that most actively seeks news.

The central bank should have launched and pushed educational campaigns to educate the public about the new currency notes. Brochures, flyers, and posters would have been produced during this campaign and distributed to schools, banks, and public places such as shopping malls, markets, and bus stops.

In addition, the CBN could have sought opportunities for collaboration with banks and financial institutions to ensure that they are aware of the new currency notes and can help in spreading the message to their customers. It could have partnered with the Nigerian Union of Journalists (NUJ), the Nigerian Institute of Public Relations (NIPR), the National Orientation Agency (NOA)and the Federal Ministries of Information and Communications and Digital Economy.

With the partnership, telecommunications services providers could have easily sent out text and WhatsApp messages every weekday and twice on weekends.

The central bank could also have provided training sessions for businesses and retailers to ensure that they are aware of the new currency notes and can educate their customers about the changes.

We should ask questions. For instance, how many public events such as exhibitions, roadshows, and seminars did the CBN organise to showcase the new currency notes and provide information to the public?

When it set a deadline for the demonetization of the old notes, did it provide clear guidelines on how and where to exchange them?

How many people can honestly say that the central bank used a variety of communication methods to ensure that the message reaches all citizens in the country?

Did the CBN provide clear and concise information to avoid confusion and facilitate a smooth transition to the new currency notes?

The answer to these questions is a measure of the effectiveness of the CBN’s naira redesign communications strategy.

The reality is that the CBN could have done more. The truth is that all through the period, the CBN acted like it couldn’t be bothered.

In implementing a project such as introducing new currency notes, it’s essential for the central bank to continuously monitor and review the process to ensure that it stays on track and achieves its objectives. This would have helped it make the necessary adjustments.

How did the bank fare here?

Consider monitoring. The central bank ought to have monitored the project’s progress regularly, and if possible, in real time. This will enable it to identify issues and address them promptly.

The CBN failed to monitor the banks.

The central bank was almost asleep while the banks withheld new naira notes. It played the ostrich when people complained about the unwillingness of the banks to load ATMs with the new notes or pay across the counter.

Furthermore, the collection of feedback from stakeholders, such as citizens, financial institutions, and businesses should have been a priority. This enables it to evaluate the satisfaction with the new currency notes and the project’s overall progress.

How about the area of identifying potential risks to the project’s success and the development of plans to mitigate or manage them? Were there contingency plans in place in case of unexpected events? Did it activate these plans when things went south?

Did the central bank seek external expertise to provide an independent assessment of the project’s progress and suggest areas for improvement?

Did the CBN do everything that it could to ensure that the project achieved its intended objectives?

The first time that I saw a new note was the last week in January 2023. Of course, I didn’t mind because I could still use the old notes. Panic began to set in when the January 31, deadline drew close.

As (patriotic) Nigerians, we pretend to understand the haste but we can’t excuse the shortcomings, failings and gross inefficiency with which the process was handled.

The CBN, it would appear, didn’t rate the citizens. It pretended not to hear genuine complaints, ignored veritable solutions and refuse to evaluate the process to improve it.

The CBN could have done a lot of things differently and better. The suffering the people went through was needless and we should be talking about compensation.

The central bank didn’t do justice to the naira redesign communication. So, the CBN should be rightly counted as a villain in this naira redesign imbroglio.

Eromosele, a Corporate Communication professional and public affairs analyst lives in Lagos.

The post Naira Redesign: Evaluating the Effectiveness of CBN’s Communication appeared first on Tech | Business | Economy.

As a result, ATMs are becoming fewer, and those that are available often run out of cash with little warning. The few that dispense cash are always crowded and lots of people don’t mind as POS vendors have parachuted their prices; you now use money to collect money – way beyond the initial N100 for N5,000 and below.

Bank transfers are expensive and slow, while app downloads are high pending issues with connectivity in most parts of the country. 

In the past few years, Nigeria has seen an increase in the number of mobile money leverage but the few days following the naira redesign and disposal of old notes has seen an even higher increase in this aspect. 

E-payment transactions in Nigeria hit a monthly all-time high of N33.2 trillion in August 2022. By November of the same year, there was a 145% surge.

Total transaction value in the Digital Payments segment was projected by Statista to reach $14.25 billion in 2023 — but it has gone beyond this following the naira redesign.

However, the recent hiccups put together have placed a spotlight on the lack of an efficient banking system in the country.

Connecting this to sustainability and resilience, an adequate banking system should be able to withstand stress irrespective of the situation that comes up. This just explains that we have a lot of work to do in the sector.

