Naira redesign policy comes under pressure
• 27% of Lagosians yet to sight new banknotes
• Customers seek six-month extension of January 31 deadline
• CBN under pressure to extend old note demonetisation
• Fasua: Subject implementation to evaluation, adjustment
• Bankers making brisk business over lapses as VIPs mop up available volume
• Yusuf insists rigid implementation unnecessary
From poor logistics to trust issues and racketeering, efforts by the Central Bank of Nigeria (CBN) to continue with strict enforcement of the naira redesign policy have come under siege, findings by The Guardian have suggested.
The old notes are expected to be out of circulation, ceasing to be legal tenders in the next 20 days.
However, a survey conducted by The Guardian suggests 27.3 per cent of Lagos residents, Nigeria’s financial hub and headquarters of the Nigerian Security Printing and Minting Plc, are yet to see any of the new banknotes, much less receive one.
Of 176 respondents, 43.2 per cent called for a six-month extension of the window set for demonetisation of the old notes. Another 18.9 per cent asked for three months while 16.2 per cent were comfortable with a month extension.
Proponents of extension limits, such as a year and above, received the least percentage at 8.1 per cent while those demanding additional two months came next at 13.5 per cent.
The Senate had asked the apex bank to heed reason and move the deadline to the end of June, citing the hardship hasty enforcement would have on Nigerians.
The upper legislative chamber’s resolution followed a motion titled, ‘Urgent need to extend withdrawal of old currency from circulation’, sponsored by former Senate Leader, Ali Ndume.
While the CBN said the currency redesign is aimed at checking counterfeiting, reducing the volume of money outside the banking system earlier estimated at N2.7 trillion, among others, some have suggested that the programme seeks to mop up black money and checkmate politicians ahead of the February and March general elections.
A few weeks after the policy was unveiled, The Guardian reported high net worth individuals, including politicians, were on Lagos and Abuja streets mopping up foreign currencies. But for the timely intervention of the Economic and Financial Crimes Commission (EFCC), the dollar had crossed the N850/$ psychological barrier and was heading to N1000/$.
According to The Guardian survey, administered through Google Form, 29.1 per cent of Nigerians believed the Senate’s intervention was driven by selfish reasons.
The CBN’s position is even more unpopular. The survey says 79 out of every 100 Nigerians doubt the apex bank was guided by altruistic reason.
Yet, the regulator has insisted it would go ahead with the policy template, arguing there is no fundamental challenge to the new notes circulating sufficiently before the old versions are withdrawn for destruction.
CBN Governor, Godwin Emefiele, argued that there are sufficient channels across the country where Nigerians could turn in their genuinely earned cash. Besides other measures, it removed previous penalty on above-limit cash deposits and directed banks to extend workdays to weekends to accommodate influx of customers.
Notwithstanding the steps taken, the huge money outside banking intermediation trickled in, raising questions about the whereabouts of the huge warehoused cash. Recently, photos of bags of money stashed away in strange locations trended on social media. Mints printed two decades ago also made their way to social media.
Still, former Director General of the Lagos Chamber of Commerce and Industry (LCCI) and private sector advocate, Dr. Muda Yusuf, argued that there “is no logic behind CBN’s stampede”. He warned that millions of poor Nigerians in rural areas could lose their money or pay a high premium to have their old banknotes exchanged for the new legal tenders if the straightjacket implementation goes on.
“The CBN keeps assuring us that it would meet all the demands. Even though some of us disagreed with the whole idea, since we are in the process, we have requested that it should give Nigerians more time. That would make sense, and I do not see anything it would lose if it postpones the timeline by two or three months,” the economist told our correspondent yesterday.
Yusuf called on the apex bank to take a cue from Europe, the United Kingdom and the United States where there are different versions of the same denominations. In the United States, discontinued banknotes are not phased out artificially while worn-out pieces are not reprinted.
Recently, the Bank of England (BoE) unveiled the King Charles III banknotes but noted that to “minimise the environmental and financial impacts” of the change, old notes will continue to exist side-by-side with new ones, allowing them to phase out naturally. Worn-out bills, the BoE said, would not be replaced going forward.
