By AYOOLA OLAOLUWA
The Nigerian economy is teetering on the brink of collapse as the currency denomination policy of the Central Bank of Nigeria (CBN) continued to squeeze life out of Africa’s biggest economy. According to major economic indicators in the month of February 2023, the nation’s economy is in a terrible shape.
For instance, while the nation’s Gross Domestic Product (GDP) recorded a sharp drop, interest rates are on the rise owing to the CBN resolve to control inflation by reducing money in circulation.
The CBN Governor, Godwin Emefiele, it would be recalled, had in October 2022, announced to the nation the plan to redesign the N200, N500, and N1, 000 notes.
While warning Nigerians that old notes would cease to be legal tender by 11.59pm on January 31, 2023, he advised those with the old notes to deposit them in deposits money banks before the expiration of the deadline.
Unfortunately, most Nigerians could not access the new naira notes after dumping their old notes with the banks as demanded by the CBN.
The hardship caused by the scarcity resulted in violent protests across the country as angry customers attacked banks buildings and facilities.
Rattled by the violent protests, the CBN governor, after a meeting with President Muhammadu Buhari, extended the deadline for the collection of the old naira notes by 10 days from January 31 to February 10.
In spite of that, the cash crunch continued unabated. The crisis got to a head March 3rd when a 7-member panel of the Supreme Court unanimously directed that the old notes should remain legal tenders until December 31st, 2023.
The apex court held that President Muhammadu Buhari erred by sanctioning the redesigning and withdrawal of the old notes without due consultation.
Despite the apex court’s order, cash, both old and new naira notes, have largely disappeared from banks’ Automatic Teller Machines (ATMs), while banks, having ran out of the cash, started rationing the scarce notes to customers.
While lucky customers could get up to N10,000 cash from banks, others get as little as N2,000, even N1,000 after spending hours waiting.
Expectedly, this has left many Nigerians who need small cash for basic needs like foods and transport fares facing serious hardship. Owing to the nation’s economy being an informal one, with more than 70% percent transactions cash based, many businesses, particularly small and medium scale enterprises, have been badly affected by the policy.
For instance, the Centre for the Promotion of Private Enterprise (CPPE), said the Nigerian economy lost not less than N20 trillion from the deceleration of economic activities, crippling of trading activities, stifling of the informal economy, contraction in the agricultural sector and the paralysis of the rural economy as a result of naira scarcity.
The CPPE CEO, Dr. Muda Yusuf, while noting that the scarcity of cash also led to corresponding job losses in hundreds of thousands, advised the president to ensure that the CBN fully comply with the judgment of the Supreme Court.
“The protracted acute cash scarcity has not only crippled economic activities in the country, it is now a major risk to the livelihoods of most Nigerians.
“Millions of citizens have slipped into penury and destitution as a result of the disruptions and tribulations perpetrated by the currency redesign policy, especially the mopping up of over 70% of cash in the economy. Nigerians have not been this traumatized in recent history.
“The economy is gradually grinding to a halt because of the collapse of payment systems across all platforms.
“Digital platforms are performing sub-optimally because of congestion; physical cash is unavailable because the CBN has sucked away over 70% of cash in the economy; and the expected relief from the Supreme Court judgement has not materialized.
“Curiously, there is an apparent reluctance or unwillingness by the federal government and the CBN to comply with the Supreme Court judgment. This is very disturbing and inexplicable”, Yusuf pointed out.
In a tacit confirmation of the CPPE’s boss insinuation that the Federal Government and the CBN were not disposed to complying with the judgment of the apex court, the CBN on Friday disclosed that total currency in circulation dropped to N982 billion from N3.29 trillion (about 235.03%) it was in October 2022.
The figure, Business Hallmark’s checks indicated, is the lowest since 2015 as the CBN intensifies its aggressive naira mop-up and redesign policies.
According to data from the CBN, N2.3 trillion was mopped up from circulation between October 2022 and February 2023.
A financial expert, who did not want his identity disclosed, blamed the continued cash scarcity in the country despite CBN’s directive on to banks on the apex bank unwillingness to back down on its aggressive cashless policy.
“Let me tell you what Emefiele and his handlers did. They used the accounting/statistical/withdrawals and deposits approach to compute the currency in circulation in Nigeria, which involves tracking money movements in circulation on a transaction-by-transaction basis and in turn try to control it.