A lot of Nigerians are complaining about the poor working of ATM networks in Nigeria. They say that if you don’t have enough money, it is difficult to get access to your own money – reference to the exorbitant prices placed on cash withdrawals. If you can’t make a transfer, it is difficult for anyone to spend their money.

The success or failure of reforms depends on whether they can be put into practice. The Naira redesign is a good example of this; it has been implemented with some difficulty, but it shows that Nigeria’s banking system needs to put in more effort.

Conclusion

Nigeria’s banking system is not completely broken, but it could be better. A lot needs to be done to improve the network, make it more accessible, bring down costs, increase efficiency and transparency, as well as help people get access to their own money.

The post Cashless Policy becoming more Realistic but the Banking System Already Overwhelmed appeared first on Tech | Business | Economy.

This was revealed on Sunday in an interview with NAN in Lagos by ABCON President Aminu Gwadabe.

The Naira has been mostly constant over the previous few weeks when compared to the dollar, trading between N740/$ and N750/$ on the black market.

As the date for the demonetization of old naira notes, January 31, draws near, he discussed the future of the Naira.

“The Naira redesign and the security surveillance of the financial system have stemmed the volatile demand pressure in the parallel market,” Gwadabe said.

“This explains the stability witnessed at the retail end of the parallel market.”

According to the President of ABCON, since the start of the strategy, the local currency has fluctuated within a stable range of N750 to the dollar.

In spite of the market’s lack of supply of dollars, he said that the exchange rate had held steady.

According to Gwadabe, the lack of the new naira notes has persisted in instilling apprehension and worry among typical Nigerians.

To guarantee a smooth transition from old notes to new ones, he asked the Central Bank of Nigeria (CBN) to maintain its advocacy and stakeholders’ participation.

The post Bureaux De Change Operators say Currency Redesign Boosting Naira Stability appeared first on Tech | Business | Economy.

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The current economic and sociopolitical environment in which the Central Bank of Nigeria (CBN) possesses certain monopolistic, statutory powers in the creation and management of national currency and foreign reserves is characteristically pained, complicated and stressed.

For instance, on the macroeconomic front, there is the unprecedented presence of virulent stagflation (the concurrent existence of unemployment and inflation) following import restrictions side by side with undue applications of ways and means which conspired with a series of external and internal debts that both aggravated the multiplier effect of money supply and crowded out private sector investment respectively.

This is, in addition, to exchange rate volatility in a heavily import-dependent economy, the uncontrollable balance of payments deficits resulting in dwindling foreign reserves, frightening national budget deficits leading to escalating national borrowings, and grappling with the existential challenge of a huge underground economy.

Like never before, political gladiators now wield state powers to restrain opposition parties from campaigning in certain strategic locations.

With the rising wave of impunity, there are reports of stack naira bills running into billions, held ahead of the 2023 general elections, apparently for vote buying and other political mischiefs.

Physical cash estimably put at hundreds of millions are paid daily across the 36 states and FCT as ransoms to bandits, terrorists, kidnappers, etc. in the land where hunger roars like a ferocious beast in the face of heightening insecurity.

The above structural background is of great national concern and should be tackled with a great sense of national urgency. However, it does appear from the body language of the CBN Governor and as contained in the CBN fact sheet that much of the solution lies in the CBN currency redesign.

This is not surprising as the CBN Governor has since interpreted its mandate beyond its conventional jurisdiction to include agriculture, industries, production, curbing of criminal activities oozing from the political and socio-cultural atmosphere and the moves to cushion the effect of COVID-19.

Is the CBN biting more than it can chew? Well, for one, the CBN Act mainly charged it, inter-alia the responsibility “to promote monetary stability and sound financial structure in Nigeria”.

This mandate reveals that the monetary authorities have limited powers to single-handedly address the above sociopolitical and economic crises hunting the Nigerian state. This symbolic warfare can only be won in the spirit of the sincerity of purpose, patriotism and proper policy coordination between the monetary and fiscal authorities.

Sadly, there are clear signs of rising discordant tones between both authorities. Earlier in October, the Minister of Finance had opened up on national media that her office (which is at the apex of the fiscal authorities) was not carried along with the initiative of currency redesign, even when the extant law made room for the Ministry to be adequately represented through the presence of the permanent secretary of the Federal Ministry of Finance in any of the CBN board of Directors sessions.

Meanwhile, the CBN Governor, rather than resolving the purported information gap quietly, chose to use the same media to inform Nigerians that he has the backing of the President.

