Gainers and Losers of Naira Withdrawal Policy

Despite the initial challenges of the Naira Redesign and Cash Withdrawal Policy of the Central Bank of Nigeria, some Nigerians are already reaping the gains, which has also activated the cashless policy of the apex bank, writes  Festus Akanbi

Amid the confusion caused by contradictory court rulings on the Central Bank of Nigeria’s Cash Redesign and Withdrawal Policy, some banking industry observers say a cross-section of the Nigerian people have begun to count their gains and losses from the policy.

 The apex bank claims the new policy will reduce the incidence of vote buying, currency speculation, counterfeiting, and outright hoarding, among others.

On October 26, 2022, the CBN redesigned the financial system’s 200, 500, and 1,000 naira notes. But since the CBN unveiled the new notes, many Nigerians across the country have had difficulty accessing them from banks and ATM points. 

Penultimate week, amid the chaos caused by the scarcity of new notes, the CBN extended the deadline for phasing out the old naira notes from January 31 to February 10.

However, the political dimension of the currency crisis manifested in the decision of some state governors to initiate legal proceedings against the new deadline given by the apex bank.

Before the case began, the Conference of Nigerian Political Parties Chairmen and candidates for the 2023 elections slated for February 25 and March 11 rejected the plans to force the CBN to suspend the policy by securing a restraining order from a High Court of the Federal Capital Territory.

It was a restraining order on President Muhammadu Buhari, the CBN Governor, Godwin Emefiele, and 27 commercial banks from suspending the demonetisation policy of the federal government. 

In its unanimous ruling, a seven-member Supreme Court panel led by Justice John Okoro, granted an interim injunction preventing the federal government, CBN and their agents and commercial banks from implementing the February 10 terminal dates for now-outdated 200, 500, and 1000 naira notes to cease being legal tender.

The Winners: Nigerian Economy

The anticipated economic gains of the naira redesign and cash withdrawal policy have placed the Nigerian people as the first beneficiaries of the policy.

According to data from the central bank, the currency in circulation in 2015 was only N1.4 trillion. Currency in circulation had risen to N3.23 trillion as of October 2022, with only N500 billion in the banking system and N2.7 trillion held permanently in people’s homes.

Ordinarily, when the CBN releases currency into circulation, it is intended to be used and then returned to the CBN, thereby keeping the volume of cash in circulation under the CBN’s control.

Ordinarily, notes in private homes and outside the banking system are not available for economic activities, which may impact the economy’s ability to reach its total potential growth.

Economists contended that if the naira redesign policy is implemented without being politicised, the process will benefit the economy by putting excess money at the disposal of the apex bank for economic activities rather than stacking piles of naira in private homes.

Nigerians 

Given the fear of vote buying and the unfavourable consequences that the Nigerian people had to face in the past, supporters of the Naira redesign policy believed the policy would give Nigerians a level playing field. They thought by compelling people to return excess cash to the CBN; politicians would be able to go for election without the undue advantage of vote buying.

Cashless Policy

Given the involvement of some banks in naira hoarding, a greater proportion of Nigerians are now embracing the CBN’s cashless policy for transactions. 

Last week, social media was replete with videos and photographs of artisans and hawkers of essential items, fruits, and food using PoS terminals for their daily activities in a manner unprecedented in the history of Nigeria.

Perhaps the most significant beneficiaries are the PoS operators, who took advantage of desperate Nigerians to make huge gains by charging ridiculous transaction rates. 

As the scarcity of new naira notes stifles economic activity, many PoS operators have increased transaction fees by 400%.

Some operators have raised their withdrawal fees from 10% to 25%, depending on the amount a customer intends to withdraw at a particular time.

Last week, a customer told our correspondent in Abuja’s Lugbe neighbourhood that she was charged N1,000 for a N10,000 withdrawal, while another said he was charged N150 for a N1,000 withdrawal.

Findings by our correspondent further revealed that most PoS operators could not meet customers’ huge requests as they complained about the scarcity of cash.

According to reports, many PoS operators get money from various sources to service their customers and remain in business.

“We go to banks and wait for people coming to the bank to deposit money. We intercept them, make deals, transfer to them, and then collect their cash. Some people still do businesses that are cash based,” a PoS operator explained.

Checks showed that some PoS operators also make arrangements with fuel stations, meet them after a day’s sales, and pick up their cash instead of allowing them to take them to the bank.

“What we do is to collect daily sales of some of these fuel stations. By this, we have saved them the stress of going to banks. We now use the money for our business as more people come to us for their daily cash transactions,” Mr Alice Matthew,  a PoS operator in the Ojodu area of Lagos, said in an interview.

Our correspondent observed that some PoS operators in the famous Ladipo Spare Parts Market in Lagos had to rely on owners of food canteens, raw food sellers, and other small-scale business owners who collected petty cash for their activities.

According to reports, the cash shortage forced market PoS operators to set the withdrawal limit at N5,000 per person, with a commission of N1000 per transaction.

When asked why the PoS operators couldn’t go to any of the five banks in the Ladipo Market, one of them said, “We don’t get the cash again,” adding that he had to offer a “bribe” last Wednesday before a bank official offered to provide cash.

The shortage of cash has also forced many food sellers to accept bank transfers; however, some have decided to include bank charges in the cost of their food.

A food vendor in the Ogba area of Lagos, Miss Kemi Adeagbo, said: “I sell a plate of food for N1,000. I accept transfers, but if you must pay through transfer, you will pay N1,200 for a plate because I have to use N200 as the service charge to withdraw the money when I want to buy foodstuff.”

Rural Communities

More than at any other time in history, the central bank has invested heavily in the ongoing campaign to extend its cashless policy to every nook and cranny of the country.

For example, the bank claimed to have deployed 30,000 Super Agents nationwide to help with its Cash Swap initiative in the hinterlands, rural areas, and regions underserved by banks in the country, ensuring that the weak and vulnerable among us can swap/exchange their old notes.

According to the apex bank governor, the CBN has also deployed all of its staff, particularly the Assistant Directors, Deputy Directors, and Directors in Abuja, to all CBN branches across the country to participate in the mass mobilisation campaign and monitoring programmes.

According to Emefiele, these officials are to work in collaboration with deposit money banks, agents, and branch controllers across the 36 states of the federation.

The bank explained that the measure ensures compliance with our previously issued guidelines for the program’s smooth implementation.

It was gathered that the few arrests of some indicted officials of money deposit banks made were at the instances of some of these CBN officials deployed to the various banks nationwide.

Losers: Corrupt Politicians

One can understand why the political class was the most vocal in its opposition to the naira redesign policy.

As the general election approaches, politicians with the mindset of buying votes during the election are concerned that it will be difficult to manipulate the process without access to their war chest. This explains the rash of policy-related lawsuits.

Kidnappers

The naira redesign targeted criminal elements in society, especially the various kidnapping gangs whose primary attraction is ransom collection. With the restriction to access to a large pool of money, the expectation is that kidnapping activities will be less profitable.

As Nigerians await the final decision of the Supreme Court on February 15, the reality is that the gains of the new policy far outweigh the initial challenges the apex bank said will surmount sooner than later.

It is also a clarion call on the CBN to intensify its regulation of the money deposit banks as a few banks’ hoarding of the naira has given a clue of a culture of corruption in the industry. All indicted bank officials should be made to face the wrath of the law as a good deterrence to others.