The protracted acute cash scarcity in Nigeria has not only crippled economic activities in the country, it is now a major risk to the livelihoods of most Nigerians. Millions of citizens have slipped into penury and destitution as a result of the disruptions and tribulations perpetrated by the currency redesign policy, especially the mopping up of over 70 percent of cash in the economy. It is expected that economic growth in the first quarter of 2023 will drop. BAMIDELE FAMOOFO & FESTUS OKOROMADU report.
Nigerians have not been this traumatized in recent history as the economy is gradually grinding to a halt because of the collapse of payment systems across all platforms. Digital platforms are performing sub-optimally because of congestion, physical cash is unavailable because the Central Bank of Nigeria has sucked away over 70 percent of cash in the economy and the expected relief from the Supreme Court judgement may not be quick to materialize as citizens are still skeptical about transacting with the old banknotes while the cashless policy limits on disbursement of cash by banks largely limits business activities. The citizens are consequently left in a quandary.
Retail transactions across all sectors have become nerve-wracking and distressing as payment system challenges persist.
Director/CEO, Centre for the Promotion of Private Enterprise, Muda Yusuf, disclosed that since the onset of the cash crisis, the Nigerian economy has lost an estimated N20 trillion.
These losses, according to the economist and former Director General of the Lagos Chamber of Commerce and Industry arose from the deceleration of economic activities, the crippling of trading activities, the stifling of the informal economy, contraction in the agricultural sector and the paralysis of the rural economy. There are also corresponding job losses in the hundreds of thousands.
It is expected that the cashless policy will impact negatively on the financial performance of the banking industry in the first quarter of 2023 as banking operations have been greatly distorted since the CBN made its pronouncement on cashless policy and Naira notes redesign.
“Director/CEO, Centre for the Promotion of Private Enterprise, Muda Yusuf, disclosed that since the onset of the cash crisis, the Nigerian economy has lost an estimated N20 trillion”
There are indications that banks are starved of deposits as customers no longer have the confidence to entrust their hard-earned cash to them. Analysts believe that the output of banks in terms of financial performance in the first quarter of 2023 will be poor as banks are unable to carry out their traditional business of sourcing deposits and lending to make gains.
Also, the stock market which is a barometer for measuring the performance of any economy is showing that all is not well with the Nigerian economy as the Nigerian Exchange Limited has sustained its losing streak in the last one week. Sell-side pressure and volatility surfaced on the local bourse with the bears tightening their grip following the news of the contagion from the failure of some US banks.
To this end, the market pulled back to trade below the 55,000 psychological levels on sell-offs in some of the highly priced stocks and some blue-chip companies even as equity investors continued to digest the recently published inflation data ahead of the forthcoming monetary policy meeting next week.
The market’s performance was lackluster in the review week as the NGX-ASI shed 1.54 percent week on week to 54,935.20 points due to profit-taking activities in some blue-chip and high-priced stocks. In the same manner, the market capitalisation nosedived by 1.54 percent week on week to N29.93 trillion as the sum of N468.12 billion was wiped from investors’ pockets, while the year-to-date return inched further to 7.19 percent from 8.87 percent last week.
Across the sectors in the week the trading week ended March 17, 2023, performance was largely bearish across the indices under the purview of stock analysts at Cowry Asset. Thus, there were declines in the Banking (-4.59%), Insurance (-2.45%), and Industrial Goods (-0.27%) sectors from the prior week.
An Abuja based economist and chief executive director of African Centre for Leadership Strategy and Development, Monday Osasah, told The Point that the Naira redesign policy is a good initiative but was badly implemented.
He noted that the absence of necessary infrastructure required for full implementation of the cashless policy created more challenges than was envisaged.
“The CBN and the commercial banks failed the Nigerian people especially on the lack of cash in the system. People were asked to deposit their money with the banks but at the end of the day, it became difficult for them to retrieve their money. When there is no cash in an informal economy like ours how do you expect it to run?”
“People have lost their lives because they couldn’t make payment in hospitals to access medication not because they couldn’t afford it but because the system failed them, how do you expect them to continue to trust the banks that disappointed them at the most crucial time of need,” he lamented.
Explaining why bank customers have developed apathy towards depositing money in banks, he said, “Globally, the banking system operates on trust, when customers no longer have confidence in the banks, you don’t expect them to continue to deposit their money in the banks.
“You see bank customers queue up struggling to retrieve their money, I hope this will not lead to panic withdrawal at the end of the day,” he added.
Speaking on how the cash crunch affects business activities, he said, “As one operating in the non-governmental sector, organising programmes has become a challenge because in facilitating our activities, we mobilise participants by making resources available. To do this we pay stipends, now we have to do transfers, but when such transfers don’t go through in two or three days you’re likely not going to get full participation.”
“On the other hand our staff now find it difficult to either come to work or resume at the appropriate time, thus leading to man-hour loss. People now have to work from home because taxi drivers don’t accept transfers most times for the fear of a failed transaction.
“In clear terms the CBN needs to review the policy and make cash available to sustain the confidence of citizens in the banking system.”
A banker, who spoke to our reporter on the condition of anonymity, confirmed that customers are not making deposits as it was prior to the implementation of the Naira redesign policy.
He disclosed that though online transactions have increased, cash deposits are getting slimmer by the day.
“The 21.91% February 2023 inflation number indicates a less aggressive rise over the number printed in January 2023. I think it could have been worse than what was announced if not for the cash scarcity that came alongside the existing bad supply side situation”
“In short, one sometimes wonders what happened to the new notes dispensed. Under normal circumstances, the new notes are supposed to circulate and return to the bank but as it is now, that is not happening.
