Day of Decision: Nigerians to know fate as currency scarcity bites harder

Nigeria’s President Muhammadu Buhari is set to take a decision Friday as Africa’s biggest economy battles a cash crunch on a day that the Central Bank of Nigeria is expected to phase out the use of old notes.

Mr Buhari is holding an emergency meeting of the National Council of State to discuss crucial issues affecting the country such as the currency crisis and fuel scarcity. The meeting will also review the preparations for the general election.

The president acknowledged “hardship” in the country last week but urged citizens to give him seven days to resolve the cash crunch that has crippled businesses, caused suffering and triggered protests across the country.

Many Nigerians faulted the currency swap policy and the shortage of the new notes which have frustrated efforts by many Nigerians operating in the nation’s cash-dependent informal economy to do business, make payments, and enjoy certain services.

Millions of Nigerians are stranded and some are forced to sleep at ATM units due to the chaotic rollout of the naira redesign. While Nigerians in some cities are allowed to withdraw a maximum of 20,000 naira, bank ATMs are not dispensing cash in many parts of the country.

The cash crunch has also overwhelmed the digital payments system as customers opt for online transfers, with transactions taking hours to be completed or failing outright.

Amid these operational challenges, a PREMIUM TIMES survey showed that Point of Sale (PoS) transaction charges jumped 400 per cent in most cities across the country last week.

As the president is expected to take a decision Friday, many Nigerians are asking for the currency swap policy to be suspended immediately and only resumed when the equivalent of the money withdrawn from circulation has been printed and is available to replace the old currency notes.

The New Policy

The CBN on 26 October 2022, announced the introduction of redesigned 200, 500, and 1,000 naira notes into the financial system. The currency was later launched in November and the new notes went into circulation on 15 December 2022.

The nation’s apex bank also capped the withdrawal of the new banknotes at N100,000 per week for individuals and N500,000 for corporations. As analysts raised concerns that the withdrawal limits were too low and would impose hardships on Nigerians, the central bank raised the limits to N500,000 per week for individuals and N5 million for corporations.

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But many Nigerians and concerned groups faulted the policy. The Nigerian Governors’ Forum and federal lawmakers called for the suspension of the policy, at least until after the 2023 general elections.

Amid pressure from many Nigerians, the CBN extended the deadline for the phasing out of the old notes from 31 January to 10 February. Despite the extension, many Nigerians have had to scramble for the new notes while others lamented their inability to withdraw their hard-earned money from their bank accounts.

Bank executives say they have not been supplied with enough naira to replace the old ones that have been collected, estimated to be almost N2 trillion. Nigerian anti-corruption agencies have alleged that some banks are hoarding the new currency.

Uncertainties

In the midst of the melee, PREMIUM TIMES reported that the CBN’s supply of new notes has been grossly inadequate, making it difficult for commercial banks to meet customers’ demands, according to sources familiar with details of the CBN operation.

Central Bank Governor Godwin Emefiele, however, defended the bank’s decision, noting that the reasons for the policy ranged from fighting counterfeiting, kidnapping, corruption, money laundering, and other forms of illicit financial flows. He also said the policy will end vote-buying practice ahead of the 2023 elections.

In her intervention, Finance Minister Zainab Ahmed described the initiative as a “success” because it had brought trillions of naira of cash into the banking system, which the government believes will boost digital payments, cut inflation and curb corruption.

“The only sore point is the pain it has caused to citizens,” Ms Ahmed said.

However, the unfolding crisis has turned political ahead of the presidential elections in just about two weeks. Bola Tinubu, the APC presidential candidate, suggested that the naira redesign plan was a plot to sabotage or delay the polls.

On his part, Atiku Abubakar of the main opposition PDP urged the CBN not to grant further extension from the 10 February deadline while Labour Party’s Peter Obi asked Nigerians to be “patient with the CBN and Federal Government with the hope that the general populace and Nigeria will harvest the gains that will come with the reforms.”

Meanwhile, governments of Kogi, Kaduna, and Zamfara States took the federal government to court, arguing that the scarcity of new notes was causing severe hardship and saying there had been “insufficient and unreasonable time” to complete the process.

The Supreme Court granted an interim order on Wednesday restraining the CBN from going ahead with the enforcement of its 10 February deadline for the use of the old naira note. The court also adjourned the hearing until February 15.

But amid the uncertainties, the central bank is yet to comment on the supreme court’s ruling.

The IMF on Wednesday called on the Nigerian government to allow more time to implement the naira redesign policy, noting that there are “problems” with the rollout.

“In spite of measures introduced by the central bank to mitigate the challenges in the banknote swap process, the IMF encourages the central bank to consider extending the deadline, should problems persist in the next few days,” the bank said.