Cash crunch, cash swap, cash restrictions, cash confiscation, By Simbo Olorunfemi

What the CBN is doing is to withdraw excess cash from circulation, not exchange what is there naira for naira in a swap. That, in part, explains the volume of new notes being printed. Some, relying on questionable sources, say the CBN is not printing or releasing enough new notes.

It has been depressing enough to see so many sad faces in ATM queues in the past few weeks, desperately scrambling for cash. An equally sad read of the pain and anguish of those who have lost relationships and friends or have gone through hell trying to find healthcare for their loved ones, as a result of the cash crunch. As mentioned, this is because some medical facilities refuse to offer emergency treatment to patients unless a cash payment is made, although they should know how the situation is, or maybe because of that.

However, as I mentioned last week, this may be nothing, a crisis without an original basis, because it is supposed to be a routine change of notes, even if it is driven by an effort to improve the existing drive. for a cashless regime. One is characterized by low cash transactions, while at the same time short-changing the nefarious deployment of cash by parasitic actors, who take advantage of various elements of the system to wreak havoc.

However, this is an avoidable failure, as it has become. The CBN is a diverse kabiyesi in currency management. Section 17 of the CBN Act provides that “The Bank shall have the sole right to issue currency notes and coins throughout Nigeria, except the federal, state or local government or any person or authority.”

Section 18 (a & b) of the Act states that “The Bank shall arrange for the printing of currency notes and the minting of coins; and the issuing, re-issuing and exchange of currency notes and coins at bank offices and at agencies that may , from time to time, determine or choose.

In line with this exclusive mandate, the CBN, in October, announced the redesign of some naira notes and tinkering with the cash withdrawal policy, with the aim of enhancing the cashless regime.

According to the CBN, “despite global best practice for central banks to redesign, produce and circulate a new local legal tender every 5-8 years, the existing Naira series has not been redesigned in the last 20 years.”

The introduction of the new naira notes with a view to addressing the following challenges, among others: “The significant hoarding of cash by members of the public, with statistics showing that more than 85 percent of the currency in circulation is outside the vaults of commercial banks. To be more specific, like at the end of September 2022, data available at the CBN shows that N2.73 trillion out of the N3.23 trillion currency in circulation, is outside the vaults of Commercial Banks across the country; and is supposed to be held by the public… The lack of clean money and coinciding with the negative perception of the CBN and increased risk to financial stability; increased ease and risk of forgery as evidenced by several security reports.

However, no announcement is made that all kinds of knives are dug in the middle of what everyone would normally consider to be good policy. Cynics start from the design of new notes for everything else. Some are subject to records for washing tests. But all these activities are insignificant compared to the strenuous efforts of politicians, using the media, to destroy policies that they consider incompatible with their plans for the upcoming elections.

Unfortunately, even the CBN seems to have not properly factored in the strange socio-psychological dynamics of the operating environment, taking lightly the determination of the antagonists of the policy to make it fail. It appears that the CBN may see this project as linear, using a waterfall approach in management, rather than the flexible and agile approach that is needed. In the most important part of communication, made more complicated by the challenges that come with disinformation and misinformation, its performance has been abysmal. poor.

In the early days of December, it will probably be a short stop at the mechanic. But it didn’t go as planned. It was as if the people who had gathered under the tree had decided that the questions piled up for Godwin Emefiele should be answered by me, then. It seems he must have had his daily dose of Berekete.

He sought to understand how, as a small player in the economy, operating in the informal sector, he is supposed to deal with the cashless regime that restricts cash withdrawals to a weekly limit of N500,000 for individuals and N5,000,000 for corporate entities.

At the time, the concerns expressed were considerable. People wonder how to do their daily activities with restrictions. Answer: The first thing I ask these people is whether anyone has as much as N10,000 cash with them. No one has it. N5,000? No one has it. But here, they are worried about the N100,000 cash withdrawal limit. I also asked the mechanic that in the three years he has worked with me, it has not been one of the cashless transactions between us. He confirmed it had been. We all then concluded, I think, that the hue and cry over the cash withdrawal limit policy, following the cashless policy that has been in place since 2012, is largely misguided. This is a case of the disaffected, against those who are not in their interests, against what is actually in their interests.