“The goal of the policy is to rein in as much cash as possible to drive the cashless policy. And I think the brains behind it are not ready to back down without a fight”, the source claimed.
Also, the Purchasing Managers’ Index, which measures private-sector operating conditions dropped from 53.5 in January 2023 to 44.7 in February 2023.
The report, produced by Stanbic IBTC Bank and S&P Global, indicated that the index dropped below the 50.0 no-change mark, signaling a deterioration in private-sector operating conditions from the previous month of January.
BH checks revealed that the February’s PMI result marked the weakest reading since May 2020 and halted a 31-month streak of improving conditions.
According to Stanbic IBTC Bank and S&P Global, February’s downturn reflected the ongoing cash shortage in the economy as Nigerians struggled to swap old notes for the newly redesigned ones.
“Consequently, consumers were unable to secure funds to spend, prompting new orders and output to decline at the sharpest paces in the series’ history, which started in January 2014—barring the start of the Covid-19 pandemic.
“In response to slower business, firms reduced head counts in February”, the report stated.
Likewise, the lingering naira scarcity has led to a 25 per cent drop in sales of manufactured goods.
This revelation was made by the Director-General of Manufacturers’ association, Segun Ajayi-Kadir, who urged the government to permanently resolve the lingering difficulties associated with the currency transition, which he claimed had resulted in a more than 25 per cent dip in sales of manufactured products.
The MAN boss said that the scarcity of naira notes had led to reduced sales of manufactured goods as naira scarcity and the pressure the cash crunch had put on online transactions has negatively affected the free flow of goods.
“This is a very big issue in the economy. If you put all these together, you will agree with me that we are really facing a critical time as manufacturers”, he said.
However, the Chief Executive Officer of Coleman Technical Industries Ltd, George Onofowakan, said that the 25 per cent dip in sales mentioned by MAN is understated as it did not reflect the losses suffered by many manufacturers.
“The fact of the matter is that most workers come to work using public transportation. I heard of a company that closed down because it did not have the numbers for production.
“They had to shut down because the workers could not get to work. Thank God some of us even have transport buses for our workers. That was how we were able to get the numbers we needed for production, but most people in manufacturing were struggling with a workforce reduction of about 50 per cent.
“The one that closed down produces packs that eateries use. It could not get workers to come because they could not get transport.
“So, you can imagine many other manufacturers like that who could not get workers to come to work. They are struggling.
“As long as the struggle for cash continues, manufacturers will continue to have a hard time getting back to optimum levels of production”, Onofowakan warned.
As a result of the CBN’s naira redesign policy and other factors, headline inflation rose to 21.91 per cent in February, according to the National Bureau of Statistics (NBS).
Data from the NBS showed that this is the second consecutive month inflation is rising in 2023 after it halted an 11-month rise in December 2022.
Since the policy began in December 2022, inflation figures have been on the rise. For instance, inflation rose to 21.82 per cent in January from the 21.34 per cent that was recorded in December 2022.
Speaking on the new inflation figures, the Organised Private Sector (OPS) blamed it largely on the CBN’s naira redesign policy.
“The policy has contributed to a naira crisis that has driven inflation to record highs. Nigeria’s 21.91 per cent inflation rate for February is the highest in 18 years”, the OPS lamented.
Also speaking, the Poultry Farmers Association of Nigeria (PFAN), said its members lost more than N30 billion worth of eggs due to the lingering cash scarcity in the country.
In a statement at the weekend made available to BH, the National President of PFAN, Sunday Onallo-Akpa, said the poultry industry was on the verge of total collapse and extermination.
“Poultry farmers in the country have lost over 15 million crates of eggs being unsold and are damaged. The average loss to the poultry industry as at this press release is in excess of over N30 billion”.
According to Onallo-Akpa, the near absence of naira notes for Nigerians to make daily transactions have made businesses in the poultry industry more difficult.
“Eggs being daily produced by poultry farmers since the first week of February 2023 till date have never been off-taken by 20% because of the near absence and lack of the naira notes to buy basic food items and other necessary proteins like eggs and chickens,” he said.
He then called on the federal government to help in mopping up unsold eggs through the association for distribution to the most vulnerable in the country.