Currency redesign: Supreme Court ruling fails to end naira scarcity

BY EMEKA EJERE

The ruling by the Supreme Court invalidating the naira redesign policy initiated by the Federal Government may not bring about the much desired end to the acute shortage of cash currently bedeviling the economy.

Analysis by Business Hallmark Economic Team suggests that while the humongous amount of the old naira note already mopped up by the Central Bank of Nigeria (CBN), are not likely to find their way back into circulation, the apex bank does not seem to have the capacity to print the amount of the redesigned note that can meet the cash demand in the economy.

The Supreme Court had on Friday extended the validity of the N200, N500, and N1,000 naira notes till 31 December. The court held that the directive of President Muhammadu Buhari for the redesign of the new notes and withdrawal of the old notes without due consultation is invalid.

Nigerians have experienced difficulties accessing their money since the currency swap programme was launched, leading to protests and attacks on banks and Automated Teller Machines in parts of the country.

Last week, the Association of Mobile Money and Bank Agents in Nigeria, (AMMBAN), lamented the impact of the sharp decline in Currency Outside  Banks on its members, commonly referred to as PoS agents.

AMMBAN President, Olojo Victor, claimed that 90 per cent of PoS agents had closed shop as a result of the cash scarcity, worsened by low supply of the new naira notes.

He said: “It is very disturbing. The PoS business is adversely affected. As I speak to you, 90 per cent of PoS agents in Nigeria today have either closed shops or don’t have cash to do business.

“As a matter of fact, even our people have become targets of the protests. So we are going through a lot of issues.

“We hope that there will be some form of remedy or solution to the current situation on the ground. But the reality is that our business is affected and many agents are right now jobless with no means at all of making ends meet.

“The reality is the new notes are not available. The banks are not giving them out. There is an intense scarcity of cash. Nigerians are going through a very difficult time at the moment. We hope that this problem will be resolved and settled at the earliest possible time. That is where we stand at the moment.”

Mounting mop-up

Following the announcement of its decision to redesign and replace the N200, N500 and N1000 notes with new ones, the CBN initially gave Nigerians up to January 31 to deposit the old notes into their bank accounts. The deadline was later extended to February 10.

CBN Money and Credit data for January showed that Nigerians in response to the initial deadline deposited N1.81 trillion into the banking system in January. Consequently, Currency Outside  Banks, (CoB) fell month-on-month (MoM) by 70 per cent to N788.9 billion in January 2023 from N2.6 trillion in December 2022.

Also reflecting the impact of the initial deadline, currency-in-circulation (CIC)  fell MoM by 54 per cent to N1.38  trillion in January 2023 from N3 trillion in December 2022 amidst the naira scarcity experienced in the country.

Shortly before the presidentail election, Governor Nasir el-Rufai of Kaduna State, via his verified Twitter handle, accused the CBN of withdrawing N2 trillion from circulation and replacing the old notes by minting only N400 billion, claiming that the apex bank only confiscated the currency as against what was obtainable in the currency swap policy.

His tweet reads, “During the implementation of the cash swap, the CBN withdrew over N2 trillion from circulation but printed only N400 billion, so in effect, currency confiscation was then unilaterally and unlawfully implemented by the CBN. Trade and exchange have collapsed. Human suffering, impoverishment, and economic contraction resulted.

“The policy objective was derailed into a deliberate national fiasco to sabotage the elections to prevent vote-buying. All efforts to get CBN to implement what was lawfully approved failed.”

In a move widely seen as attempt to woo the electorate ahead of the general elections, e-Rufai and 15 other Nigerian governors pushed back against the policy, suing the Federal Government and asking the court to put a hold on the policy.

The Supreme Court ruled in favour of the governors, stopping the FG from implementing the February 10 deadline. But there was confusion over jurisdiction, as there were also questions about whether the CBN, an independent body, should obey the court’s judgment as it was not a party to the suit.

Eventually, the Federal Government implemented the deadline, only conceding that old N200 notes would remain legal tender for another 60 days, with President Buhari admitting in a broadcast that the CBN undertook the currency redesign on his orders.

Commenting on the development a public affairs analyst, Mr. Babatunde Otitoji, maintained that allowing the old and new naira notes to co-circulate is the only way to address the cash crunch.

Otitoji, who was speaking during the Friday edition of Journalists’ Hangout, stressed that ‘’those who were hoping that normalcy would return immediately after the elections would probably have had the disappointment of their lives but for the Supreme Court ruling.’’
According to him, the apex bank ‘’was never going to print enough of the redesigned notes to put an end to the scarcity.’’

On its part, the Centre for the Promotion of Private Enterprises (CPPE) lauded the ruling of the Supreme Court, noting that the ruling of the apex court will protect Nigerians from what it describes as ‘disruptive policy’.

In a statement made available to Business Hallmark, the Chief Executive Officer of CPPE. Dr Muda Yusuf expressed hope that President Buhari, the CBN Governor and the Attorney General of the federation would comply with the court order in the interest of the rule of law.
His words: “We welcome the Supreme Court ruling as it protects the citizens from a policy which is, by all accounts, disruptive, repressive and draconian. It is also punitive, cruel and insensitive.

“Indeed, Nigerians deserve an apology from the promoters and proponents of the policy, especially the arbitrary and uninformed mopping up of cash in the economy. The CBN currency redesign policy inflicted indescribable agony, suffering and distress on majority of Nigerian citizens.’’

However, Director-General, Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, noted that while the Supreme Court order must be respected, the independence of the CBN could be in context.

Ajayi-Kadir said the back and forth on the naira swap exercise was not without implications on the business community, on manufacturing and the ordinary Nigerian. He emphasised the need for the CBN to outline means of compliance so as not to further confuse Nigerians.

“The CBN manages monetary policy and so the process of reintroduction, particularly in rural areas, should be addressed as the public does not deserve the back and forth this matter has generated.

“I am not sure the judgement has brought any respite, but has rather exposed the disagreement between the executive and the judiciary arms of government.

“There’s the need for the arms of government and the CBN to meet and come to an understanding with the welfare of the economy and the people as primary particularly during this transition of government period,” he said.
Meanwhile, the CBN is said to be waiting for legal advice as it affects the entire naira redesign policy. A top official at the apex bank told a national daily that the banking sector regulator would make its position on the matter known but that it was awaiting legal advice, ostensibly, from the Office of the Attorney-General of the Federation (AGF).