A Choppy Time for Banks

Nume Ekeghe chronicles recent events in the country that resulted to attacks on banks’ branches and nationwide unrest
 
The ongoing currency redesign policy of the Central Bank of Nigeria (CBN) has continued to generate mostly negative responses from the public and mostly from the political class who are working towards a major election this weekend.

The cash crunch that followed the scarcity of the new notes led to violence in some parts of the country, with banks and public properties being destroyed. The violence is also being escalated by some state governments, which had insisted that the old N500 and N1,000 notes that are no longer legal tender should continue to be in use in their states.

Some government officials and politicians have also continued to stir the violence as they insist that the old notes would continue to be in circulation and used for transactions if their candidates are voted into power, adding a political undertone to a monetary policy.

during the announcement of the policy by the CBN Governor, Godwin Emefiele, he had noted that currency management has faced several daunting challenges that have continued to grow in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country. 
These challenges, he said, include significant hoarding of banknotes by members of the public, with statistics showing that over 80 per cent of currency in circulation are outside the vaults of commercial banks; worsening shortage of clean and fit banknotes with a negative perception of the CBN and increased risk to financial stability; as well as increased ease and risk of counterfeiting evidenced by several security reports.

According to Emefiele, recent development in photographic technology and advancements in printing devices have made counterfeiting relatively easier.
“In recent years, the CBN has recorded significantly higher rates of counterfeiting especially at the higher denominations of N500 and N1, 000 banknotes. On the basis of these trends, problems, and facts, and in line with Sections 19, Subsections a and b of the CBN Act 2007, the Management of the CBN sought and obtained the approval of President Muhammadu Buhari to redesign, produce, and circulate new series of banknotes at N100, N200, N500, and N1, 000 levels, ”he said.
However, weeks after the new notes were to be in circulation, many Nigerians say they are yet to have enough particularly those in the rural areas. This, including the mop up of the old notes, had left the country, which mostly runs on cash, particularly in an election period with less cash.

Tension running high

Violence erupted after the CBN extended the deadline as banking agents popularly known as POS operators began charging exorbitant prices for cash with some charging as high as N1500 for a N5000 withdrawal. The violence had led to the burning of banks harassing and assault of bank officials.
President Mohammadu Buhari in suing for peace had last week Wednesday addressed the country, extending the legal tender status of the N200 note which is mostly used by the masses till April 10, 2023, while maintaining that the legal status of the old N500 and N1000 notes no longer stands.
According to the president, the redesigning policy was prompted by the need to restore the statutory ability of the CBN to keep a firm control over money in circulation.

“In 2015 when this administration commenced its first term, Currency-in-Circulation was only N1.4 trillion. The proportion of currency outside banks grew from 78 per cent in 2015 to 85 per cent in 2022. As of October 2022, therefore, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the Banking System while N2.7 trillion remained permanently outside the system; thereby distorting the financial policy and efficient management of inflation.

“I am not unaware of the obstacles placed on the path of innocent Nigerians by unscrupulous officials in the banking industry, entrusted with the process of implementation of the new monetary policy. I am deeply pained and sincerely sympathise with you all, over these unintended outcomes.
“To stem this tide, I have directed the CBN to deploy all legitimate resources and legal means to ensure that our citizens are adequately educated on the policy; enjoy easy access to cash withdrawal through the availability of the appropriate amount of currency; and ability to make deposits, “he said.
He added, “I have similarly directed that the CBN should intensify collaboration with anti-corruption agencies, so as to ensure that any institution or person(s) found to have impeded or sabotaged the implementation should be made to bear the full weight of the law.

“I similarly consulted widely with representatives of the State Governors as well as the Council of State. Above all, as an administration that respects the rule of law, I have also noted that the subject matter is before the courts of our land and some pronouncements have been made.
“To further ease the supply pressures particularly to our citizens, I have given approval to the CBN that the old N200 bank notes be released back into circulation and that it should also be allowed to circulate as legal tender with the new N200, N500, and N1000 banknotes for 60 days from February 10, 2023 to April 10 2023 when the old N200 notes ceases to be legal tender. In line with Section 20(3) of the CBN Act 2007, all existing old N1000 and N500 notes remain redeemable at the CBN and designated points.”

Call for Peace

In its call for peace, Bank Directors Association of Nigeria (BDAN) assured that it is working to free up the bottlenecks that led to the unavailability of naira notes in the country. This is as they empathized with the bank customers who had found it hard to make cash withdrawals across the country. 
Chairman, Board of Directors of BDAN, Mustafa Chike-Obi in a statement said, “We, the Bank Directors Association of Nigeria (BDAN), empathise with members of the public at this crucial time. We are mindful of the discomfort and hardship associated with the current currency reform, which has introduced the newly designed naira notes and reduction in withdrawal limit.

“It has indeed been a difficult period for Nigerians and BDAN is making it top priority to ensure that this hardship is not only addressed but eliminated. We are in constant communication with all the Banks and are assured that they are all doing whatever is within their control to normalise this difficult situation. 
“We enjoin the banking public to maintain peace, rest assured that BDAN is taking all reasonable steps to influence the structure and mechanisms that should free up bottlenecks and open channels that will speed up the resolution of the crisis,” the statement stated, as BDAN hoped “to count on the public’s patience, understanding and cooperation.”

On its part, the Chartered Institute of Bankers of Nigeria (CIBN), which expressed concern over the recent crises rocking the financial sector, called for calm as it empathized with Nigerians on the difficulty they have been facing. 

CIBN in a statement signed by its Registrar and Chief Executive, Akin Morakinyo, attested to the fact that the difficulties encountered in accessing the new Naira notes has heightened tension and, in some cases, provoked acts of violence at different customer touch points.

Expressing concern over the recent crises rocking the financial sector the CIBN said it understands the plight of bank Customers, it is passionately appealing for calm and understanding saying the regulator (the Central Bank of Nigeria) and the operators (the banks) are working assiduously to bring the situation under control

The CIBN President and Chairman of Council, Ken Opara also assured that the institute is liaising with the Body of Banks CEOs to address the current challenges, saying banks would continue to remain open to serve the public as long as it is safe to do so. 

Noting that the safety and security of the staff of banks is of paramount importance, he said: “Where there is security challenge, the Management of banks have been empowered to take proactive measures to close their operations in such location and inform the Central Bank of Nigeria. Therefore, the safety concerns being expressed “in various quarters are already being addressed.

Banks will continue to ensure that adequate security is in place to protect staff and customers whilst safeguarding their assets in contending with the current challenge. Consequently, we appeal to the general public to remain calm and eschew any act of violence, as the banking industry remains resolute and committed to finding ways to address all the related issues.”