Currency Swap: Nation In Search For Banknotes (1)

The restoration of the legal tender status of old N1,000, N500 and N200 Banknotes till December 31, 2023 following the judgment of the Supreme Court, triggered jubilation. Many Nigerians had thought that the decision of the apex court will end or at least cushion the scarcity of Banknotes as more notes were expected to be in circulation.  But the jubilation was short-lived as two weeks after the judgment, people are still looking for  both the old and Redesigned Banknotes like the traditional needle in a haystack.Recall that on  Friday, February 17, 2023 the agitation against the currency swap policy of the Central Bank of Nigeria assumed an alarming dimension in parts of Port Harcourt, the Rivers State capital especially the Ikoku Mile 3 area and the old Port Harcourt township, spanning Lagos Street to Churchill Street.  The protest which was initially peaceful suddenly turned violent with some banks and Automated Teller Machine facilities installed at affected banks were destroyed, when some suspected hoodlums infiltrated and hijacked the protests. It took the intervention of joint military and police operatives to quell the incident which would have degenerated to a major catastrophe. The grouse was an accumulated disenchantment over bank customers’ inability to access their money in Deposit Money Banks either across the counter withdrawal or other financial outlets like the Points of Sale and the Automated Teller Machines.
The situation was compounded by the rejection of the old N1000, N500, and N200 Banknotes by traders and petrol stations which the Central Bank said their legal tender status expired on February 10, without availing customers the right to access the Redesigned Banknotes. Recall that on  October 26,  2022, the Central Bank of Nigeria initiated a new financial policy. The policy covers the redesigning of some denominations of the Naira notes. They are the N1,000, N500 and N200. The Redesigned Naira notes was launched on Wednesday November 23, 2022 by the President of the Federal Republic of Nigeria, General Muhammadu Buhari (Rtd). According to the Director of Banking Supervision of Central Bank of Nigeria, Haruna B. Mustafa, in line with the cashless policy of the Central Bank of Nigeria, all Deposit Money Banks and other financial institutions were directed that: Minimum Cash withdrawal over the counter by individuals and corporate organisations per week shall be N100,000 and N500,000 respectively. Withdrawal above these limits shall attract a processing fee of five and ten percent respectively; Third party cheque above N50,000 shall not be eligible for payment over the counter; the maximum cash withdrawal per week via the Automated Teller Machine (ATM), shall be N100,000, subject to a maximum of N20,000 cash withdrawal per day; Only denominations of N200 and below shall be loaded into the Automated Teller Machines: and the maximum cash withdrawal at Point of Sale (PoS) terminal shall be N20,000 daily.
Consequently, Nigerians were given January 31 deadline to deposit those denominations of the Nigerian currency before they cease to become legal tender. However, currency swap deadline of January 31 has been extended by 10 days to expire on February 10 following the difficulties associated with getting the Redesigned Naira notes.Today, it is not saying a new thing that Nigerians are not finding it easy to access money deposited into banks for safe keep. Banks are crowded by customers. Though pro-currency swap groups claim that the crowd scenario was sponsored, stage managed and  the architecture of some politicians to discredit the policy. The crux of the matter was that the Redesigned Naira notes were not available at Points of Sale and Automated Teller Machines (ATMs). This compounded the situation and heightened the pains of Nigerians in a country with a depressed economy. In desperation to get the Redesigned notes, some person paid N1,000 for every N10,000. A man also bartered his old N20,000 notes for N13,000 of the new currency thus losing N7,000 to enable him meet basic family necessities.While some bank customers were struggling to get the new notes at Automated Teller Machine points, some made brisk business cashing on the scarcity of the new Naira notes. You can trust the unscrupulous Nigerians who are poised to exploit every abnormal situation to amasse wealth and gains.
My worry was how could some person had had access to the New Currency to exchange for the old ones at a prohibitive and Shylock’s rate while genuine customers wallow in pain to get the new notes which most Automated Teller Machines were not dispensing. Customers went to bank and they could not be paid. They were told to make transfers or use the Automated Teller Machines that were not dispensing cash. On Friday, February 17, 2023  parts of Port Harcourt, Rivers State capital, aggrieved youths protested the non acceptance of the old N1,000 and N500 Banknotes following the expiration of the Central Bank of Nigeria’s deadline. It took the timely intervention of the Rivers State Police Command to stem the degeneration of the protest to a major catastrophe.  To soothe frayed nerves over the hardship faced by Nigerians, President Muhammadu Buhari on Thursday February 16, in a nation wide broadcast appealed for understanding as the Central Bank commits to implement the new financial policy while apologising for the inconveniences the alleged sabotage of the process had caused Nigerians.President Buhari harped on the merit of the currency swap policy on the economic, security and political stability of the country. He said the policy was designed to mop up about N2.7 trillion in circulation outside the Banking system and stated that the the non regulation of the whooping amount, distorts the financial policy and efficient management of inflation.
