Again, Nigerians have begun to wail over the unavailability of their country’s legal tender. The naira, other than its free fall against the dollar, has again yielded to absence. PoS operators have hiked charges for this reason by a hundred percent in most parts of the country.
The Central Bank of Nigeria has insinuated that the major reason for the scarcity is a mop up of counterfeit notes. The banking regulator noted that the counterfeit notes were common with higher denominations by some individuals for transactions in food markets and other commercial centres across major cities in the country.
It said this in a statement signed by the Acting Director, Corporate Communications, CBN, Mrs Sidi Hakama.
This development came as bank depositors continued to complain of cash shortage, both from Automated Teller Machines and over the counter in the banks.
Naira scarcity has lingered, despite the CBN’s directives to the banks to continue to issue, and accept old and redesigned naira banknotes.
It should be noted that while the Central Bank of Nigeria (CBN) has suspended the processing fees on cash deposits above N500,000 until April 2024, the economy faces harder times ahead. This makes a root-and-branch reform of the banking sector that more urgent.
Of course, in reforming the industry, its people’s risk will matter, if the health of the financial system matters. And it does, because recessions that include bank failures hurt economies more, and the negative effects last longer. Far more than this, however, banks are a key component of the country’s monetary transmission mechanism.
In spite of rising yields on money market instruments in the open market, the monetary transmission mechanism remains out of whack. The CBN’s policy rate is an orphan. The debit to banks for cash reserves with the CBN would confuse a sorcerer’s apprentice.
It is clear that the cost of money still has some way to go up. Partly because we are not likely to see the naira return to its function as a store of value for so long as the real yield on naira-denominated assets remains negative. But no less important, too, because despite the wishes of our policymakers, Nigeria is not a low-cost jurisdiction.
Domestic infrastructure, both physical and social, is too decrepit for this to be the case. On the upside, we have seen the month-on-month inflation rate trend down in the two months to October. Is this because we are seeing the base year effects from rising food prices finally work its way through? Or have the Federal Government’s tentative policies begun to bear fruit?
For instance, at Checkpoint of Abuja, Gate some bank ATMs were observed to be paying just N5,000 to non-bank customers, while customers of the bank could withdraw as much as N20,000. Other non-bank customers up to N10,000, while bank customers could withdraw as high as N20,000.
This seeming bad state of the naira coupled with its persistent devaluation against other major currencies is casting a shadow over the original objectives of the redesign policy.
At a time in the early stages of the implementation of the policy, the new naira was so scarce that Nigerians were buying the local currency just like other nations’ currencies. It was said that some families giving out their daughters in marriage insisted on the payment of bride price in the new currency to the chagrin of the grooms’ families who were also negatively impacted by the scarcity of the new notes. What a paradox!
The most worrisome in this debacle is the recent ruling by a seven-man panel of the Supreme Court led by Justice John Okoro that the old currency remains a legal tender indefinitely, to exist side by side with the newly redesigned notes. This has thrown up another economic conundrum as Nigeria is perhaps the only country in the world presenting two types of currencies of the same economic value as legal tender amidst its scarcity.
But be that as it may, some critical questions are begging for answers: what manner of economic blueprint is the All Progressives Congress government of President Bola Tinubu implementing? What is in this naira war that the APC government, from the Buhari era to the present administration, cannot resolve to bring reprieve to the majority of people who continue to bear the brunt? I used war advisedly because the former Central Bank Governor, Godwin Emefiele, is still in prison custody following an order of court as he is facing prosecution for ‘economic crime’ while in office. Why is the APC going to court against the policy of its past administration? What has changed in the philosophy of the party that makes it difficult to reconcile existing policies of the past administration and the present?
Although it is commendable that the Central Bank of Nigeria (CBN) has suspended the processing fees on cash deposits above N500,000 until April 2024, it’s very important that the Apex bank take urgent measures to ensure the availability and access of the Naira considering the fact that the festive season is at hand because millions of Nigerians are suffering under the current situation.