The Naira Swap Confusion

The controversy surrounding the redesign of the naira by the Central Bank of Nigeria (CBN) and the subsequent withdrawal of the old notes with the deadline originally set at January 31, 2023, has been reverberating nationwide. The CBN, however, extended the deadline for the usage of the old notes by 10 days, up to February 10, 2023. But the intervention of the Supreme Court halted the CBN from enforcing the February time limit.
This battle, which extended to the two arms of the National Assembly, the Senate, and the House of Representatives, remains heated in the public domain with various permutations and insinuations introduced into the unfolding imbroglio. The Senate and the House of Representatives had earlier passed resolutions for the deadline to be extended to the end of June and July 2023 respectively.
The recent claims by the CBN that about N1.9 trillion worth of the old notes had already been received by the banking system and about N900 billion worth are still outside appeared instructive and worth further consideration. In any case, countless issues arise on this seeming power play between the apex monetary authority on one hand and the politicians and lawmakers on the other.
There is the general perception that the naira redesign and the subsequent policy on cash withdrawal limits are linked to the forthcoming general elections scheduled for February and March 2023. That appears plausible given the country’s experience in previous elections where vote buying through the dispensing of cash to gullible voters had played a very key role in the electorate’s inducements to vote in some particular direction.
Consequently, some individuals and civil society organisations called on the CBN to resist any attempt to extend the deadline beyond the dates set for the elections. Most of the reported incidences of vote buying usually take place a few days before the election as well as on the election dates when cash is splashed across the polling booths in the country with the destitute and vulnerable population tempted to compromise in this regard.
Excess cash in the hands of unscrupulous politicians allows them to influence votes cast for their political parties. This is a clear case of the weaponisation of poverty for political gains. So, the CBN’s currency redesign policy appears to have some serious advantage in ensuring free and fair elections in February and March. But the challenge here is how the apex bank can navigate through this process without constituting a stricture in the wheel of progress for the enhancement of economic activities.
Since the apex bank announced that it was going to redesign the N200, N500, and N1,000 denominations and urged Nigerians to swap the old naira notes with the new ones, the policy is generating more reactions from Nigerians as the new notes are scarce despite assurances by the apex bank that commercial banks should continue to load their ATMs with the new notes. Nigerians across the country have been lamenting the scarcity of the naira notes, with some angry and frustrated bank customers vandalising the facilities of some banks.
The epic battle over the retention or ban of old naira currency notes shifted to the Supreme Court recently when the Attorneys General of three states (Kaduna, Kogi, and Zamfara) approached the apex court on the issue of the deadline set by the CBN. The states are asking the court to stop the Federal Government from proceeding with its demonetisation policy because of the hardship the policy is bringing upon people in the affected states. The court granted the interim order against the Federal Government, restraining it from going ahead with its deadline for the use of the old naira note until February 15, 2023.
Some state governments, including Rivers, have decided to file separate applications to join the suit instituted by the three states at the Supreme Court on the same issue. The Rivers State Governor, Nyesom Wike, commended the Supreme Court for saving democracy by halting the Central Bank from banning the use of the old naira notes after February 10, 2023. The governor said the intervention of the court was timely because some elements were bent on derailing the democratic process. He urged Nigerians to vote against any candidate supporting the manner the currency redesign policy was being implemented.
We entirely agree with the governor’s views. Our position is based on the imminent economic dislocation the hurried implementation of the policy has brought upon hapless Nigerians struggling for survival. For weeks, while the CBN boasted that it had enough of the new notes with the commercial banks, their ATMs were crying in need of them. And as the blame game persisted, the short time frame led to a rush by the people to banks to dispose of old notes.
The CBN could have taken a leaf from the United States, which adopted a gradual process in the redesign of the dollar notes. For instance, the issuance of new banknotes in the first redesign since the 1920s began with the $100 note in 1996. That was followed by the $50 note in 1997, the $20 note in 1998, and the $10 and $5 notes in 2000. As for the United Kingdom, which set 30th September 2022 as the last day to use the paper £20 and £50 notes for retail purposes, the withdrawn notes can always be exchanged at the Bank of England for new notes at any time after this date.
To reduce the present currency crisis, therefore, there is a need for aggressive action by the CBN to ensure an adequate supply of naira in the system. This also accords with the position of the National Council of State (NCS). The council had tasked the CBN during its meeting last week to make the new naira notes available or recirculate the old notes to ease the current suffering of Nigerians. The volume of the new notes in circulation is highly insufficient and most of the ATMs have no new notes to dispense, while the dispensing few are still paying out old notes.
Beyond issuing mere threats, the CBN should sanction severely any commercial bank found hoarding the new naira notes since it claims that it has produced enough for distribution to all the banks across the country. Furthermore, many Point of Sales (PoS) agents are engaged in sharp practices by charging customers up to 30 per cent before paying them money. This has produced a negative effect on the cost of living and businesses. Accordingly, the CBN should punish these agents by withdrawing their licences.
Currently, millions of Nigerians are battling with fuel scarcity and escalating prices of petrol, kerosene, and diesel. Enormous productive time is being wasted on long queues. The untoward fuel crisis coincided with long queues at the INEC offices across the country by eligible citizens who waited to collect their PVCs, ahead of the forthcoming elections. Sadly, Nigerians now have to endure another long queue to obtain the redesigned naira notes and swap the old currency.