By Kelechukwu Mgboji (InsideBusiness.ng)
“In my lifetime I have seen Naira being bought by Naira in Nigeria! This is the lowest of low!!
“I don’t know how much lower they can sink people more than making their own funds unavailable and inaccessible!!” noted a tweet by @HenshawKate on Monday, February 6, 2023.
The tweet captured the pervading sentiments and frustrations among Nigerians who are fantastically grappling with unprecedented scarcity of the new naira notes, a situation Kate Henshaw described as the lowest of low in the history of Africa’s most populous nation.
Like most ordinary Nigerians, the Nollywood star actress had been in the queue for cash withdrawal for several hours on end without getting cash from the Automated Teller Machine (ATM). She moved from one bank to another, trying her luck across banks without success, until she returned home, after wasting energy and fuel that is also, a gold commodity.
Kate Henshaw’s sad experience is one of the innumerable tales of frustration Nigerians have been subjected to since the initial deadline of the Central Bank of Nigeria (CBN) naira redesign and old notes swap elapsed on January 31, 2023.
Unknown to Kate Henshaw, InsideBusinessNG was told that it took ten branches of one of the top five Nigerian banks to arrange N10,000 new naira notes during the week for the senior brother of their Group Managing Director. When a friend of the GMD also requested for assistance to get just N20,000, the GMD had to instruct a branch manager of one of the bank’s branches in Ikeja to talk to 19 other branches to arrange the amount It is that bad.
“Cash For Sale Parallel Market” Springs Up
Nigerians had been used to parallel market operation for foreign currency purchases at Bureau de Change (BDCs) offices, but lately, with the naira scarcity, a new parallel market for the purchase of local currency with local currency has opened up.
Unlike the usual parallel market which has the BDCs as its operators and are regulated by the CBN, this new parallel market of naira for naira is not regulated discreetly by petrol attendants at fuel stations, food sellers, transport operators, and whoever has enormous cash. The Point of Sales (POS) operators are the fortune tellers: they set margin percentage interest for customers whether they like it or not.
For the dispense of N5,000 new notes, POS operators charge a 20 percent interest margin; and 10 percent for old naira notes. In other words, the customer who wants N5,000 is given N4,000 for new naira notes; and N4,500 for old naira notes.. Even the BDCs don’t charge this much.
Most Nigerians who are the poorest of the poor according to National Bureau of Statistics (NBS) report cannot afford to pay so much naira to buy naira amount of little value. That is the lowest of new low Kate Henshaw was talking about. This is why bank account holders prefer to stay in queue to withdraw from the ATM no matter how long they spend. But how did Africa’s most populous nation get to this sorry state?
Trigger Of Long Queue For Cash
The apex bank launched the redesigned currency notes of N200, N500, and N1,000 on December 15, 2022, with the major objective to mop up about N2.9 trillion which it claimed was stashed away inside homes of money bags outside the banking system. Announcing the decision earlier on October 26, 2022, after a meeting of CBN’s Monetary Policy Committee (MPC), CBN governor, Godwin Emefiele, said that the new and existing currencies would remain legal tender and circulate together until January 31, 2023, when the existing currencies would cease to be legal tender.
On the eve of the January 31, 2023 deadline after most banking public had paid in their old currency notes, CBN announced the extension of the deadline till February 10 while the swap of old currency notes with new ones would continue till February 17. And that marked the beginning of a grave scarcity of cash never known in the history of the country.
Reasons Behind The Cash Scarcity
Cash scarcity in Nigeria is one of the direct outcomes of CBN’s naira redesign policy launched on December 15, 2022. The financial industry regulator claimed it had distributed a sufficient quantity of the new naira notes to banks’ branches, alleging that some branches of deposit money banks as well as individuals were hoarding the new notes, and there were pockets of evidence for its allegation.
Officials of a couple of banks have been indicted for hoarding the new notes both in Abuja, Lagos, and other states of the federation. CBN Director of Consumer Protection, Rashidat Mongunu, said on Thursday, that the redesigned notes were made available in the right quantity by the CBN, but those hoarding the notes are to blame for currency scarcity which is further worsened by the sheer number of people thronging banks to collect money almost at the same time. “Because of the attitude of some Nigerians in hoarding the money, even those that don’t really need the money are rushing to get it and keep it, not to spend,” she said.
