ABUJA, Mar 06 (IPS) – Nigerians struggling with the scarcity of new naira notes coupled with the country’s cashless policies introduced by the apex bank have received a last-minute reprieve from a policy that had disrupted their lives and exacerbated the situation. hungry.
On Friday, March 3, 2023, the country’s Supreme Court temporarily suspended the March 10, 2023 deadline for using the redesigned naira, saying that imposing such a tight deadline was an affront to the 1999 constitution.
Trying to get money from the ATMs of licensed commercial banks had caused so many problems that people had put their lives on hold. Artisans, teachers and other professionals could not go to work, many schoolchildren hung out at home, itinerant traders were stranded and families now went hungry and occasionally resorted to violent protests because they had been unable to access their money.
Experts had warned that the situation could trigger a cash-driven recession as the country’s economy is primarily cash-based.
Last October, Central Bank of Nigeria Governor Godwin Emefiele announced that three major denominations would be redesigned by order of the federal government.
Emefiele announced that Nigeria’s last redesign was in 2014, when the N100 note was redesigned to mark the country’s centenary.
“In accordance with section 19 subsection a and b of the CBN Act 2007, the management of the CBN has sought and obtained the approval of President Muhammad Buhari to redesign new series of notes at N200, N500 and N1000 levels, produce and market.” he said.
In November last year, Buhari launched the new naira notes and said they would be in circulation from December 15, and the deadline for exchanging old notes for new ones in the Deposit Money Banks (DMBs) was set for this year on January 31 . But the massive objection and the banks’ inability to exchange the money forced it to be extended until February 10, 2023. On February 17, the old banknotes were no longer recognized as legal tender.
To add to the misery on Dec. 6, the top bank, in an effort to encourage a cashless economy, introduced a limit on cash withdrawals and directed the lower banks to accept over-the-counter amounts used by individuals and businesses. should be included, to be limited to N100. ,000 and N500,000 (approx USD 207 and USD 1085.5) per week. This order was expected to take effect on January 9, 2023, and ATMs and point of sale terminals (PoS) would dispense a maximum of (N20,000) (USD 43.4) at a time.
The first phase of the cashless policy was introduced in Lagos in April 2012 to encourage electronic transactions and improve the efficiency of the Nigerian payment system. It was successful there, and the policy was subsequently expanded to five other states in July 2013. For the expansion of financial entry points and financial inclusion and dissemination of electronic transactions, the CBN gave full implementation in September 2019 before the nationwide implementation was recently announced to start on January 9 this year.
Like many other African developing countries, Nigeria’s economy was greatly affected by the war between Russia and Ukraine. In 2016, the country entered a recession, causing its economy to shrink by 1.6 percent due to a drop in oil prices on the international market.
The economy also plunged into recession in the third quarter of 2020 due to the negative impact of COVID-19 on travel and the supply chain of goods worldwide.
In addition, the growth of its inflation rate rose to 21.82 percent in January 2023.
The CBN justifies the cashless policy in the banking system saying it can defuse kidnapping for ransom, armed robbery, terrorist financing, extortion, advance fraud and other crimes, while the mandatory withdrawal limit will deflate the country’s economy.
Inflation occurs when there is too much money in circulation. The central bank findings showed that as of October last year, the currency in circulation was N3.23 trillion naira, but only 500 billion naira was held in custody at various banks and 2.7 trillion naira was permanently undeposited. Observers have predicted that with the decision to withdraw the money from circulation, inflation would decrease.
Not enough money in circulation
News analysts questioned whether the Nigerian Security Printing and Minting (NSPM) could print the money. It was established in 1963 with the authority to produce currency and security documents for ministries, government agencies and companies.
In addition, a World Bank study found that there were 16.15 ATMs per 100,000 adults in Nigeria in 2021 – meaning that for a population of over 200 million people in Nigeria, there are only 32,000 ATMs across the entire federation. Each ATM should dispense a minimum of 1 million naira daily.
But the problem was compounded as the commercial banks were short of cash and unable to get the newly printed naira from the central bank as the NSPM could only print 4 billion notes per year.
The deputy governor of the central bank, Aisha Ahmad, said in December that 500 million new notes had been ordered, which a financial analyst said was insufficient.
“The intention of the naira redesign and introduction of cashless transactions is to reduce vote buying and terrorism in the country, but the CBN needs to put more money into circulation,” said a Lagos-based KPMG analyst Babatunde Babajide in a statement. interview.
Since luring voters with cash was a phenomenon in previous Nigerian elections, the CBN insisted on keeping the banknotes in the banks and kicking against any further expansion of the exchange of the old currency to prevent vote-buying during the elections. against February.
However, many members of the ruling party All Progressive Congress (APC) said the cash crisis is a plot against their candidate Bola Ahmed Tinubu. Last week, Tinubu was declared the winner of the election – despite allegations that the poll was flawed, and is now being contested by both main opposition Peoples Democratic Party (PDP) leaders Atiku Abubakar and the Labor Party’s Peter Obi.
A political scientist from the University of Nigeria, Adilieje Chukwuma, also confirmed that the redesign of the naira was primarily for economic gain, but may also have had political overtones.
“Looking at the timing, it could have political overtones. But I prefer to see the situation primarily as an economic recovery,” he told IPS.
While some believe the naira replacement program was designed to hit the poor, Babajide, the financial analyst, sees it as beneficial to the majority.
“Nigerians are only required to adopt electronic transactions. The CBN action is deliberate, mainly to reduce the supply of cash and curb inflation,” says Babajide.
However, the analyst added that things would hopefully return to normal after the general election in the country.
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© Inter Press Service (2023) — All rights reservedOriginal source: Inter Press Service