The ruling by the apex court of the land (the Supreme Court of Nigeria) on Friday, 03 March 2023 that all redesigned Naira notes and the old ones will remain legal tender and in circulation till December 31, 2023 climaxed the lingering titanic struggle between the political power brokers and managers of the Nigerian economy. Since the announcement of the Naira redesign policy on October 26, 2022, some sort of ‘war’ had been raging between the drivers of political ‘expediency’ and economic imperatives of the Nigerian polity. For the first time in living memory, wielders of political power openly confronted and stoutly stood against economic management policies of the Federal Government. In what looked like an incestuous confrontation, top political officeholders of the same party took opposing positions on a single monetary policy.
Specifically, the Central Bank of Nigeria (CBN) came up with the seemingly innocuous Naira redesign initiative to deal with a number of obvious challenges facing the trudging Nigerian economy.
Some of these stubborn challenges included very high and steadily rising inflation rate (standing at almost 22 per cent as at end-January 2023), huge illicit and counterfeit funds and large volumes of cash in circulation—yet outside the banking system. The policy was also aimed at fast-tracking the attainment of financial inclusion and cash-less economy objective of the Federal government. The apex bank therefore gave a timeframe for all existing Naira denominations of 200, 500 and 1000 to be returned to the banking system (deposited). This was to be achieved within about one hundred days—October 26, 2022 to January 31, 2023.
However, as the end-January deadline was approaching, powerful political power brokers and their cohorts were perfecting both clandestine and obvious moves not only to scuttle the currency initiative but to have it fully reversed and jettisoned. Thus, to effectively pre-empt the deadline, three state governments sued the Federal Government at the Supreme Court; and the apex court pronto gave an ex parte ruling, suspending the stoppage of the old currencies (200, 500 and 1000 Naira notes) from being legal tender. This was even after the CBN had extended the earlier deadline from January 31 to February 10, 2023.
Surprisingly, even before the unprecedented move of the three states (Kaduna, Kogi and Zamfara) in suing the Federal government over monetary policy, both arms of the National Assembly (the Senate and the House of Representatives) had harangued and arms-twisted the CBN to push forward the deadline for the stoppage of the use of the old currency notes. Similarly, state governors under the aegis of the Nigerian Governors’ Forum (NGF) had applied several tricks and suasion to get the CBN cave in to their stance of not stopping the use of the old currencies as scheduled. The NGF equally carried their ‘appeal’ to Mr President who asked them to give him a ‘reprieve’ of seven days!
On Thursday, February 16, 2023, however, President Muhammadu Buhari made a nationwide address in which he ordered the CBN to “allow the old 200 naira notes and redesigned 200, 500 and 1000 naira notes to coexist” until April 10, 2023. This meant that even with the pendency of the ex parte ruling of the Supreme Court, the old 500 and 1000 naira notes have ceased to be legal tender courtesy of the Presidential order
However, rather than assuage frayed nerves, this conflicting scenario created more tension and confusion in the polity. By this time, the apex bank, apart from re-introducing the ‘old’ 200 naira notes as ordered by Mr President, had practically mopped up all ‘old’ notes and stuck to its new policy of ‘minimal’ cash withdrawal limits by all economic agents.
Yet, the suspicion remained high that many top and desperate politicians still had huge volumes of the old naira notes stashed away in their strong rooms and private vaults to keep ‘oiling’ their electioneering towards the Presidential and National Assembly elections slated for February 25, as well as those of the gubernatorial and state assembly scheduled for March 11, 2023. This desperation apparently led to some state governors making public addresses, largely direct counterpoise to Presidential orders on the way forward in ensuring the success of the Naira redesign initiative. Some even told their constituents not to bother about doing away with their ‘old’ naira notes as directed By Mr President.