“I hope this will not affect the system in the long run. As I speak with you there are loan facilities we are supposed to have executed but everything is on hold for now because the economy has slowed down,” he lamented.
On his part, Aruna Kabiru, MD/CEO Globalview Securities Limited, expressed concern over the impact of the policy on banking stocks.
“You know that the capital market is driven by the banking sector, my concern is whether banks can post similar or better results as they posted in the first quarter of last year.
“The business of banks as you know is to receive deposits and give out part of that deposit as loans to customers who need it for economic activities. The question is when people are no longer making deposits for fear of not being able to withdraw them when the need arises how would the banks give out loans? And if they don’t, how can they make profit?
“I want to adopt a wait-and-see approach to know how things play out by the end of the first quarter. But I assume that there are going to be challenges. The manufacturing sector is equally affected, when workers cannot come to work as and when due, man-hour is lost and the aggregate of these little losses have serious impacts on the macro economy,” he said.
Also, a civil society group, Congress for Rights Of Yoruba Nationalities, has called for the prosecution of the CBN Governor, Godwin Emefiele, and the Attorney General of the Federation/Minister of Justice, Abubakar Malami, over the death of 14 innocent Nigerians during the unrest that trailed the sudden implementation of the controversial naira re-design and swap policy of the Federal Government.
The group in a statement signed by its National President, Abiodun Fanoro and General Secretary, Tunde Aiyenumelo, also called for the immediate sack of the two officials, adding that refusal by President Muhammadu Buhari to sack them after denying knowledge of their despicable roles in the exercise was either an attestation to his insensitivity to the plight of the victims or a concealed collaboration.
The group, therefore, appealed to the Nigerian Bar Association, Socio-Economic Rights and Accountability Project, Human Rights Writers Association of Nigeria and other leading civil society organisations to spearhead the trial of the duo and others that may have hands in the exercise, as a measure to ensure justice for both the dead and injured victims of the “Presidency-engineered unrest because the victims were legitimate bank-depositors operating legally under relevant financial Acts and the Constitution.”
The group, which commended civil society outfits, especially the Coalition of Northern Groups for keeping the naira crisis in the front burner, said, “it would be a great disservice to the memory of the dead, which would continue to haunt and hurt the aspiration and development of this country if as a state we fail to do justice to dead victims of injustice.”
The group also stressed that victims of the naira tragedy deserve much more national and international attention as done to #EndSARS’ victims.
CROYN also called on the National Human Rights Commission to set up a national Panel of Inquiry on the unrest, with a view to ascertaining how many people were actually killed and wounded, suspected law officers involved in the dastardly act, payment of compensation to the victims, including families of the dead and a follow up trial of suspected killers.
It lambasted members and leadership of the National Assembly who it accused of abandoning Nigerians to their fate while President Buhari, Emefiele and Malami were snuffing lives out of them through the naira policy and also refused to rescue the Supreme Court when the Presidency was treating it with disdain and ignominy after its various rulings on the currency re-design.
It described as “inhuman, insensitive and unremorseful the unapologetic disposition of Buhari and Emefiele to persisting suffering by Nigerians even weeks after the Supreme Court had put the exercise on hold”, which it said was being surreptitiously and cleverly undermined by Emefiele who was insincere in complying with the order of the apex court while Nigerians and their businesses were dropping dead every day.
Recall that one of the objectives of the Naira redesign policy, according to the CBN, is to help curb inflation, claiming that there is too much cash in circulation.
However, the February inflation rate data released by the National Bureau of Statistics negates that claim.
Commenting on the economic performance from the perspective of the inflation rate in February, Uche Uwaleke, President, Association of Capital Market Academic of Nigeria, said the economy witnessed a slight downward pressure in the general prices of commodities.
“This may not be unconnected with the cash scarcity which resulted in low demand for goods and services in view of the cash-based nature of the Nigerian economy,’’ he argued.
Tajudeen Olayinka, Managing Director/ CEO, Wyoming Capital and Partners, said: “The 21.91% February 2023 inflation number indicates a less aggressive rise over the number printed in January 2023. I think it could have been worse than what was announced if not for the cash scarcity that came alongside the existing bad supply side situation.
“It goes to show that people who could afford to buy money before buying goods were quite few; otherwise the multiplier effect of large numbers of consumers behaving that way could have translated to higher inflation in the month of February. When people discount the value of money before exchange for goods, it translates to higher prices of goods and services effectively. I think the impact could be felt more on output growth in the month of February because the horrible mismanagement of currency redesign programme actually affected both aggregate demand and aggregate supply concurrently.’’
The views expressed by Nigerians on how the CBN and commercial banks have handled the implementation of the Naira redesign policy must take the centre stage as members of the Monetary Policy Committee meets today in Abuja. They must be wary of the bank failures emanating from the United States of America. Banks thrive on trust, if customers no longer trust the banks these are signs of doom days ahead.
The Director General of the Lagos Chamber of Commerce and Industry, Chinyere Almona, faulted the CBN’s policy especially the time restriction placed on its implementation.
“Redesigning currency is a routine exercise that central banks do not necessarily make noise about. Old notes are gradually replaced with new ones once they return to the banking system. Proposing a sudden withdrawal of notes for replacement with redesigned notes is of no economic benefit to the country, but it will come at huge costs,” she said.
