Explainer: How the New Naira Note Scarcity is Affecting Nigerians

On 26 October 2022, Godwin Emefiele, the Central Bank of Nigeria (CBN) governor, announced that new naira notes—200, 500 and 1,000 naira bills—will replace the current ones, starting from 15 December, 2022. The change was said to have many benefits, from combating crime to lowering inflation.

But though the CBN governor had said the old notes will become null by 31 January 2023, perhaps envisaging it would have been completely out of use by then, the reverse has been the case. The old notes lurk still, and the new notes have come with new challenges for many Nigerians: they are hard to come by, which has made life difficult for many.

Responding to this, the CBN has extended the deadline of the validity of the old notes to February 10. But this has not improved the situation.

Why are the new notes scarce?

Godwin Emefiele blames Nigerian banks for the scarcity, accusing them of breaching the CBN’s protocol for distributing the new notes. He said this on Wednesday when he appeared before the House of Representatives’s committee in charge of the new naira notes.

Emefiele charged that banks did not, as the CBN stipulated, load automated teller machines (ATMs) with only the new notes. Banks instead, he said, have been giving bundles of the new notes to individuals who spend them at parties. “Many of us have unfortunately seen the new naira, instead of being used for the purpose it’s meant, is used in parties, in celebrations,” said Emefiele. “Some said, maybe it’s money from the ATM and I said no, money from the ATMs is already broken. They (the ones spent at parties) are in leaflets… which means they (banks) had breached certain aspects of the guidance note we gave to them.”

But many have criticised the CBN’s one-month deadline as imprudent, insisting that it could only have created a crisis. One such critics is the Human Rights Writers Association of Nigeria (HURIWA) who in a statement said, “HURIWA is of the opinion that the haste with which the redesigning project of the national currency was handled by the Governor of CBN and President Muhammadu Buhari is shrouded in politically organised witch-hunt and confusion.”

How have Nigerians been faring?

Reports of long queues in bank halls and at ATMs have dominated national discussion in the last few days, as many are eager to swap their old notes for the new ones. But many banks and ATMs have not been dispensing the new notes, leaving many without physical cash to perform their daily affairs.

“I have been to two banks this week to collect money for our cooperative. The last one I went to, we collected one million naira but only N50,000 was in new notes. The bank staff are even very lackadaisical, it’s either they don’t have it or they are intentionally being inhumane,” said one resident of Abeokuta.

It does not help that many businesses are also refusing the old notes, thus stalling economic activity.

“Best Deal Supper market will no longer accept the old notes (N200, N500, N1000) as legal tender for purchases as from 27th January, 2023. This is with respect to the Central Bank of Nigeria (CBN) policy on old notes,” reads a poster on a pharmacy in Ijaye, Ogun State.

POS Operators: an expensive alternative

Point of sale (POS) operators can be found in nearly every street in Nigeria. A new report by McKingsley claims there are approximately 147 point-of-sale devices for every 100,000 Nigerians. Since their emergence, they have removed the need for many Nigerians to visit banks or ATMs for petty cash transactions, either money withdrawals or transfers. For their service, these POS operators demand a small fee per transaction. However, the new naira note scarcity has affected many of them, leaving many of them with no cash to give customers.

Those of them who have managed to get a hold of the new naira notes are now charging customers exorbitant fees for transactions. Some, reports claim, are charging as much as 1,000 naira to give out 10,000 naira, whereas the same transaction normally costs about 200 naira.

Many of these operators have either claimed that they had to hike the transaction fees because of the difficulty they faced in getting the new notes themselves, or because they, too, had to pay exorbitant fees to buy the new notes. But some have accused many of these operators of greed and of merely capitalising on a grim situation.

Whichever is the case, these POS operators offer an alternative that comes at a great cost to many.

Government’s response

On Tuesday, during an interactive session with the house of representatives ad hoc committee on the currency redesign and naira swap policy, Godwin Emefiele said the Central Bank of Nigeria will continue to accept old naira notes after the stipulated deadline of February 10.

“It (old naira notes) could have lost its legal tender status which means we have moved on,” Emefiele said. “But if you have your money that you have not been able to send to the bank, we will certainly give you the opportunity to bring them back into the CBN to redeem it. Either you pay it to your bank account or you want to do exchange, we will give you. You will not lose your money. This is the assurance I give to Nigerians,” Emefiele said.

The CBN governor has also said anti graft agencies will investigate banks which have flouted the CBN’s directive. Some of the agencies he cited include the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices and other Related Offences Commission (ICPC), the Nigerian Financial Intelligence Unit (NFIU), and the Department of State Services (DSS).