The issue of new currency notes in Nigeria is a little beyond crazy and pathetic. This should not be the case, as currency mop ups have occurred in the past without much hassle. However, this time around, it has created a whole lot of violence in the country, particularly in cities such as Abeokuta, Ibadan, Benin, Port Harcourt, and of course, Lagos, the commercial hub. This article dissects the implementation of the cashless policy, its political and economical value.
How did we get here?
In December of 2022, the Government of Nigeria announced the phasing out of old naira notes N200, N500, and N1000 and introduction of new ones - a redesign. The reason for this, one would say, is political as well as economic.
Evidently, this is political because it is envisaged that the new naira notes will curb vote‑buying during the upcoming General Elections. However, with the Naira redesign, Nigerians face the reality of cash scarcity as Naira notes are in high demand. All of these issues are brought to light at a time of increased political activity leading up to the 2023 general elections when political parties and their candidates are using a variety of ploys, plots, and strategies to win over voters. The demonetization initiative, which is the focal point of Nigeria's monetary policy, is coordinated by the Buhari government and the Central Bank of Nigeria (CBN). The intention is to control money gathered for shady political activities and counterfeit currency. It can be agreed that this naira change will reasonably eliminate vote‑buying.
However, for all this, one thing is sure: whether the old naira notes continue to be tenable alongside the new naira notes until the election period or not, after the election, there will be a calm like Nigeria has not known in the last six weeks, and possibly, even the old naira notes of N1000, N500 remaining in acceptance until April 16th (the extended date for the old N200 to be acceptable).
Dr. Muiz Banire, a senior Advocate of Nigeria, explained in the Punch Newspaper that, by insisting on the continued use of old naira notes, state governors are encouraging vote-buying. He also asserted that governors are insisting on the collections of old notes because they already stocked those to purchase the voters’ conscience. Dr. Muiz, however, advised Nigerians, “your conscience is not worth buying, but if you must collect the money which mostly is stolen from the treasury, insist on legal tender and still vote your conscience. This is part of our leadership campaign leadership series.” Many others have supported this political reason. On the flip side of it, the CBN Governor, Dr. Godwin Emefiele, is introducing the Cashless Policy, which he pushed for a long time to put in place.
The Socioeconomic Reason
In terms of socioeconomic influence, a nation's economy is vital. It decides things like average price levels, total national income, output and productivity, levels of employment in labor and capital, exchange rates, and the balance of payments. Naira, along with other currency notes in Africa, is among the banking notes still highly used physically in the world, compared to currencies in the Western or European nations: the US Dollar, the Canadian Dollar, the Australian Dollar, and UK Pound. For this reason, and several beneficial reasons, the CBN Governor has been aiming to introduce and implement the cashless policy, which was unsuccessful in the past. However, with the recent loss of old currency and scarcity making the rounds, people are beginning to trust and go for the cashless policy more. The cashless policy is anticipated to curtail racketeers' activities and lessen the amount of currency in the illicit economy. It will shrink the money stock and, as a result, slow the long-term path of inflation by decreasing the amount of currency held outside of banks. Further highlighting the benefits of the cashless policy, Emefiele pointed out that, Typically, nations implement currency redesign policies (also known as demonetization policies) to improve the performance of critical macroeconomic indicators while addressing social ills. “By spurring more people to use bank accounts, this policy will further increase bank account ownership and use by enhancing people’s saving behavior and encouraging hitherto informal business operators to formalize the pattern of transactions and adopt more formal settlement channels.”
He claims that the macroeconomic effects of currency redesign are multifaceted and may appear unclear, particularly in the beginning when the inconvenience is greatest. As more deals are conducted through online platforms and bank accounts, more agents are exposed to governmental regulations. The Governor's odd choice was also motivated by concerns about money hoarding, inflation, and counterfeiting. Approximately 85% of the overall amount of money is in use. This topic has been extensively discussed among policy experts, including Economists, Attorneys, and others. Many of them think that this change in the policy provides no real economic benefits to the populace and is simply a distraction from the severe financial crises currently roiling the nation. Taking into account the benefits and costs of the strategy, the issue at hand is whether it should be implemented at this time.
The meaning of Naira Re‑Design for the Average Nigerian
According to the CBN's data, as of September 2022, N2.73 trillion of the N3.23 trillion in currency was purportedly kept by the general public outside the country's commercial banks' vaults. This demonstrates that Nigerians have not entirely embraced the cashless system. Other difficulties include a growing scarcity of banknotes that are clean and in good condition. According to the CBN, the currency redesign will strengthen our efforts to establish a cashless economy.
On social media, there are endless sad videos of people's reactions, showing the general anger, frustration, and suffering people are going through. Did the CBN Governor achieve his political objective of introducing the new naira notes at this time? He did. But at whose peril? Those in high places and wealthy politicians? Or the vendors, stall owners, and other individuals from low socioeconomic backgrounds? Why does a single person, the CBN Governor, control a significant portion of a whole country's economy? To effectively operate the cashless policy system, Nigerian financial technology must be improved. Several commercial institutions have come under fire for transfers that recipients have not yet received. As with all things, new ventures should be introduced lightly, not suddenly and immediately, as the CBN Governor chose.
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