The NASS-CBN battle over redesigned naira

The brouhaha surrounding the redesign of the naira by the Central Bank of Nigeria (CBN) and the subsequent withdrawal of the old notes with the deadline originally set at January 31, 2023, has been reverberating nationwide even before the end of 2022. It is, however, gladdening to note that the CBN has just extended the deadline for the usage of the old notes by 10 days, up to February 10, 2023. The battle, however, appears unabating. This battle which had extended to the two arms of the National Assembly, the Senate and the House of Representatives has still remained heated in the public domain with various permutations and insinuations introduced into the unfolding imbroglio. The Senate and the House of Representatives had earlier passed resolutions for the deadline to be extended to the end of June 2023 and to the end of July 2023 respectively. The CBN on its part, with the tacit approval of the Presidency had remained adamant and merely gave a token extension of 10 days beyond the original January 31st deadline. The recent claims by the CBN that about N1.9 trillion worth of the old notes have already been received by the banking system and about N900 billion worth are still outside appear instructive and worth further consideration. Also the promise that massive printing and deployment of the new notes are currently being processed appears to suggest that the issue of exchange of old notes for the new would soon be a thing of the past. In any case, lots of issues arise on this seeming power play between the apex monetary authority on one hand and the politicians and law makers on the other.

First, there is the general perception that the naira redesign and the subsequent policy on cash withdrawal limits are linked to the forthcoming general elections scheduled for February and March 2023. That appears plausible given the country’s experience in previous elections where vote buying through the dispensing of cash to gullible voters had played very key role in electorates’ inducements to vote in some particular direction. Though this view is not necessarily conclusive, it appears to have some merit. Hence some persons and civil society organisations have called on the CBN to resist any attempt to extend the deadline beyond the dates set for the elections. Most of the reported incidences of vote buying usually take place few days to the election as well as on the election dates where cash are splashed across the polling booths across the country with the very poor and vulnerable population tempted to compromise in this regard. The abundance of cash in the hands of unscrupulous politicians affords them the opportunity to influence votes cast in the favour of their political parties. This is the clear case of the weaponisation of poverty for political gains. So the CBN policy to literally hoard cash over the election period seemingly appears to have some serious advantage in the ensuring of free and fair elections in February and March. The challenge here is how the CBN can navigate through this process without constituting a cog in the wheel of progress for the enhancement of economic activities and the payments for goods and services in the country over this period.

Second, the above scenario raises the issue of the need for the promotion of a cashless economy in the country. This would require the strengthening of the requisite soft and hard infrastructure to guarantee success. Issues of cyber security need to be addressed as well as the enhancement of financial inclusion for the vast majority of Nigerians in the rural areas who scarcely have access to banking and financial services in their domains. The common avenue to which such Nigerians have to access the financial system is the use of the Point-Of-Sale (POS) facility for cash to carry out their local transactions. In a situation where the POS operators are also short of cash, then a lot of work has to be done by the authorities to promote the much-desired cashless means of consummating economic transactions. These are short-term challenges the CBN needs to be cognisant of in the implementation of its policies in this regard.

Currently, there has been a silent blame game brewing between the CBN and the Deposit Money Banks (DMBs). The DMBs are saying they don’t have the new notes while the CBN says they have it. Somebody is not telling the full story. It is strange that even after depositing the old notes with the banks, withdrawal of cash from the Automated Teller Machines (ATMs) still bring out old notes. This is a case of going round in circles. The CBN should compel the banks (DMBs) to stop feeding their ATMs with the old notes. Only new notes should be fed into the ATM machines. By so doing, the withdrawal of the old notes would be completed in no distant time. Any bank found to be feeding their ATMs with old notes should be sanctioned. If this crisis persists longer than expected, people may be tempted to resort to self help, as is being displayed on social media. If bleached notes circulate and go undetected, then that could pave way for more counterfeiting of the notes, which in effect will lead to an underestimation of the volume of money supply in the economy and the consequent implication for price stability.

It would be advisable to conclude this process before the commencement of the Presidential elections on February 25. Hence, the new February 10 deadline set by the CBN appear feasible. It may not be proper to prolong this issue up to June or July 2023 as proposed by the House of Representatives and the Senate respectively. Rightly or wrongly, any extension beyond the period of the elections could be perceived as aiding vote buying, particularly in the hinterland. Nigerians need to have this sense of satisfaction of the credibility of the forthcoming elections. According to the report of the National Bureau of Statistics, more than 50 per cent of Nigerians are classified as poor and vulnerable and many of these could easily fall prey of any cash inducements over the election period. All that the CBN and the DMBs need to do is to put their house in order and ensure that the two policies of naira redesign and the cash withdrawal limits are implemented seamlessly.