Indeed, data provided by the CBN shows that 94% of cash transactions are within the new limit of N500,000 for individuals, while 82% of corporate cash transactions also fall below the new limit indicated for corporate bodies, meaning that about 84% of individuals in all do not will be affected by the cash withdrawal limit.

But that’s not the impression you’ll hear on the road during the three-month window that begins to cancel old notes and retroactive restrictions.

So one of these policies is deliberately followed by many people, because the cash withdrawal ban policy is labeled as cash exchange by a section of the media. However, the policy announced by the CBN is not a cash swap nor does it aim to be one. Bank customers are only encouraged to pay in cash and explore alternative payment platforms for future transactions. This is not a wrong policy as the cash swap with the later cash swap arrangement is done directly by the CBN in rural areas.

What the CBN is doing is to withdraw excess cash from circulation, not exchange what is there naira for naira in a swap. That, in part, explains the volume of new notes being printed. Some, relying on questionable sources, say the CBN is not printing or releasing enough new notes.

However, experts say that less than 2% of the cash in circulation should be able to handle cash-based transactions adequately. The argument is that the cash crisis experienced has more to do with the fact that about 90% of what is released is removed by politicians, speculators and saboteurs who are looking for cash for reasons known to us, which makes them desperate. have a policy. Having mopped up cash that may have been enough for the system and eagerly waiting to mop up more, contrary to the dictates of policy, some actors rechristened this policy as confiscation of cash, while calling for a new life for old notes. , which CBN claims has about 80% already sitting in CBN vaults.

While some question the system’s capacity to switch from old to new records in what they see as a short window, I don’t think that’s as much of a problem. There are not many reports of people being caught with old notes, unable to deposit, even in December. More and more people who have deposited what they have, want to access the cash in the new notes. With some actors mopping up, some banks are not helping, panic reinforces a further surge in demand, it is a recipe for disaster, which can only be caught with oversupply, as NNPC will do, but this is cash, not petrol. The fear for the CBN may be about the return of the gains it has made.

The CBN has argued that capacity issues do not exist. Claiming that “between banks and microfinance banks, we have 6,500 locations, 900,000 POS terminals, 14,000 ATMs across the country and 1.4 million agents nationwide and every local government in Nigeria is represented by an agent.” It also accounts for the huge jump in the rate of electronic transactions in the country. From N48 billion in POS transactions in 2012, there is a record of N6 trillion POS transactions in 2022, while electronic transfers have jumped from N3 trillion in 2012 to N300 trillion in October, 2022. Financial inclusion has improved, the Nigerian payment system is now strong, as Nigeria grade sixth in the world for fast real payments.

Even so, I am not sure that the CBN has prepared adequately or really seen the pressure that could lead to panic and wrong policies. The emfielization of monetary policy, which many swear is a political tool, is surprising because it is surprising to see how many people are installed under the tent. But can you blame them? Because the way the CBN governor is embedded in political manipulation and partisan political horse trading, it is difficult for anyone to impeach him.

However, it has become a high-stakes game, with misinformation and disinformation being actively disseminated no doubt. Mischief can easily be smelled from a mile away on reports that the CBN governor has told the State Council that the mint has run out of paper to print new notes. If indeed the report came from a ‘source’ present at the meeting, it is easy to guess the motive. The bank and the mint have denied the claim. The presentation slides by the governor also did not offer any advice. But, who really knows? Who knows with all that has been played.

I stand by my position that once the window set by the CBN is closed, banks will now just have to issue new notes, everything will be easy. Some of us are lucky to have settled in this life of cashless transactions long before now, almost not using cash. I don’t have to look for new notes and even when offered last week by a colleague, I declined because I hardly ever use cash. Standard Chartered Bank also sent a letter guaranteeing cash from counters and ATMs, but I never took the bank up.

But I saw that it was really hard enough for many. The earlier the normal, the better. I don’t agree that this is targeted at anyone. I see no evidence to corroborate that. All I see is a good policy on paper, even okay with a window of three months, but it is allowed to be misconstrued and mischaracterised, triggering mistrust and panic that have lost sight of obvious inherent benefits.

Simbo Olorunfemi works at Hoofbeatdotcom, a Nigerian communications consultant and publisher. African companies. Twitter: @simboolorunfemi