Emefiele is not to blame, By Majeed Dahiru

What Emefile’s CBN has succeeded in doing is cash “seizure”, which has left millions of Nigerians miserable as they struggle to obtain their own money from deposit money banks, and not cash swap as it is pretending to do. But Emefiele is not to blame. He was hired by someone and the CBN he heads is an agency of the Federal Government that is headed by the same someone. And that person is President Muhammadu Buhari. It is President Buhari who approved Emefiele’s disastrous currency swap programme and cashless “policy” as a useful instrument to tackle vote buying, which is now posing a national economic and security challenge.

In his bid to solve a problem – excess liquidity induced inflation – that doesn’t exist in Nigeria, Central Bank Governor, Godwin Ifeanyichukwu Emefiele has only succeeded in creating an artificial currency scarcity of a magnitude without precedent anywhere in the modern world. With the approval of President Muhammadu Buhari, Emefiele had in October 2022 announced a currency redesign programme of Nigeria’s N200, N500 and N1,000 bills for reasons such as mopping up excess liquidity to curb inflation, combatting the booming kidnap-for-ransom cash payments and the tightening of anti-money laundering regulations, among many others. A window of 90 days, which was to close in February 2023, was opened to Nigerians to swap their old naira notes for the newly redesigned ones.

Everything appeared well intentioned until midway into the currency swap programme, Emefiele’s CBN pronounced a “cashless” policy decision, which placed limits on withdrawals from individual and corporate accounts domiciled in deposit money banks in Nigeria. According to the CBN, there was too much cash of about N3 trillion outside the banking sector and that the cashless policy, in addition to the currency swap programme, was to reduce excess cash in circulation by nudging Nigerians to adopt a cashless lifestyle of moving their transactions to digital channels and platforms. A political twist to what ordinarily should be an economically motivated monetary policy of the CBN, was added when it suddenly emerged that the twin measures of naira swap and a cashless policy was to combat the menace of vote buying, as Nigeria goes into general elections from 25 February.

Thus far, the results of Emefiele’s experimentation with a politically motivated monetary policy have been sorrow, tears and blood, as Nigerians in millions who have returned their old naira notes are finding it next-to-impossible to retrieve their hard earned monies, as newly redesigned naira notes. When the deposit money banks kept recycling the old naira notes throughout the 90-day window between October and February, with just a sprinkling of the new naira notes, it became clear that the new notes in circulation were grossly inadequate. Yet, against all wise counsel, common sense and logical reasoning, Emefiele’s CBN insisted on phasing out the old naira notes by the 10th of February.

The unfolding economic tragedy in Nigeria has once again called to question the competence and capacity of Nigeria’s monetary authorities and the quality of the thought process of the political masters in the highest office in the land. Nigeria’s inflation is not caused by excess liquidity in the system, which may have resulted in a demand-fueled sort of inflation…

This insistence of CBN, coupled with gross inadequacy of the newly redesigned naira notes, has plunged Nigeria into an unforced economic crisis that might push the country into a prolonged economic depression if nothing is done urgently. The currency scarcity of banknotes in Nigeria has not only reduced economic productivity by nearly 40%, according the National Employers Consultative Association, but a currency black market has emerged where the naira is now traded against the naira at an average price of N12,000 virtual naira to N12,000 in physical cash. And this situation has compounded the woes of Nigerians who were already grappling with an acute energy crisis. That Nigerians are not only queuing for petrol at gas stations but also for banknotes at ATMs in order to retrieve their own monies, is a combustible recipe for social unrest that may derail the 2023 transition programme and sink the ship of the Nigerian state.

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The unfolding economic tragedy in Nigeria has once again called to question the competence and capacity of Nigeria’s monetary authorities and the quality of the thought process of the political masters in the highest office in the land. Nigeria’s inflation is not caused by excess liquidity in the system, which may have resulted in a demand-fueled sort of inflation, in which too much money is chasing too few goods. Nigeria’s double digit inflationary rate is cost-propelled in nature, arising from the higher cost of energy and other inputs of production, which continue to push up the costs of goods and services in the country. Whilst it was true that that the physical money in circulation – before the mop up, was in excess of N3 trillion, however that only accounted for about 6% of the total money supply in Nigeria, which stood at N52 trillion at the end of 2022. This is so because Nigeria had gradually embraced the cashless economy model due to the digital penetration in the country’s financial services sector in the last decade, since the idea was first introduced. Nigeria’s milestone in the cashless economy has made it one of the most cashless countries in the world, even more than the United Kingdom, United States and China. Whereas, Nigeria’s cash-to-GDP ratio stands at 1.7%, that of the UK is 3.5%, the US is 7.5% and that of China is 9%, according to IMF sources. This is why the attempt by CBN to withdraw over N2 trillion worth of old naira notes from circulation and replace these with less than N500 billion, in an economy that is already “cashless” enough, has created a rare kind of currency scarcity resulting in a parallel money market in Nigeria, where naira is bought with naira and sold at a profit.

Vote buying cannot and should never be combatted through an ill-thought, needless and puerile monetary policy, as it is an economic taboo to do so. Vote buying is best tackled by enforcing electoral laws and order, which prohibits vote buying and other related offences on election day by security agencies before, during and after elections.

Compared to Nigeria, with a cash circulation of about N3 trillion, the cash circulation in UK is about £85 billion and $2.4 trillion  in the US (thousands of trillions of naira). The UK, US and China do not have an official cashless policy but only a growing cashless economy, where willing sellers and buyers of goods and services mutually agree to transact without cash. In deposit money banks in UK, US and China, there is no limit to the deposit and withdrawal of physical cash, with British and American bank ATMs dispensing between £300 and £1,000 and $300 and as high as $20,000 (millions of naira) respectively to individual customers on a daily basis. Clearly, Emefiele’s policy of criminalising cash is without parallel anywhere in the prosperous world. As a matter of fact, governments of the US and China have used legislative and regulatory frameworks to protect their millions of unbanked citizens who rely on cash for their transactions, from being economically marginalised as a result of the growing cashless economy, by mandating businesses to accept cash for transactions whenever the need arises.

What Emefile’s CBN has succeeded in doing is cash “seizure”, which has left millions of Nigerians miserable as they struggle to obtain their own money from deposit money banks, and not cash swap as it is pretending to do. But Emefiele is not to blame. He was hired by someone and the CBN he heads is an agency of the Federal Government that is headed by the same someone. And that person is President Muhammadu Buhari. It is President Buhari who approved Emefiele’s disastrous currency swap programme and cashless “policy” as a useful instrument to tackle vote buying, which is now posing a national economic and security challenge. Vote buying cannot and should never be combatted through an ill-thought, needless and puerile monetary policy, as it is an economic taboo to do so. Vote buying is best tackled by enforcing electoral laws and order, which prohibits vote buying and other related offences on election day by security agencies before, during and after elections. Sadly, it will be said of President Buhari that after eight years in power he left behind a Nigeria of 100 million poor people who are queuing to buy petrol and naira and other essential-to-survive commodities.

Majeed Dahiru, a public affairs analyst, writes from Abuja and can be reached through dahirumajeed@gmail.com.