As Emefiele grounds the economy



Uba Group

Godwin Emefiele, the Governor of the Central Bank of Nigeria, is stewing in a bind that he created. Out of N3.2 trillion of the old currency in circulation, he withdrew N2 trillion, and pumped in a mere N300 billion in return. Now, there is about N1.5 trillion mix of old and new notes for Nigerians to spend, less than half of the money previously in circulation.

Unfortunately, the road into the cul-de-sac that he took fellow Nigerians into cannot be remedied easily. There is speculation that the government is not able to pay the printers to print more of the new N200, N500 and N1000 notes needed to replace the old notes that may have been incinerated after they were withdrawn from circulation.

The government’s poverty is caused by the theft of more than 70 per cent of crude oil production, 90 per cent of government revenue being used to service debt acquired to finance Big Government and the fictitious fuel subsidy. Emefiele has plunged himself and Nigerians into what can be described as, “Iwaju o see lo. Ehin o see pada si” situation.

That is the Yoruba way of saying that you are stuck in the middle, with no chance of advancing or retreating. When he realised that he didn’t quite thoroughly think the policy through, he braved it out with another wrong policy, rationing the amount of cash Nigerians could withdraw from the banking halls or through the ATM devices.


Unfortunately, the net effect of what Emefiele has done is a (un)witting contraction of the Nigerian economy. The idle cash sitting in the bank vaults confirms the old economic argument that savings is not exactly equal to investment.

President Muhammadu Buhari partially obeyed Supreme Court rulings for old notes to circulate pari passu with new notes. He allowed continued use of old N200 notes but insisted on the withdrawal of the N500 and N1000 notes.

Today, Nigerians buy new notes; they transfer, say N12,000, to the bank account of POS operators, for N10,000 new notes that have become the new hard currency that you receive in exchange for digital transfers, thereby forming a sub-economy that excludes most Nigerians. CBN’s faux pas pretty much translated into a Cash Reserve Requirement or Commercial Bank Reserve, where money is restricted within, or allowed to go out of, the banking system, in a bid to limit or expand the lending ability of banks.

CRR is the tool used by a central bank to set a minimum amount that commercial banks must hold on to in liquid or cash assets. This may include physical cash held in the vaults of the banks and the banks’ balances in the central bank.

An abrupt change in the access of the banking public to cash, like the wrong-headed currency swap, wrought by Emefiele, and approved by his inattentive boss, President Buhari, amounts to limiting cash available to the public. By restricting physical money from entering into the financial system, CBN has unwittingly contracted the Nigerian economy. Another word for this is recession, which a 94-year old friend and former CEO of a blue chip company predicts will be apparent in the next six months.

Economic contraction, a free fall of the business cycle, occurs when the production cycle of an economy is interrupted to the extent that fewer goods are produced and exchanged for monetary or other considerations. When fewer goods are produced, it goes without saying that fewer resources –land, labour, capital and enterprise– are utilised.

In addition to the reduction in the Gross Domestic Product of the economy, scarcity of goods also leads to inflation, which is extremely inconvenient to the poor masses. It is probably the most basic principle of economics that when goods are scarce, the prices of the goods rise. The reverse, that prices drop whenever there is a significant increase in the availability of goods, is also true.

Somebody has suggested that the reduction in the capacity of Nigeria’s manufacturing sectors has not only led to scarcity and shortage of consumer goods, it has also led to a reduction of foreign exchange.

Though this appears to be a long shot, a stretch of somebody’s imagination, therein may lay some element of truth. At least, agricultural produce and industrial manufactures that Nigerians export to other countries to earn foreign exchange must have dropped significantly after the introduction of the Emefiele policy.

It’s like when the Covid-19 pandemic hit the world big time in 2020. Most enterprises were shut down and the world economy absorbed huge losses, a situation akin to the Great Depression, a devastating nightmare that the American economy experienced between 1929 and 1930.

Many Americans lost their livelihoods, many banks collapsed and many people killed themselves when they saw no hope on the horizon for themselves and their businesses. America had to redefine itself and its economy in very drastic proportions. A depressed economy typically reduces the level of employment, lowers, or sometimes does not even pay wages. And, worst of all, it reduces the production of critical consumer goods that make a huge difference between life and death.

According to a recent report of the Purchasing Managers’ Index, fuel scarcity and cash shortage have led to low industrial productivity and loss of jobs. The Manufacturers Association of Nigeria corroborates this reality with the revelation that scarcity of cash has significantly disrupted the flow of goods along the value chain.

That is the affliction that Emefiele and his principal have inflicted on Nigerians. The effect of which has been so terrible on the masses that two Federal Ministers, holders of the strategic Ministries of Finance, Budget and National Planning and Labour and Employment, washed their hands off what turned out to be a fiendish policy.


Both of them deftly dodged responsibility for the CBN’s policy, claiming that because it wasn’t discussed in the Federal Cabinet, the principle of collective responsibility didn’t apply: Members of the Cabinet could not be held responsible for a decision that they were not privy to taking.

Even the President-elect, Bola Ahmed Tinubu, had argued that because his person was different from the All Progressives Congress he could not be held responsible for the gaffe of the APC President, Head of the government that introduced the foul policy. Tinubu assumed the role of the victim by claiming that the policy was introduced by some evil people in the corridors of power, who did not wish him and his present quest well. Interestingly, many believed his cooked-up conspiracy theory.

But luckily, on Friday, March 3, 2023, the Supreme Court reversed the President’s decision and insisted that the old N200, N500 and N1000 notes shall remain legal tender till December 31, 2023.

The Supreme Court described the currency redesign as an affront to the 1999 Constitution. The Supreme Court added that the demonetization policy wrought by the Federal Government and the CBN is inconsistent with the CBN Act, and is therefore illegal and that the President failed to carry the National Council of State along when he varied the Supreme Court ruling.

Nigerians can only hope that the President and his CBN Governor will obey Supreme Court rulings this time around. And if it does, the National Orientation Agency should be geared up to convince skeptical Market Mammies to accept the old notes once again.