Uncertainties trailing the Central Bank of Nigeria (CBN)’s naira redesign policy continued, yesterday, when the Supreme Court overruled an earlier injunction granted by a high court in the Federal Capital Territory (FCT) restraining the Federal Government and the CBN from undermining the February 10 deadline for the ongoing currency swap.
While the Supreme Court ruling appeared to have doused the tension scarcity of cash had induced in the polity, the Federal Government, last night, approached the Supreme Court, asking it to dismiss a suit challenging the February 10 deadline set by CBN to end the legal tender status of the old currency notes of N200, N500 and N1,000.
It argued that the Supreme Court lacks jurisdiction to hear the suit, which was filed by three states – Kaduna, Kogi and Zamfara – all in the northern part of the country and controlled by the ruling All Progressives Congress (APC).
The respondent maintained that the case is not a dispute between the federation and the state governments, but merely an issue about CBN’s policy. It said the suit is, therefore, not qualified to be taken directly to the Supreme Court for adjudication, arguing that the suit ought to have commenced at the Federal High Court.
Attorney-General of the Federation (AGF) and Minister of Justice, Abubakar Malami (SAN), sued as the sole defendant, as the representative of the Federal Government, filed his opposition to the suit as a preliminary objection against it at the Supreme Court on Wednesday night.
The three state governments, in their application filed to challenge the naira redesign policy, prayed for an order restraining CBN from ending the use of the old notes on February 10. They cited the sufferings scarcity of the new notes had brought upon many Nigerians.
After listening to the applicants’ lawyer yesterday, a seven-member panel of the court, led by John Okoro, issued an order of interim injunction halting the plan by CBN to end the use of the old banknotes as scheduled. The court then adjourned the hearing of the main case until February 15.
Shortly after, President Muhammmadu Buhari met with the CBN Governor, Godwin Emefiele and AGF, Malami, at the Presidential Villa, Abuja. Outcome of the meeting was yet to be known as at press time, apart from the AGF asking the apex court to dismiss the governors’ suit.
This is as the International Monetary Fund (IMF), yesterday, called for the extension of the February 10 deadline for cash swap. The IMF, in a statement by its Resident Representative to Nigeria, Ari Aisen, issued on his behalf by Office Manager for Resident Representation for Nigeria, Laraba Bonnet, in Abuja, hinged its plea on the hardship Nigerians were going through.
It said: “In light of hardships caused by disruptions to trade and payments due to the shortage of new bank notes available to the public, in spite of measures introduced by CBN to mitigate the challenges in the banknote swap process, IMF encourages CBN to consider extending the deadline should problems persist in the next few days, leading up to the February 10 deadline.”
IMF is the first international financial organisation to openly call for extension of the deadline for the deposit of old Naira notes.
Governor el-Rufai has urged Nigerians to continue spending the old denominations of the redesigned notes. El-Rufai said Nigerians should disregard the CBN directives because the APC presidential candidate, Asiwaju Bola Tinubu, would reverse the decision if elected on February 25.
Speaking in Kaduna, the governor said: “Continue running your businesses and daily activities with whatever notes (old or new) you have. Don’t rush yourself into taking old naira notes to the bank, and wasting your time in the unnecessary queues at the bank. Nobody can stop you (people) from using the notes. When we come to power, if Tinubu becomes the president, we’ll give people more time to get rid of the old naira notes.”
BUT more commercial banks have shut their doors to customers, halting cash operations as safety concerns take priority in management decisions.
Findings suggest that most bank managers have been strongly advised to avoid putting the lives of their employees at risk until there is “reasonable assurance of safety”.
The security concern and the sheer size of currency taken out of circulation may have reversed any relief expected from yesterday’s Supreme Court interim injunction restraining CBN from enforcing the deadline for phasing out the old notes scheduled for tomorrow.
CBN Governor, Emefiele, in Lagos last week, said N2.1 trillion had been mopped up since the beginning of the exercise. Plus N500 billion said to be in the banking system, the apex bank could have warehoused over N2.6 trillion from N3.23 trillion that was in circulation as at last year, shrinking the total value of the volume of old banknotes in the economy to about N400 billion.
The volume of new note in circulation is yet unknown. The Deputy Governor of the Bank (Financial System Stability), Aisha Ahmad, during an appearance at the House of Representatives, said the 500 million new banknotes had been ordered without giving details of how the different bills make up the figure. If the volume is evenly distributed across the three bills (N200, N500 and N1000), it translates to N283.3 billion or 8.8 per cent of the volume of cash in transit as at October 2022. Though the CBN had earlier informed that it would not mass produced the higher denominations (N500 and N1000), which it said should not be transactional.
