Thoughts on the naira redesign and the resulting cash scarcity
If we ask all Nigerians to raise their hands if they have had to look for cash for any reason, we would most likely form the largest human canopy in the world and block the rays of the sun from Nigeria. I never imagined that I would see the day when I would look for cash and not find it, and not because I didn’t have any money in my bank account.
I tried to buy fuel earlier and luckily found a petrol station selling at N230/ litre, slightly above the “unofficial official” price (seeing as NNPC fuel stations have been retailing at N184/ litre, up from N169/ litre, and no formal announcement was made). I was in the queue for about 20 minutes, a record in this day and age, only to get to the pump and get told that it was either cash or nothing: no card payments or transfers were allowed. I had to leave as there was no bank close by. I didn’t even bother as the probability of even finding an ATM without an embarrassingly long queue was low.
Cash is now King and anyone who has it dictates to everyone else, their slaves. The last couple of weeks have been disastrous with Nigerians going from looking for the new currency notes (to date, I have only seen the 1,000 naira note) to queueing at ATMs to having to pay as much as 20% of the value of their debits at POS operators. To make matters even worse, protests and riots have broken out in some parts of the country with bank branches very often being the target.
For those who, perchance, may be unaware of what this is all about. The Central Bank of Nigeria (CBN) announced a redesign of the 200, 500, and 1,000 naira notes on October 26, 2022, and circulation of the new notes commenced on December 15, 2022. The old and new notes were then expected to circulate side by side until January 31, 2023, when the old denominations were supposed to cease being legal tender. The CBN, working together with the banks, also stated procedures for retrieving the old denominations and the banks had gone ahead to open on the weekends to ensure people had enough time to deposit their old notes.
The reason for the currency redesign? The CBN governor had cited that the naira had not been redesigned in the last 20 years whereas it was standard practice to redesign and circulate a country’s currency every 5 to 8 years. Other reasons adduced for the currency redesign were the significant hoarding of banknotes by Nigerians (over 80% of currency in circulation was not within the commercial banks’ vaults), the shortage of clean notes, and the increasing ease and risk of counterfeiting the naira. On a side note, the currency redesign was also expected to address terrorism and kidnapping as access to large funds was expected to be reduced.
Predictably, there were diverse opinions about the impact of the policy. Whilst some welcomed the new development citing positive effects on the economy, some either had caveats or disagreed completely with the exercise. Some had issues with the timeline provided to mop up the old notes and render them illegal tender (roughly 7 weeks), and others wondered whether there would be sufficient new notes to meet demand by the deadline. Many people perceived a political undertone due to the coming national elections and some were quite happy irrespective as they felt that vote buying preceding the election would be severely limited due to the absence of large sums of cash.
My main concern at the time was with the timeline. What was the hurry? Why such a short period to withdraw the new notes? India was touted as following this approach but many other countries haven’t done so. Would things go on smoothly? Somehow, something always seems to go wrong with seemingly snap decisions such as this one. Whilst I also recognised the potential of speeding up the previously almost moribund full adoption of the cashless policy, I wondered what it would cost us.
As the deadline drew nearer, retailers started setting deadlines to receive payments with the old notes. I had about N20,000 on me about 5 days before the deadline so I quickly went into my neighbourhood store to buy some items. It wasn’t until I got to the till that I realised they had set their deadline for the day before, 4 days before the CBN deadline! I eventually got to deposit the cash in the bank two days before the deadline. I was walking into the bank when I got the message that the deadline had been moved by 10 days. I have no idea why I didn’t think to hold on to that cash instead because now, it seems like there isn’t any cash anywhere!
I have tried to buy small food items but the sellers will only take cash as they don’t have bank accounts. Paying for parking at a mall where I had to do some work and only cash was acceptable. I went into a supermarket there and requested a cashback which was promptly denied. I had to wait around for about 30 minutes before I found someone willing to give me their cash while I paid for their items with my card so that I would have the cash to pay for parking. I am even lucky as I can make payments for other things with my card or do transfers, what about those who aren’t tech-savvy or have no access to tech? How do people with daily cash needs fare?
The Supreme Court, in response to a suit filed by the governments of Kaduna, Kogi and Zamfara states, has now temporarily halted the ban on the use of the old naira notes from February 10, 2023. Whether this ruling would be obeyed remains to be seen as it appears everyone in Nigeria now does as they like, after all, what’s the worst that would happen? I support the court’s decision fully. Both the old and new notes should co-exist for a reasonably longer period while the CBN get its acts together. They should accept responsibility for failed planning and implementation (who am I kidding?) and let us move ahead without the unnecessary disruption to our lives. It is bad enough that the Federal Government has been burying its head in the sand for months while the fuel scarcity mess has been going on. Adding cash scarcity to the mix is simply deplorable.
It would be nice to know exactly how much of the new currency has been printed and made available, and how much was planned to be made available by the deadline. I do not completely buy the story that the cash shortages are a result of the banks’ inefficiencies or collusion. If what has been printed is inadequate then they can release some of the recouped cash since they have supposedly recovered a good chunk of the cash in circulation?
A hungry man is an angry man and the news from cities where riots have broken out proves this. If people cannot readily access cash for transportation and feeding, and this madness persists for a few more days, I fear for the outcome of law and order across the country. Mr CBN Governor, over to you. Take your “L”, consider the facts before you, and act with wisdom! This is the way I see things today.