In November of last year, the central Bank of Nigeria (CBN) announced its plans to redesign the currency in response to perceived high levels of cash hoarding across the country, as this was perceived to be one of the key factors behind the hyperinflation of the naira.
The chief culprits behind the cash hoarding tend to be the banks themselves, usually in cahoots with black market currency changers locally known as ‘Bureau De Change’; in whose interest this artificial scarcity plays out.
While defending its decision to redesign the Naira, the apex bank in October expressed that some individuals were stockpiling huge amounts of cash outside the banking system.
The CBN Governor, Godwin Emefiele released a press statement saying; “Significant hoarding of banknotes by members of the public, with statistics showing that over 85 per cent of currency in circulation are outside the vaults of commercial banks.
“To be more specific, as at the end of September 2022, available data at the CBN indicate that N2.73 Trillion out of the N3.23 trillion currency in circulation, was outside the vaults of Commercial Banks across the country; and supposedly held by the public”.
Meanwhile statistics showed that currency-in-circulation (CIC) grew year-on-year (YOY) by 11.2 % to N3.3 trillion in October 2022 from N2.97 trillion in 2021.
CIC in October gained 2.17 per cent or N70.03billion to N3.3trillion in October from N3.23trillion reported by the CBN in September.
By enacting a naira redesign policy, the hoarders will be forced into dumping all their old notes as quickly as possible before the deadline, and this will in turn, give the economy a much required boost with the sudden injection of billions of naira into circulation.
But like all else in Nigeria, it’s much more easily said than done.
The November announcement has predictably continued to attract mixed reactions; with politicians in particular, crying foul.
The exercise, which comes in the wake of the 2023 general elections, has been criticized as politically motivated by a section of the political class.
For instance, the Senate last week urged the central bank to extend the withdrawal date of old currency notes from January 31 to June 30, 2023.
The argument has also been advanced, that a cashless economic policy would frustrate the activities of criminal gangs, especially kidnappers and bandits, who abduct members of the public and demand huge amounts of cash. It would be a nullity to expect victims to pay cash ransoms if such amounts of cash are not readily accessible, and can be easily traced.
It also helps to curb the amount of money laundering ongoing especially in the real estate sector. Major industry players in the sector have previously highlighted the fact that desperate members of the public move around with billions in cash, in order to invest their embezzled funds in houses and lands across the country.
Those behind such transactions are aware that it would be foolhardy to deposit shady monies in their bank accounts, for the fear of the Economic and Financial Crimes Commission (EFCC); therefore turn to the property industry to help launder the money.
If well implemented, the cashless policy would help in no small measure the anti-corruption crusade in the country because public officials, who always insist on cash ‘kick-back’ before award of contracts, would have a re-think.
Private individuals many times, have to deal with corrupt officials who collect bribes before awarding contracts and reject bank transactions which can easily be traced.
Critics however point out that the currency notes are yet to achieve even modest levels of circulation, with many banks and financial institutions, choosing to hand out old notes to customers, while hoarding the new notes.
Which does nothing to curb the initial problem of hoarding, by the main culprits. In fact, there have been reports of some banks in the East reserving the new notes for politicians on the campaign trail and not the consumers it was redesigned for It’s a new year for some, but it’s just another day in Nigerian politics.