Still, this may not accurately capture the depth of cash scarcity Nigerians are currently grappling with. With so much speculation of the hoarding by banks and slow circulation, it is difficult to know the proportion of the money that has been released to the economy. The CBN has also not given an update on the current production status – whether any more notes have been printed since the deputy appeared before the parliament.
Despite the Supreme Court order, The Guardian learnt that the cash scarcity may linger for a while. Cash points, whose operations have been scanty in the past week, have been completely grounded as insecurity has added to the original challenges.
For instance, most automated teller machines (ATMs) in Lagos have been disabled, pushing more people to point of sale (PoS) terminals, most of whom have run out of cash.
With bank sources completely locked, operators of PoS (which some people had labelled the new parallel market) have turned to fuel stations and informal traders where they buy cash at a premium.
Already, investigation suggests that only a little proportion of the banknotes disbursed through ATMS and over-the-counter (OTC) are released into the economy. Much of it is hoarded by individual customers who are not sure when they will get it or if the crisis will be brought under control anytime soon.
At the recent Lagos press conference, Emefiele, said the panic behaviour is a major hindrance to the flow of the currency, urging Nigerians to have confidence in the ability of the regulator and commercial banks to meet their cash needs.
Sadly, close to a week after Emefiele’s assurance, the situation deteriorated. Profiteering among bankers has increased while currency traders’ charges have ballooned. In Lagos yesterday, individuals were charged as much N3, 000 for N10, 000 withdrawal. An operator linked the spike to rising illiquidity.
The majority of bank branches, The Guardian learnt, have not received cash supply from their head offices this week, hence their cash operations have been suspended since deposits are non-existent.
With the entire banking sector in abeyance, the Bank Directors Association of Nigeria (BDAN), yesterday, said it is on top of the situation, working with all stakeholders to restore sanity.
In a statement signed by Chairman, Mustafa Chike-Obi, the association said: “We are in constant communication with all the Banks and are assured that they are all doing whatever is within their control to normalise this difficult situation. We enjoin the banking public to maintain peace, rest assured that BDAN is taking all reasonable steps to influence the structure and mechanisms that should free up bottlenecks and open channels that will speed up the resolution of the crisis.”
The body, comprising all boards of directors of banks, sympathises with Nigerians, assuring that it “is making it a top priority to ensure that this hardship is not only addressed but eliminated”.
The Guardian reported, yesterday, that the boards of directors of banks were activating necessary measures and seeking the understanding of all relevant stakeholders to restore sanity in the industry.
The sheer non-existence of the old notes may have also suggested that Nigerians would wait painfully on the CBN to print more notes and circulate what is left in the vaults before a return to normalcy. It would be recalled that much of the cash holding had been returned to banks before the extension, from January 31 to February 10, 2023
However, experts have called on the apex bank to oil the needed logistics and quickly recirculate the withdrawn cash. Dr. Tope Fasua, a former presidential candidate and economist, said returning the old notes was the most feasible option as mounting undue pressure on Nigerian Security Printing and Minting PLC could be costly for the country.
Fasua said: “In view of the suffering of the masses, I don’t think there is any point rushing through the exercise. The cash mopped up can still come back to the system. Some of the money must have been taken to CBN branches across the country.”
Also, speaking, Godwin Owoh, a professor of applied economics, called on the apex bank to urgently release the old notes alongside the new ones to bridge the gap. He observed that further delay could leave the banking system with scares that could take years to heal.
“It depends on how the CBN reacts to the judicial pronouncement. If it releases sufficient cash and customers are confident that they can get cash whenever they need it, the panic will fizzle in a matter of days,” Owoh stated.
Director-General of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said “all the cash that have been mopped up should be released to their owners unless there are reasons to suspect such lodgments”.
“Citizens that have lodged their cash for purposes of the cash swap should be allowed unfettered access to their money,” he added. He said the suspension of the deadline enforcement would ease tension, especially in the distributive trade, informal sector and rural economy. He also noted that the social tension building across the country would fizzle out in the coming days.
“The CPPE reiterates its position that given the huge population of over 200 million, the large informal sector which accounts for over 40 per cent of the gross domestic product (GDP), the large rural economy and the over 30 million unbanked Nigerians, the CBN cash swap model and timeline was greatly flawed. It is inappropriate to arbitrarily cut down on currency in circulation without due regard to data, empirical studies and global best practices.
“We affirm our position that N2.6 trillion currency in circulation is not too much for the Nigerian economy with a GDP of about N250 trillion. Any attempt to arbitrarily cut it will create a crisis. It is unacceptable that citizens are denied access to their cash deposited for purposes of cash swaps. This could undermine the confidence of the citizens in the banking system and pose a major risk to the financial inclusion objective of the CBN,” Yusuf said in a prepared response.
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