What Observers Say
But beyond hoarding the new notes lies the grave fact that CBN failed to do the needful, which is why the country is in this new crisis of confidence. Our findings revealed that CBN did not issue sufficient currency notes, partly because it was in a hurry to carry out the project. “CBN did not think through the naira redesign project before it began its execution,” a senior bank official told InsideBusinessNG in confidence.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, has criticised CBN, stating it has become very obvious that the central bank grossly underestimated what it takes to execute this transition from the old notes to the new notes.
“So I think the logical thing to do is to extend it. We are in a democracy, the CBN cannot afford to continue to snub our democratic institutions the way it has done so far.”
He added that Nigerians have seen clear evidence of lack of capacity with respect to production from the apex bank because if something is available in adequate supply, it would show and if otherwise, it will still be obvious as is currently the case with Nigerians.
“So clearly we are dealing with a situation of acute shortage, that’s when you relate what’s made available to the demand of the new notes. Even up to last Friday, some banks and ATMs were still dispensing the old notes,” Yusuf lamented.
In his intervention, the CEO of Global Analytics Consulting Limited, Tope Fasua, argued that many people were against the CBN policy of redesigning the naira notes and that they would want the reversal of the policy. “Why would they want the reversal of the policy is what I don’t understand,” he said.
The economist explained that part of the problem is the fact that many banks have closed down some of their branches due to certain challenges, especially in rural areas. In such situations, he suggested that the CBN could have deployed officials in different places in Nigeria, especially places with a huge population of unbanked Nigerians.
Commenting further, he suggested that President Muhammadu Buhari wants the policy to succeed because he wants it to be some sort of legacy he would be leaving as his tenure comes to an end. “Just as he did in 1984, he is desirous of this policy pulling through and I think he is also desirous of it being a linchpin for him to be said to have conducted a clean and fair election in 2023,” he said.
Fasua said he disagrees with people saying the CBN naira redesigning policy is coming at the wrong time because of politics.
“This policy of cash management is 18 years late. In fact, we should be asking the CBN what they have been for 18 years since 2005,” he argued.
InsideBusiness discovered that the CBN allocates only N1 million new notes weekly to commercial banks’ branches in Lagos. This is why deposit money banks in Lagos have very limited new naira notes in automated teller machines (ATM) to dispense, contrary to claims by certain Abdulkadir Jibrin, an official of the Bauchi State branch of the apex bank, who claimed that CBN Bauchi allocates N30 million new naira notes daily to each branch of banks. However, commercial banks are scared stiff to disclose the true situation to the banking public for fear of victimization by CBN.
A reliable source close to a branch of First Bank in Agbara, Ogun State, told our correspondent that only a million naira new notes is allocated to the branch on a weekly basis, citing authoritatively classified information by one of the senior officials of the branch. When InsideBusiness contacted a source in FCMB, it was learnt that CBN allocated a total of N350 million to the second-tier bank with 300 branches, which amounts to a little over N1 million per branch..
InsideBusiness further gathered from a source in Polaris Bank adjacent to Zenith Bank head office at Ajose Adeogun, Victoria Island, Lagos that only one bundle of new N200 notes was allocated to the branch by the CBN. For Access Bank with about 600 branches, CBN allocated a little above N600 million only, while Zenith Bank and GTCO got about N500 million each in CBN’s new policy of cash allocation.
“I have been to the manager begging for cash. But he said there is no cash. When I persisted he told me that they only receive N1 million new notes weekly. I became weak. At POS, I was offered the new notes at a service charge of N1,000 per N10,000. This cash scarcity may ground a lot of projects. “I have a project at hand and need to make cash payments because some of the natives working for me insisted on having cash payment because they said they buy with cash in their locality,” our source narrated.
InsideBusiness gathered that ATM machines dispense cash only in the morning each day and never get reloaded till the next day. POS operators who have old naira notes to dispense insisted on a service charge of N1,000 per N10,000 disbursement while those with the new notes insisted on N2, 000 cut-throat service charge.
Reasons For Cut-throat POS Charges
When asked their reason for the cut throat charges, they explained that they paid heavily to obtain the cash which they said was not even enough for half a day’s operation. One of the POS operators, Chukwudi Ogueri who operates a chain of branches of POS transaction points at the Okokomaiko axis of Lagos, disclosed that CBN did not factor Lagos POS operators in its arrangement.
According to him, CBN allocates N500,000 per week to POS operators in other states of the federation while their counterparts in Lagos get nothing, leaving them at the mercy of sundry sources of cash at exorbitant costs. He noted that a new parallel market for the purchase of naira with naira has sprung up overnight due to CBN’s poor execution of its new notes redesign policy.
▪︎ By InsideBusiness.ng