Examining Push Back against Naira Redesign, Cashless Economy

In this piece, James Emejo interrogates the needless antagonism against the central bank’s currency redesign and a cashless programme whose benefits apparently far outweigh any shortcomings

 It has been severally established that systemic/societal dysfunction has led to the leadership quality crisis in the country which had in turn produced weak and corrupt institutions. The consequence is the chaos currently witnessed in every facet of the economy.

Corruption has been adjudged as the greatest challenge in developing countries particularly Nigeria which had been struggling since its independence to meet its development targets.

Pointedly, development had been stalled by the sheer mismanagement of public resources, and the lack of transparency and accountability among other others.

·      Endemic corruption

Only recently, the country’s ranking fell four places on the latest Corruption Perception Index (CPI) report unveiled by Transparency International (TI).

The report showed that Nigeria maintained its previous year’s score of 24 out of 100 points, but fell from 150 to 154th position out of 180 countries assessed in the 2022 ranking. In previous years, Nigeria scored 26 points in 2019, 25 in the 2020 assessment, and 24 in 2021.

The chairman of Transparency International, Delia Rubio, “Corruption has made our world a more dangerous place. As governments have collectively failed to make progress against it, they fuel the current rise in violence and conflict and endanger people everywhere.

“The only way out is for states to do the hard work, rooting out corruption at all levels to ensure governments work for all people, not just an elite few.”

Instructively, most of the issues around corruption emanated from the mishandling, and embezzlement of public resources by politicians, and the absence of due diligence among others.

One of the visible consequences of corruption in Nigeria is rising poverty as current data from the National Bureau of Statistics (NBS) indicated that over 133 million Nigerians are multi-dimensionally poor.

For instance, the present system of cash-based society had been at a huge cost to the economy and had also ensured that the vulnerable population is frequently short-changed in government social intervention programmes as the initiatives are difficult to audit because there are no traces when monies are given by hand.

The cash-based economy has emboldened financial crimes, particularly by politicians and corrupt public officials who plundered government resources and laundered funds meant for the development of the country in foreign countries.

As a matter of fact, hardly were there any government social net programmes that have not been enmeshed in allegations of corruption as the privileged elite pocket the larger chunk of the interventions.

All these atrocities are carried out with impunity partly because most financial transactions cannot be traced as they are never properly documented and the best form of evidence remains the electronic copy.

This is just corruption on the surface and a whole lot of under-dealings happen in the administration of public resources.

As a result of the illicit monies held by politicians and public officers in the homes, and outside the banking system, the economy and Nigerians, in general, have had to pay a huge price – high inflation, exchange rate crisis, distortion of monetary policy, and unemployment among others.

Interestingly, such illicit monies have been used to further suppress the political system through vote-buying during an election. This subversion constantly allowed incompetent leaders to ascend to power and further compromise the system. It was definitely time to act.

·      CBN to the rescue

For many years, Nigerians have been yearning for a change and  liberation of the strongholds of a few elites that have held the country to ransom. Even though many knew what the issues are –no one dared to take steps to sanitise the country and liberate the poor masses.

Eventually, on October 26, 2022, the CBN under the leadership of Mr. Godwin Emefiele, decided to redesign the N200, N500, and N1,000 denominations and subsequently announced a policy that limited physical cash withdrawal.

Considering the timing of the policies – being an election year – some Nigerians particularly politicians believed that the apex bank’s move was targeted against certain individuals and have refused to see beyond their noses that the actions are in the best interest of Nigerians and the economy if the country must address the current gale of insecurity, corruption, and economic sabotage among other actions of some privileged elites who continued to take advantage of a dysfunctional system to short-changed the country.

If anything, there have been early successes of the CBN intervention – the monetary policy committee (MPC) of the central bank recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.

Also, the cashless policy has led to a reduction in banditry and kidnappings which were rampant in the recent past.

The CBN Governor, Mr. Godwin Emefiele, while announcing the apex bank’s resolve to redesign the naira, pointed out that the move followed the approval of President Muhammadu Buhari.

Specifically, he noted that the move to redesign the currency was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports, and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.

Emefiele, further explained that there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.

According to him, as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable as this has the potential to harm monetary policy actions, further leading to higher inflation and currency speculation, thereby exposing vulnerable Nigerians to further economic hardship.

Emefiele said the CBN acted in good faith towards the achievement of the bank’s objectives and the betterment of the country.

Essentially, Emefiele said there had been concerns about the management of the old series of banknotes as well as currency in circulation, particularly those outside the banking system in the country, stressing that currency management remained a key function of the CBN, as enshrined in Section 2 (b) of the CBN Act 2007.