Looking at the circumstances, first the economic realities; between December 2015 and September 2022, currency in circulation doubled from N1.46 trillion to N3.23 trillion.

This period coincided with the heavy quantitative easing of currency production via the monetary printing press which was a clear violation of section 38 of the CBN Act of ways and means lending, alongside the massive central bank intervention funds, particularly during the COVID-19 era to October 2022.

Unfortunately, about 85 per cent of N3.23 trillion (i.e. N2.7455 trillion) in circulation is outside the vaults of commercial banks.

In effect, monetary policy becomes impotent, as a chunk amount of currency is not within the CBN monetary control space.

The CBN is, no doubt, attempting to reverse the ugly trend it earlier induced through currency redesign. Nevertheless, the CBN Governor should not brush aside the fact that the potency of monetary policy also depends on the spread differential between the nominal interest rate and the real interest rate. Presently in Nigeria, the nominal interest rate is higher than the real interest rate which is a potential culprit that may truncate the efficacy of monetary policy.

The current, unusual boom-and-bust behaviour in the foreign exchange market (FOREX) cannot be largely attributed to the naira redesign program as FOREX can importantly be characterized as one exhibiting the animal spirit syndrome.

Indeed, a host of forces ranging from diaspora remittances, oil receipts and theft, FDI, FPI, the tremendous quest for foreign education, and heavy reliance on imported refined products like petro to remote forces like significant political upheavals, flooding etc. all play a role in determining who buys what and who sells what in the FOREX.

By elementary principle, if the demand for the dollar is higher than the supply of the dollar in the Nigerian FOREX then the value of the dollar will appreciate over the value of the naira and vice versa. However, there seem to be some extravagant expectations over the strengthening of the naira against the dollar following the new currency redesign policy.

Well, the naira redesign no doubt has its share of influence on FOREX. For one, it complements the CBN policy move to contract the money supply.

This means that there will be fewer naira units chasing the dollar. Hence naira will at best only tend to gain value over the dollar in the interim.

This effect is inconsequential to the impact the currency redesign will have on the naira via the naira dollar speculative channels.

Lastly, currency redesign cannot earn seignorage (the real revenue government earns from printing national currency) for the government as it is meant to replace existing currency in circulation from which seignorage had already been earned at the time of print.

In all, the currency redesign as an economic solution will not have much of the desired effect on tackling the macroeconomic crises confronting the masses, particularly as stagflation typically poses a policy dilemma.

The monetarists believe that inflation is a purely monetary phenomenon, yet empirical studies have shown that prolonged stagflation succumbs to supply-side solutions, an option that largely depends on the operations of the fiscal authorities.

However, the currency redesign will be an enabler in achieving certain secondary objectives that are within the purview of the fiscal authorities.

First, currency redesign will considerably mop up much liquid in circulation used for terrorist financing and other related criminal activities like banditry, kidnapping, narcotics etc.

It will also aid in minimizing money politics (i.e. guarding against vote-buying activities) in the upcoming general elections in February 2023. Quite frankly, whether these laudable goals will see the light of day strongly depend on the willingness, credibility and preparedness of institutions (EFCC, DSS, NSA, security agencies etc.) which operate within the fiscal authorities.

If these institutions are ready to pursue national interest against all odds, then we will be confident that the sociopolitical environment will once again occupy its pride of place in society where insecurity will be significantly minimized and a newly credible-electoral process is installed to usher in men and women of character, capacity and competence in governance.

One major reason the CBN was granted independence is to be free from any form of political influence. Hence, the CBN Governor should remain politically neutral.

This implies that while the primary reasons for the naira redesign to address currency counterfeiting, the high cost of physical cash management, worsening shortage of clean and fit banknotes in circulation, the enhancement of digital/electronic transacting channels of the naira and the strategic move to bank the unbanked are laudable, he should avoid the temptation of throwing his weight around critical national assignments like tackling social vices and political mischiefs.

The truth is the primary reasons for currency redesign are complementary (not competitive) to the secondary reasons which lie within the scope of the fiscal authorities.

Though the speed at which physical cash flows from the unbanked to the banked is still very unimpressive given the January 31st 2023 deadline, but then, any extension beyond this date will grossly compromise the checks and curbs of money politics.

I hereby strongly appeal to both authorities (fiscal and monetary) for the sake of national interest to put aside their differences having in mind that money is a ‘social contrivance’, a national instrument that makes the sociopolitical and economic alignments inseparable.

*Dr. Eromosele teaches at the Federal University Otuoke, Bayelsa State

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