The past week has seen Nigerians scramble, in droves, to the nearest banks, Automated Teller Machines (ATMs) and Point of Sale (POS) machine merchants in search of new Naira notes—or any Naira notes for that matter.
The latest problem bedevilling the African Giant is as a result of the Central Bank of Nigeria (CBN) Naira Redesign Policy which was established to tackle currency counterfeiting and the shortage of clean and fit currency.
The initial announcement stated the policy would see old notes cease to be legal tender by January 31, but a 10-day extension was later given.
The policy also includes distinct cash withdrawal limits for individuals and corporate bodies from banks and ATMs. This part of the policy is intended to boost the CBN’s cashless policy and push more transactions into the formal payment system—a move the authorities believe will curb money laundering, kidnapping, terrorism financing and so on, as they usually occur with trailless cash transactions.
The CBN also believes the policy will prevent the hoarding of Naira notes and consequently impede inflation, as individuals will be forced to turn in their old notes and the flow of the new notes will be restricted.
The alternative to cash payments would be increased bank transfers and card transactions.
As of 2020, Nigeria held the 6th position in a ranking of countries with the most real-time payments, ahead of Japan and the US. The government of Nigeria would like to improve on this statistic.
Moreso, reduced cash transactions would reduce the CBN’s and general banking system’s costs related to processing and minting cash, moving cash and destroying old notes.
The Problems with the Policy
Despite repeated assurances that the policy is in favour of the masses, the general public continues to criticise its enforcement, especially in light of the ongoing Naira scarcity disaster.
Many deem the policy well-intentioned but ill-prepared for, while some others rule it out completely as seriously impractical.
Twitter user @edomalo shared in a tweet, “February 1st, 2023. 10:25am. Breaking: Nigerians are buying Naira, in Nigeria.”
He then went on to narrate how he was able to obtain N50,0000 at an added charge of N6,000 at a POS merchant point. He explained that the POS merchant limited cash withdrawals to N20,000 per person for a charge of N4,000 but gave more money for those who were willing to pay an additional N2,000.
Several other Twitter users shared similar stories, with some even calling higher withdrawal charges.
Before the Naira note scarcity saga, POS merchant charges were typically all under N1,000 for any cash withdrawals.
POS merchants make use of card machines and can be found anywhere from the roadside to shopping centres, places of business and so on, especially serving as sources of cash where there are no ATMs around.
Numerous banks do not have new Naira notes to disburse and refuse to dispense old notes, per the CBN policy. ATMs and POS merchants have limited cash, while some do not even have any at all.
Nigerians line up in extremely long queues for hours on end, only to discover that there is no more cash or that the cash is being sold at exorbitant rates—an almost identical situation with the ongoing fuel scarcity crisis in the country.
The Naira note scarcity has left many Nigerians stranded as a significant amount of transactions cannot be carried out with bank transfers or debit/credit card. For example, purchases from hawkers on the road, payments in buses, motorbikes (“okada”) or taxis used for public transport, etc.
Twitter user @AkinBald narrated how he was nearly “stranded because of N200” when he had a flat tyre and could not get any cash to pay the vulcaniser who could fix it.
Moreso, the Nigerian banking system is not without its issues. Bank network downtimes frequently affect the ability of users to make transactions, or even open the bank apps in the first place.
In light of the clearly helpless situation, another extension would likely have to be made to the deadline. Whatever the case, the CBN and Federal Government will need to make serious, tangible moves to intervene in the matter.
Sources: This Day, Business Day, Insider Business.