According to the President, some reasons underpinning the monetary policy decision are,  need to restore the statutory capacity of the Central Bank to keep a firm control over money circulation. “The huge volumes of bank notes outside the Banking system has proven to be practically unavailable for economic activities and thus retard the attainment of potential economic growth”, President Buhari said, he recalled that at the inception of his administration in 2015, “currency in circulation was only N1.4 trillion. The proportion of currency outside banks grew from 78 percent in 2015 to 85 percent in 2022. As of October, 2022 currency in circulation has risen to N3.23 trillion out of which only N500 billion was within the Banking system’. The financial swap, according to the President will deepen the continuing support for security agencies to successfully fight against crime and criminality, including ransom-taking.He claimed that the money swap policy has attained a significant level of achievement, with N2.1 trillion of the Banknotes outside the Banking system recovered. The policy will lower the inflation trend consequent upon the reduction of money supply, stemming of illegal economic activities, and corrupt practices as well as conscious effort to inject sanity into the electoral system by discouraging vote-buying and monetisation of the Elections, are some reasons the President advanced in support of the policy.
The Monetary policy is not without challenges. To ameliorate the plight of the people in accessing Banknotes, President Buhari said the old N200 Banknotes will be released and continue to be in circulation as legal tender for 60 days from February 10, 2023 to April 10, 2023.with the new N200, N500 and N1000 notes. The Special Adviser’ to the President on Media, Mallam Shehu Garba  had said, “Following series of enquiries, we wish to state that it is not true that the federal government or the CBN has taken a pre-emptive action on the legality of currency as a legal tender in view of the pendency of the case before the Supreme Court. “The position of the government and the CBN will be made known upon the determination of the suit coming up Wednesday.”Unfortunately, the Central Bank refused to wait for determination of the suit brought against it by some State governors before  the Supreme Court. The governor of Rivers State Chief Nyesom Wike, views the action of the Central Bank as contemptuous.The Supreme Court had in a ruling on February 8 suspended the CBN’s February 10 deadline to stop the use of old currency notes. The bank had ordered citizens to swap out old N1, 000, N500, and N200 banknotes for a redesigned currency by the deadline. But the apex court, ruling in an ex parte application by three states – Zamfara, Kogi and Kaduna – stopped the CBN from banning the old notes pending the hearing and determination of the case. It fixed February 15 for hearing.
Governor of CBN, Mr. Godwin Emefiele,  said the apex bank had noticed that some politicians were buying the new N200, N500 and N1, 000 for political purposes. A  coalition of 472 civil society organisations (CSOs) at a press conference in Abuja said that 10 state governors were mopping up the new naira notes in circulation in order to discredit the policy. Addressing the diplomatic community in Abuja, the CBN governor craved the support and understanding of the foreign missions and Nigerians, in general, towards the implementation of the cashless policy and in achieving the overall objectives of the naira redesign programme. “The CBN has also noticed that some politicians are buying the new notes and storing them for political purposes,” he said. Emefiele said the principal aim of the currency redesign initiative was to make monetary policy decisions more effective, adding that inflation has been trending downwards while the exchange rate has recorded some stability since the implementation of the policy. He said the apex bank remained committed to ensuring a seamless, inclusive, and equitable implementation of the exercise for the overall benefit and growth of Nigerians, the financial system, and the economy as a whole. He also said the programme sought to increase financial inclusion in the country by reducing the number of the unbanked population. Emefiele noted that there had been five reversals in the bank’s attempt to go cashless and promote financial inclusion since 2014, when he was first appointed CBN governor. He explained that the reversals were born out of the need to deepen the country’s payment infrastructure, adding that the payment system in Nigeria is now among the best six in the world.
Emefiele said the naira redesign policy was expected to curb inflation in the market, as less cash holding reduces currency outside banks and retards money circulation. He said the accompanying decline in money supply would slow the pace of inflation, adding, “We have started to see inflation trending downwards following general price stability in almost all genre of market, including for goods and financial products.” Emefiele also said the effective implementation of the policy could scrap four percentage points off the current level of inflation, which stood at 21.34 per cent, as it steadily slowed inflation rate to about 18 per cent by mid-2023. He said, “This is quite achievable, as data from our market sources indicate that the prices of grains and key staples, around Suleja and Lambata markets, for instance, have generally been on the downward trend since the beginning of the policy”.
He also said the policy had brought some stability to the exchange rate regime, and explained that prior to the announcement of the policy, the huge cash haul outside the banking system had exerted significant pressures on the exchange rate at all windows, but more so at the parallel market as it engendered asset substitution by speculators, and rent-seekers. Emefiele said: “While the policy was initially estimated to lead to more speculations due to panic moves, as most people try to understand the policy action, it is expected to reduce speculation in the medium- to long-run”.
To be continued in our next edition.

By: Igbiki Benibo