“…Ladies and Gentlemen, on the basis of these trends, problems and facts set out above, and in line with the provisions of Section 2(b), Section 18(a) and Section 19 (a)(b) of the CBN Act 2007, the management of the CBN has sought and obtained the approval of President Muhammadu Buhari to redesign, produce, release and circulate new series of banknotes at ₦200, ₦500 and ₦1,000 levels. In line with this approval, we have finalised arrangements for the new currency to begin circulation from December 15th after its launch by President Muhammadu Buhari. The new and existing legal currencies shall remain legal tender and circulate together until January 31, 2023 when the existing currencies shall cease to be legal tender…”
The clipping above is an extract from a statement given by the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, on the 26th of October 2022, where he addressed members of the Nigerian press on the CBN’s new redesign policy of Nigeria’s legal tender—Naira. Alluding to many justifications for the facial reconfiguration of the Naira, Emefiele stated that the chief reason for the currency redesign was due to the fact that ₦2.7 trillion naira out of ₦3.23 trillion printed by the CBN over the years was currently out of the vault of the commercial banks, and that the CBN needed to maintain a firm grip on monetary supply Nigeria by getting those monies back. In lay terms, Emefiele meant that the CBN was looking for ₦2.7 trillion naira it had initially printed, and that, inevitably, a currency redesign policy had been arrived at as the most viable way of getting these ‘lost’ monies back into the vault—and control—of Nigeria’s commercial banks, and by extension, the central bank.
Now, while Banking and Finance is a highly skilled course of study in many reputable tertiary institutions of the world, the decision of the CBN Governor to arrive at a cross-cutting currency redesign in the face of currency hoarding by Nigerians is a curious one for any perceptive observer. How exactly is a currency redesign affecting all commercially viable areas across the length and breadth of Nigeria supposed to instantly ‘mop up’ ₦2.7 trillion naira within 100 days—that is, from October 26, 2022 to January 31, 2023, the original deadline given by the CBN? The careful data punched by the Central Bank to make that far-reaching decision seems lost on the author. Asides trying to call back hoarded cash by members of the Nigerian public, Emefiele also stated that the currency redesign was aimed at addressing many ills bedevilling the Nigerian economy, including: worsening shortage of clean and fit bank notes, increased risk of counterfeiting of the Naira, need to redesign the Naira as the currency had not been redesigned in the last 20 years, boosting the CBN’s cashless policy programme by strengthening the eNaira and fighting terrorism through reducing hoarded cash.
In essence, Emefiele planned and plans to use the Naira redesign to kill 20 birds, or in this case about six evil birds affecting the Nigerian economy. At this point, the author is tempted to exclaim: “what a reach!”. Notably, when the CBN Governor was asked at the press briefing of the Naira redesign whether the policy move would curb Nigeria’s spiralling inflation, he affirmed that he “suspects” it will. Indeed. Nigeria’s inflation figures currently run into more than a 17-year high of about 21.34%, with far reaching consequences for the Nigerian consumer, and the Central Bank Governor is basing key monetary decisions off mere suspicions? Of course those suspicions were widely off the mark seeing as the Naira traded lower on the exchange market after the arbitrary redesign, and this was due to a plethora of reasons, not least because of the new currency’s exacerbated shortage.
It is not that the CBN’s currency redesign is out of place, it is that it is poorly timed and poorly executed, as perhaps almost all policy decisions by the CBN and other major ministries under the Muhammadu Buhari administration have gone. There have now been about two conflicting court judgments over the Naira redesign, one by the Federal High Court and another by the Supreme Court. In fact, there appears to be a constitutional crisis brewing over the matter after Kaduna, Zamfara and Kogi states filed an ex-parte motion and secured an interim injunction at the Supreme Court extending the deadline for the legality of the ‘old’ Naira, but this was before the Federal Government, which was joined as the respondents to the suit, filed a preliminary objection arguing that the Supreme Court lacks the jurisdiction to hear the matter, as it is a matter that should have gone before the Federal High Court based on Section 251 of the 1999 Constitution. Asides the legal tussles, there have also been growing uprisings across the country over the shortage of the redesigned Naira with attendant death tolls at bank queues.
Seeing all of these contorted images, the question then goes: why can’t Nigerian policy makers make seamless and well timed decisions that are less tumultuous, having considered all sides? It must be noted that the Indian government also tried to redenominate the country’s currency in 2016 within a fifty-day period and the outrage in the country at the time was similar to the one in Nigeria currently, with attendant deaths at ATM queues in the rush to access hurriedly denominated cash. Economic experts now confirm that India experienced an economic slowdown in the years after the haphazard demonetization policy and that “black money” has actually increased in India since the demonetization program.
Some curious Nigerians contend that the Naira redesign policy was targeted at Nigerian politicians who hoard currency for the purposes of buying votes in the upcoming general elections, but the author’s understanding is that every Nigerian is a politician in the strictest sense. Not only do Nigerians constitutionally submit their political power at the ballot box to a select few number of public representatives who are then stylised as “politicians”, the truth is that any politician who hoards cash for election purposes must be certain that there is a broad voter base who are willing to sell their votes, and that’s why he hoards it in the first place. Nobody is absolutely force-fed to sell their vote. Selling involves a conscious and rational decision. If no Nigerian was selling their vote then no politician would be buying it. There’s a rich but parallel market for vote-buying that should addressed holistically, and the cognitive dissonance between who a “politician” is and who an “ordinary Nigerian” is, is what has held the country back in many ways. All Nigerian politicians are Nigerians, so all Nigerians must be politicians. Afterall, as Joseph de Maistre once said, “a country gets the government it deserves”. More so, the CBN’s Naira redesign policy affects all Nigerian politicians just as much as it affects all Nigerians. Doubtless, the CBN exists to serve all Nigerians, and when it sneezes all Nigerians feel the cold—politicians and janitors alike.
Perhaps Godwin Emefiele is a man with bright ideas, but implementation is a crucial prerequisite for being a CBN governor. Instances of shortage of the redesigned Naira by commercial banks and hoarding of redesigned Naira by bank executives are issues that should have been straightened out before the CBN rolled out its policy. Ironically, the public cash hoarding reason for which the CBN redesigned the naira has found new culprits in bank executives. This just goes to show that no policy, however good, can cure latent human defects. The CBN can redesign the Naira all it wants, but arbitrage is sure to arise in any financial system filled with nepotism, scarcity, nebulousness and kleptomania. And that is what keeps playing out within Nigeria’s financial sector, not least through this poorly implemented policy.
Nigerian policy makers must empathise with the general populace before disseminating fiscal and monetary policies. Expecting to ‘mop up’ ₦2.7 trillion in 100 days without any precedent to back up such a move in an economy as intricate as Nigeria’s reeks of nothing short of African magic. And the general rancour amidst the Nigerian populace has shown how nearly impossible the move is. Mr Emefiele must resist the temptation to keep playing monetary tricks on Nigerians. Nigerians should live and work in economic peace and prosperity. The CBN should straighten out every part of its monetary policies today, not tomorrow.
Doyin Olagunju is a Barrister and Solicitor of the Supreme Court of Nigeria. He publishes National Cake, a newsletter about Nigerian politics, policy and culture. He can be reached via email at – email@example.com