OPINION: CBN And New Industry For Naira Cash Sellers 

By Olusegun Adeniyi

At the height of the Naira Redesign policy of the Central Bank of Nigeria (CBN) which eventually unravelled as a ‘Naira Confiscation’ exercise in April this year, the United Nations Conference on Trade and Development (UNCTAD) released a ‘Trade and Development Report’ on the situation across Africa, with special reference to Nigeria. “A shortage of cash, triggered by the replacement of the highest denominations of the country’s currency, hobbled the economy, especially the informal sector,” the report stated, warning of the implications for food security in the country. We are already there. No fewer than 26.5 million Nigerians are projected to grapple with high level of food insecurity in 2024, according to a joint statement last week by the World Food Programme (FAO), UNICEF, the UN Office for the Coordination of Humanitarian Affairs and the Federal Ministry of Agriculture and Food Security.

Several factors, including removal of fuel subsidy and the exchange rate Yo-yo, may account for this challenge. But, as we experienced, the negative impact of the shortage of Naira notes is also huge, particularly on rural dwellers who produce most of the food we eat. That lesson should not be lost on Abuja authoriities. While perhaps not yet a big issue, those who deal in cash transactions are aware that accessing Naira notes is becoming very difficult across the country. And when you do manage to obtain them, they are likely to be dirty and stinking, expired or/and mutilated notes, even from the banks and Automated Teller Machines (ATM) machines. Meanwhile, I fail to understand the meaning of the explanation provided Daily Trust by the CBN Director, Corporate Communications, Isa Abdulmumin that “The seeming cash scarcity in some locations is due largely to high volume withdrawals from the CBN branches by Deposit Money Banks (DMBs) and panic withdrawals by customers from the ATMs.”

In Nigeria, as I wrote in my column in March this year, “when you create incentives for bad behaviour in the public arena, the problem hardly goes away.” I added: “I hope the CBN has not created a new industry for Naira cash sellers within the banking industry and their collaborators who could still make life difficult for the ordinary people in pursuit of illicit gains.” Sadly, that ‘prophesy’ is now being fulfilled. Although we have since had a change at both the presidency and the apex bank, it is now a fact that a ‘Naira market’ has been created for unscrupulous Nigerians, to the detriment of the people. Unless President Bola Tinubu and his CBN Governor, Olayemi Cardoso, put on their thinking caps, many Nigerians may experience another bleak Christmas as Naira notes increasingly vanish from circulation.

Let me state upfront that I endorse the encouragement of more electronic-based transactions in the system, essentially because it may help to instil transparency in financial dealings. But because we have a way of compromising every process in Nigeria, it is also no surprise that kidnappers, armed robbers and other criminal cartels now operate with Point of Sale (PoS) machines. Two weeks ago, in the highbrow Guzape district of Abuja, a church member lost all his savings to these night marauders who came with PoS machines and demanded the ATM cards of their victims. Each person was then ordered at gunpoint to insert their PIN numbers for the electronic transfers. I am naïve enough to believe such criminals would be easy to trace but instead of any genuine efforts in that direction, the robbery victims are now being extorted at the police station to which they reported the case.

Introduced in 2012 by then CBN Governor, Sanusi Lamido Sanusi who later became the 14th Emir of Kano, the cashless policy commenced in 2014, and was supposed to be implemented in phases. Nigerians gradually bought in to it until last year when former Governor, Godwin Emefiele, decreed what turned out to be a fiasco—ostensibly in a bid to reduce ‘excess liquidity’ in the system and move towards a cashless economy. What some fail to understand is that the idea that any country could do completely away with cash is an illusion. Even in the developed world. The point here is that nobody should criminalise cash transactions, especially for legitimate businesses. And it is within the rights of depositors to demand their money in cash within the legal limits, as happens in most countries.

