NIGERIA’S CASH SCARCITY
Nigeria's push to replace its old currencies with new ones causes lack of cash and chaos
The issue of fuel scarcity is not only perculiar to the cameroons, even if it’s worse there. So many other countries and the world at large has been affected by it. As if that is not enough already, Nigerians have a new crisis to deal with, Lack of Cash, Cash scarcity! This has been thought to happen due to Nigeria's push to replace its paper money with newly designed currency notes (more like decolores notes), leaving people unable to buy what they need and forcing businesses to close across the West African nation. The Central Bank of Nigeria says the redesigned denominations of 200 (which is equivalent to 43 U.S. cents), 500 (equivalent to $1.08) and 1,000 naira (which is equivalent to $2.17) notes and new limits on large cash withdrawals would help curb money laundering and make digital payments the norm in Africa’s biggest economy. But the process to replace the old currency notes is "rushed," and people believe commercial banks do not have enough new cash to give to customers, pushing the need for cash higher than available cash.
The central bank "doesn’t want us to be spending cash; they want us to be doing transactions electronically, but you can’t legislate a change in behavior," said Ayokunle Olubunmi with Nigeria’s main ratings agency, Agusto and Co. "You have to make people see reasons and ensure those channels are reliable." The government is pushing for a cashless economy that is more inclusive and says the changes will drive economic growth. Critics are skeptical, pointing to decades of chronic corruption in which government officials are known to loot public funds and create more hardship for the many struggling with poverty. As of October, more than 80% of the 3.2 trillion naira ($7.2 billion) in circulation in Nigeria was in private hands, but 75% of that has now been deposited with financial institutions, the central bank governor, Godwin Emefiele, said over the weekend. He extended the deadline for Nigerians to deposit their old banknotes by 10 days, to Feb. 10.
Even as more Nigerians deposit old currency in banks, The Associated Press found some financial institutions were still issuing the outdated notes to customers as of Monday (Jan. 31). Bank customers are allowed to withdraw very little cash and face high bank charges for each transaction. It’s as though the banks in Nigeria have taken the opportunity to dupe its users, charging ridiculously higher for every transaction, and some banks refusing to give out a penny when customers want to withdraw, or giving out a token that cannot be enough for an average day’s basic needs. As a result of this, Businesses are shutting down. Digital payments run by banks are often unreliable in Nigeria, leaving businesses struggling as growing numbers of customers have been unable to find the cash to pay for goods and services. The situation has created a parallel market for people to illegally sell the new banknotes, the Nigeria secret police said Monday. "Someone might want to transfer funds to you, but it can’t be processed and they don’t have cash because of this issue," said Chima Ekwueme, who sells car parts in Nigeria's capital, Abuja. "Sometimes, I ask them to drop my goods and go and find money anywhere."
The cash supply crisis has disrupted such sales across the country, forcing a good number of businesses to shut down, said Muda Yusuf, head of the Nigeria Center for Promotion of Private Enterprise. "The two critical sectors of the economy — trade and commerce as well as agriculture — have been very badly affected because they do a lot of transactions in cash, especially in rural areas," Yusuf said. "This policy has brought their economic activities to a halt." While others cannot bear this, some others believe this is a move by CBN to thwart the bribery scheme of politicians who have hoarded cash to bribe/buy the people’s votes during elections. Well the presidential candidate of the labor party whose motor is “go and verify” due to his integrity and credibility, reacted to the ongoing crisis of scarcity of cash, saying in a tweet: That the currency redesign is not peculiar to Nigeria, although he believes that improvements could have been made in its implementation.
Pleading with Nigerians to bear with the Central Bank of Nigeria (CBN) and the Federal Government over the current scarcity of the newly redesigned naira notes with the hope that the general public will soon benefit from the reforms. Peter Obi said that such exercise usually comes with some inconveniences and pain, however, noted that it has significant long-term economic and social benefits. He also implored the CBN and the banks to increase their efforts to make the new redesigned currency available to small depositors and the unbanked so as to reduce their pains. The pressure this situation exerts on Nigeria’s fragile socio-political and economic conditions is enormous and gradually heading to a tipping point. Social media are awash with harrowing videos of people’s reactions in various parts of Nigeria, and they all point to the pervading rage , frustration, and hardship people are going through. All these are happening at a time of heightened political activities near the 2023 general elections, with various permutations, intrigues and strategies of political parties and their candidates to win the voters.
Nigerian authorities said the redesigned banknotes and new withdrawal limits would help curb the use of money to influence the Feb. 25 presidential election, though experts argue the currency changes are being done at the expense of most Nigerians. They're already facing inflation of 21.3%, a 37% increase in the rate in a year. "All these together are causing significant hardship in both rural and urban areas, (and) the hardship for people is merely collateral damage to the political class," said Tunde Ajileye, a partner at Lagos-based SBM Intelligence firm. With a lot of speculations going on about this. One cannot argue that indeed money has been used in the past to derail a lot of voters, and if the CBN is doing this to curb the corruption during the upcoming electoral period then it is a good thing, (as some people said they just wanted all the politicians who hoarded money to return it to the bank, in the process of getting new ones)
but most importantly, as the presidential candidate said, is to make a way for the masses to be able to freely transact, buy and sell, pay transport fares, and do basic daily things without all of these upheaval. Interestingly when this issue was dug in to know more on the cause, it was found, that indeed the cbn still distributes funds, cash to banks, but some bank managers still hoard the money for politicians who have made a deal with them, to keep the millions they receive from the Central bank of the nation Nigeria for their personal use disregarding the needs and chaos amongst the masses, one money stocked location was discovered recently..
We’ll definitely bring this updates to this report subsequently.