All these played out as the total ‘drying up’ of liquidity in the economy—as neither the ‘old’ naira notes were available nor the ‘new’ ones in circulation enough to facilitate commerce and business generally. Either due to sabotage or systems failure, bank electronic channels that were to be used as alternatives to cash payments—all virtually collapsed.
In this milieu, the apex court refused to vacate its ex parte stance but instead adjourned its ruling to 03 March 2023. As February 25 (elections) got closer, the polity got asphyxiated, financially—and virtually every bank branch across the country was mobbed by deluge of customers who wanted to have some cash. In not a few locations, crowds of bank customers (perhaps infiltrated by hoodlums) went wild and razed and/or vandalized bank buildings and other properties.
Apparently laden in all of these was the devious ways of the politicians in applying their very long and strong ‘tentacles’ to have a tight grip on the new bank notes rolling out of The Mint. Thus, as the CBN was assuring the polity about the volume of cash being minted and circulated, the ‘scarcer’ the currency got. This scenario did not only lead to the closure of many bank branches but also put point-of-sale (PoS) operators out of business—they had totally lost access to cash for their trade. Covertly or overtly, branch heads of not a few banks in collusion with top politicians in their various localities, hoarded volumes of the new naira notes available to them. In many localities across the country, the masses took to some sort of trade by barter; in fact, in some boundary locations, foreign currencies like French Franc (CFA) were for a while adopted in Nigerian territories as means of exchange—just to keep business going!
As backdrop to all these, President Muhammadu Buhari kept reiterating his determination, through the Naira redesign and allied policies to create and sustain a level playing field for the politicians—by ensuring that “no body holds so much resources to enable him intimidate opponents or use money to influence voting in any locality.” This shows without equivocation that the currency policy was also frontally directed at ‘sucking’ away or rendering waste, huge sums of Naira widely believed to have been stashed away by politicians, their cronies and other economic saboteurs. This way, the largely destabilizing role of money in elections and electioneering would be minimized and curtailed substantially.
However, the monetary policy had also come up with a motely of unintended sequels and ripples, including the stifling of the economy and diminishing of the quality of life of the citizenry. In point of fact, the acute cash shortages across the country since February 2023 practically grounded the Nigerian economy. For instance, Stanbic IBTC Bank, in its February Purchasing Managers Index (PMI) report has disclosed that the PMI data dropped below the 50.0 no-change mark to 44.7 per cent in February, from 53.5 in January, reflecting a decline in both mico- and macro-economic activities.
The PMI report which measures the performance of the private sector from a survey of 400 companies, from agriculture, manufacturing, services, construction and retail, showed that significant declines were seen in both output and new orders, while firms scaled back their purchasing activity and employment.
The PMI report further showed that the decline in operating conditions was the sharpest since the survey began in January 2014. According to the report, companies were also impacted by shortages of fuel which added to price pressures and led to supplier delivery delays. “The most severe impacts of cash shortages were seen with regards to output and new orders which both fell substantially as customers were often unable to secure the funds to commit to spending,” the report said. Indeed, individuals and households similarly suffered severe inability to secure funds to commit to spending—as practically all bank payment channels failed.
Alas! Six days after the Presidential and National Assembly elections, the apex court of the land came out with a unanimous ruling that all bank notes (old and new) shall remain in circulation as legal tender till December 31, 2023.
Only after this date shall the old notes cease to be legal tender in the country. The seven-man Supreme Court justices that gave the ruling also slammed Mr President for having made moves to pre-empt and side-step the apex court in having the final say on the vexed issue of Naira redesign and adjunct policies. The jurists also faulted the ‘minimal’ cash withdrawal limits imposed by the apex bank, insisting that it amounted to a denial of people’s right to access to their property (money). And with this verdict, a new lease of life beckons on economic agents, as the economy gets ‘liquid’ and off the tethers. For now, it is nunc dimittis to Naira redesign and associated policies. Hopefully!
Okeke, an economist, sustainability expert and business strategy consultant, lives in Lagos. He can be reached at: email@example.com