“The King’s portrait will appear on all four of our polymer banknotes (£5, £10, £20 and £50). The rest of the design on the banknotes will remain the same. The King’s image will appear on the front of the banknotes, as well as in the see-through security window. You can check these notes in the same way you can check our polymer banknotes featuring Queen Elizabeth II…
“You will still be able to use polymer banknotes that feature the portrait of Queen Elizabeth II. Banknotes featuring Queen Elizabeth II and the King will be in circulation at the same time. The new banknotes will only be printed to replace those that are worn and to meet any overall increase in demand for banknotes. Our approach is in line with guidance from the Royal Household, to minimise the environmental and financial impact of this change,” a notice released on the Bank’s website reads.
Many economists have joined Yusuf, calling for the old naira to naturally phase out.
As of March 2022, the country’s money supply stood at N45.7 trillion, while the currency in circulation was N3.2 trillion. That puts the ratio of money cash-in-transit to money supply at seven per cent.
A former presidential candidate and economist, Dr. Tope Fasua, is among experts that have taken sides with the CBN on the urgent need to mop up black money.
In an interview with The Guardian earlier in the year (before the currency direction was announced), he charged the authority to urgently go after black money as a necessary action plan to stabilise the sliding naira.
Yesterday, he reiterated support for the policy but asked the monetary authority to periodically evaluate the programme and bend when necessary.
But Fasua observed that there is so much noise, preventing the authority from hearing those whom the policy could negatively affect. He noted: “Salary earners are not seriously affected.”
The illiterate, commodity traders and operators of the informal sectors, he said, are those who the CBN should be speaking with. Overall, he urged the CBN, saying it is time to keep an eye on the ball and engage other critical electronic payment partners, such as telcos, for possible infrastructure upgrade.
While the CBN said it would stick to plans, a source informed The Guardian that the institution is under pressure from within and without to see reason. The source said there is “also overwhelming pressure from the political elite” but could not confirm with certainty how much the bank would backtrack.
If it does, it would be the second time it would adjust the programme to suit populist view. The weekly cash withdrawal limits for individuals and corporate entities (which came into effect yesterday) were adjusted from N100,000 and N500,000 to N500,000 and N5 million respectively in December.
Meanwhile, banks are still paying in old notes, just as most automated teller machines (ATMs) are yet to be configured to pay the new notes. Also, conflicting reports on the directives have not helped the situation.
On the slow switchover of ATMs, a source hinted that banks are wary of configuring the machines, as they are not sure of sustainable supply. The source said the trickling supply has prevented banks from going all out with the new system.
As expected, the new notes have become objects of profiteering. Merchants and very important personalities (VIPs) are mopping up much of the supply. During Yuletide, almost all the banks ran out of supply as demand by partygoers shot up.
Different sources told The Guardian, yesterday, that politicians are also actively taking a cut of the supply to banks. Also, the money sprayed at parties, findings suggested, ends up in a few individual pockets. Much of it does not make it to circulation or get deposited at banks, findings revealed.
Wholesale warehousing is a historical fate of the naira. Billions of naira, in the past, were found in the houses of politically-exposed individuals. And experts said inclination towards hoarding would increase as elections approach on the back of inability to deal with the challenge of vote buying.
The scarcity also questions whether the Central Bank, which argued that N500 and N1,000 notes should not be transactional, had printed sufficient volume. It also raises issue about the capacity of the printing company, which is said to have handled the job locally.
The apex bank had pegged the maximum payable denomination at N200 for reasons relating to low quantity. But yesterday, the spokesperson of the bank, Osita Nwanisobi, told The Guardian that banks were free to load any denominations on ATMs.
A top banker said the CBN might have initially printed a limited volume, hoping to cash on the opportunity to scale up the cashless policy. With the crises of failed e-payment transactions suffered during Yuletide, with some customers still in the queue to resolve pending issues, the authority’s hand may have been forced.
Banks are optimistic the situation would improve in the coming days to reassure the CBN the January 31 deadline is achievable. Otherwise, the bank could succumb to another round of pressure in the programme and move the goalpost in the next three weeks.