·      Early successes of CBN cashless policies

As currently attested to by monetary authorities and Nigerians in particular, since the introduction of the naira redesign programme, and cashless policy where individuals are restricted to the withdrawal of N500,000 weekly and N5 million for corporate institutions, there had been a dropped in inflation to 21.34 per cent in December, having risen for 10 consecutive months.

Also, according to Emefiele, as of last week, over N1.9 trillion of the N2.7 trillion that was outside the banking system had returned to the central bank as a result of the currency redesign. This will further ensure that the bank is able to manage currency in circulation and fight inflation.

The CBN governor also said instances of kidnapping, banditry, and ransom-taking had also reduced though the military had also stepped up their onslaught against banditry.

As a matter of fact, according to the latest updates, of the N2.7 trillion that was outside the banking system, about N2.2 trillion had been recovered with a balance of about N500 billion.

Furthermore, a cashless policy will ensure that those who carry more than the approved limits of cash are easily tracked and apprehended.

Without a doubt, the implementation of the policies will curb corruption to a greater extent and help to channel such resources to other productive uses for the public good.

Furthermore, analysts believe that the naira redesign and cash policies could address corruption by ensuring that cash transactions are carried out in a transparent manner while the electoral process would be more sanitised, leading to the emergence of quality leadership that can drive the development of the country.

·      Who is allergic to naira redesign, cashless policy?

Despite the prospects and hope that these policies present toward setting the economy and sanitising the system, some people appeared to be averse to the CBN’s efforts. 

Interestingly, the pushback has come mainly from the political elites who have continued to benefit and take undue advantage of a dysfunctional system.

Notably, from the cash seizures recorded by the anti-graft agencies during the 2023 presidential elections from politicians Nigerians could then appreciate the central bank’s disposition towards a cashless economy moving forward.

While the ordinary Nigerians have come to terms with the benefits of the current drive by the CBN to secure their future from selfish politicians, and elites, the latter has been doing all they can to bring the exercise into disrepute and incite poor Nigerians against the critical reforms currently taking place. Some have spread misinformation on social media platforms to jettison the currency redesign and cashless policies.

However, according to Emefiele, “Even in areas around the Sambisa, our agents are there conducting cash swap and cash exchange, the old to new currencies.

“I saw a tweet by someone who said, oh, somewhere in Yobe, another says somewhere in Maiduguri … that they had old notes, and now they can’t buy food and again they’re dying or crying…ladies and gentlemen, those who did those tweets, they know who they are.

“It is not the vulnerable and weak people that cannot write in English that are doing this. Those that are doing them, know themselves, and they know the purpose for which they are doing that. Like I keep saying, we will not go with them on that journey.”

The CBN governor, however, said, “We will remain focused on the weak, we will be more focused on the vulnerable in Nigeria. We will do everything to make sure that we are available to serve them, and make sure that this new naira permeates every nook and cranny of the country.”

• Analysts’ perspectives

Nonetheless, analysts have offered their insights on why there is some opposition to the currency redesign and cashless policies.

Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, told THISDAY that such pushback is normal especially if the reforms tend to dislodge some vested interests.

He pointed out that the current scarcity of the naira could fortunately strengthen the local currency.

He said, “There is no policy, no matter how plausible and beneficial it is, that will not be criticized and opposed. It is either the policy does not favour a particular set of people and they oppose it, or they do not want the policymakers to succeed in the achievement of the policy.

“Whatever that is happening with the Naira redesign and attendant scarcity of same is expected. It is for the good of the country and economy that the currency is redesigned around now. It is reducing demand and may bring down prices that are causing inflation. The scarcity of the Naira may also reduce the exchange rate.”

Also, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said, “The political class is the ones that will push back and resist the cashless policy because they primarily benefit from the old order and will be averse to any change in their modus operandi.

“The political elites need cash for vote buying and election rigging purposes and any policy against cash will jeopardise their operations.”

Gbolade said, “The benefits of the cashless policy and Naira redesign might not actually tackle electoral malpractices immediately but in the long run it will reduce the ability of our politicians to manipulate elections knowing fully well that their financial activities could be tracked in a cashless economy.”

On his part, Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, said, “Change is one of the hardest things for people to accept, especially when they are used to a certain way of doing things”.

He said, “Admittedly the implementation of this new policy has been rather poorly managed and will undoubtedly lead to some discomfort and inconveniences to a large number of people, especially those in rural areas who may not have access to electronic channels.

“There are sets of people who use cash for illicit activities, and this policy will also severely hamper their activities, especially in the short term, until they discover alternative ways of continuing their activities.”