A publication by ‘Cash Matters’, funded by the International Currency Association (ICA) recently disaggregated the 2022 Global Payments Report and I found it interesting that in majority of the countries we are trying to ape, the volume of cash transactions within their economies is huge. Even in the United States, according to the report, “Cash continues to be a vital part of the PoS mix, accounting for 17.9% of transaction value (over US$8.3 trillion) in 2021.” In March this year, a Bloomberg report led with this headline: ‘More US Homebuyers are paying in cash, sweeping a majority of sales in some markets…All-cash deals share above 50% in 13 cities, including Atlanta’.

The import of the foregoing is that cash is critical in every economy and even more so in ours that is driven mostly by the informal sector. The CBN can therefore not be cavalier about the problem that is now spreading across the country. Cardoso and his team must come clean with the real volume of currency in circulation and what exactly is going on to cause the current scarcity of Naira notes. It is curious that the cashless policy, in place for so long, has resulted in such a high demand as to make the national currency a commodity in and of itself. The ‘cash rationing’ that banks now use as an excuse to deny customers their money seems rather odd. The only plausible explanation is that some people are playing games with our national currency, as they did earlier in the year.

Since collective amnesia is a rampant disease in our country, I will not be surprised if many have forgotten what Nigerians went through from last December to March this year before the Supreme Court intervention. From schools to offices and hospitals, there was no sector that did not feel the negative impact of the ill-digested CBN policy. The weakest and most vulnerable of our society were the worst hit. Despite concerns by economists, the policy, of course, had the endorsement of President Muhammadu Buhari who claimed that “People with illicit money buried under the soil will have a challenge with this but workers, businesses with legitimate incomes will face no difficulties at all.”

If President Buhari believed that fantasy, to borrow from a James Hardley Chase novel title, then he will believe anything. Tales abound of fatalities in hospitals and health facilities across the country because people could not access their money in cash. The situation was worse in rural communities where few have access to bank accounts or the required mobile phones and internet for such transactions. The loss to the economy was enormous. Many could not make sales because their customers didn’t have cash to pay. Market people selling perishable food items like tomatoes, pepper, fruits etc. had distressing tales to share of how those products ended up in refuse bins. Newspaper vendors, roadside sellers of maize, plantain and yam who barely eke out a living were sent out of business. Mechanics, vulcanizers and other artisans became destitute as PoS operators made a killing from the misery of others since bank transfers were erratic at the time.

PoS merchants are now everywhere because we have opened a new business line for them. May be that is not bad, except that the people we see in street corners are just mere retailers and small players. The high rollers are at the CBN, the banking halls and the National Security Printing and Minting Company (NSPMC). Today, while the few available Naira notes in circulation we scramble to get have outlived their usefulness, middlemen and commission agents are in custody of the new notes which they then sell at premium. So, having created merchandise of Naira Notes, we may have unwittingly added the scarcity of national currency to our legions of problems.

As an aside, the National Bureau of Statistics (NBS) revealed yesterday that headline inflation rate in the country increased to 27.33 per cent in October (last month). According to the NBS Consumer Price Index (CPI) and Inflation Report for October, the figure is 0.61 per cent points higher compared to 26.72 per cent recorded in September. More significantly, on a year-on-year basis, the headline inflation rate in October was 6.24 per cent higher than the rate recorded in October 2022 at 21.09 per cent. But perhaps more concerning is that food inflation rate in October increased to 31.52 per cent. On a year-on-year basis, that is 7.80 per cent higher than the rate recorded in October 2022 at 23.72 per cent. These are enormous economic challenges already. We cannot afford to compound them with a shortage of Naira notes.

In the absence of an explicit CBN policy, I am willing to concede that the scarcity may be a reflection on operational inefficiency in cash management and distribution rather than a deliberate action. But even that could only have happened because someone did take eyes off the ball. Whatever the reasons, Cardoso and his team must find a solution. Especially as we inch towards the Christmas and new year holiday when people, quite naturally, need Naira notes. Yes, the CBN has extended the validity of the old N1000, N500 and N200 notes indefinitely. But beyond availability of the currency, I do not know for how long the apex bank will keep the current stinking Naira notes in circulation that are no longer fit for purpose. It says so much about our country that we cannot even produce decent currency notes for citizens, residents, and visitors.