Expert decries continuous cash scarcity, tasks CBN on circulation of naira notes

A financial expert, Mr Muktar Muhammed, has  urged the CBN to take urgent steps to address continuous shortage of naira notes.

Muhammed, also an investment banker made the call on Sunday in Abuja when he spoke with journalists.

According to him, refusal by the CBN to obey a Supreme Court order legalising the old naira notes on time is partly responsible for the continuous scarcity of naira notes.

He said that inadequate circulation of the new notes was also an indication that the Nigeria Security Printing and Minting Company (NSPMC) had limited capacity to produce the required quantity of currency notes.

“The CBN was not ready to obey the Supreme Court order until the presidency made a pronouncement.

“Even after that, the circulation is inadequate and we see more of the old notes than the new ones.

“This implies that the NSPMC lacks capacity to print the required quantity of naira notes within a specified period,’’ he said.

Muhammed added that though the naira redesign policy had enormous economic advantages, its lacklustre implementation made it problematic.

The expert said that the fact that the policy was driven by some other factors that were not strictly economic also created problems.

“The policy had to do with fighting inflation. One of the tools to fight inflation is to mop up liquidity.

“It is a good policy but poorly implemented because we did not take into consideration the Nigerian factor.

“It was not driven entirely by economic considerations. We had to contend with political considerations as it relates to vote-buying and we had the security consideration,” he explained.

Muhammed said that the policy had done great harm to the informal sector of the economy which is the driver of the economy and which mainly does cash transactions.

“That sector suffered during this period because of the scarcity of cash, and even the digital platforms that were created did not have capacity to handle a lot of transactions from the informal sector.

“The CBN should have collaborated with the Bankers Committee to build a strong infrastructure that can accommodate the cashless policy and the naira redesign robustly.

“They should have come together to build the Nigeria Interbank Settlement that would make digital transactions seamless for Nigerians,” he stressed.

Muhammed noted also that many Nigerian youths had become jobless because of the naira redesign policy and the scarcity of naira notes.

He said that the policy had also not worked well in checking rising inflation because of its negative effect on the informal sector, which is integral to checking inflation.

He noted, however, that in spite of the difficulties that the policy inflicted on Nigerians, it recorded some gains.

According to him, a lot of Nigerians have now moved into the digital space, especially small businesses.

“Some of the small businesses have started to open bank accounts because they realised that it is the only way they can do business.

“It has also helped in stabilising the exchange rate, from between N800 to N900 to the dollar to around N750 to the dollar.

“That is still not good enough, but it is better considering where we are coming from,” the investment banker said.

He also said that the naira redesign policy had also helped to improve government’s revenue generation.

“The Value Added Tax, for instance, has improved within the last few months.

“The Federal Government said it recorded 160 per cent increase in VAT collection for the month of January 2023,” he said.