Nigerias Unbanked, Poor Get Reprieve After Court Rules Naira Deadline Unconstitutional — Global Issues
ABUJA, March 6 (IPS) – Nigerians are facing hardships due to the scarcity of newly redesigned naira banknotes coupled with the country’s cashless policy led by apex bank offered a last-minute exemption from a policy that disrupted their lives and exacerbated hunger.
On Friday, March 3, 2023, the country’s Supreme Court temporarily suspended March 10, 2023, the redesigned naira, and said the application of the tight deadline such a violate the 1999 constitution.
Attempting to withdraw money from the ATMs of accredited commercial banks has created so many difficulties that people have to put their lives on hold. Artisans, teachers and other professionals are unable to go to work, many school children loiter at home, itinerant traders are stranded, and families are now starving and sometimes resorting to violent protest because they were unable to access their money.
Experts have warning that the situation could cause a cash-induced recession because the country’s economy relies heavily on cash.
IN October last year, Central Bank of Nigeria The Governor, Godwin Emefiele, announced that the three major denominations would be redesigned by order of the Federal government.
Emefiele announced that Nigeria’s last redesign was in 2014 when the N100 banknote was redesigned to mark the country’s centenary.
“In accordance with section 19, subsections a and b of the CBN Act 2007, CBN’s management sought and obtained approval from President Muhammad Buhari to redesign, produce and circulate a new series of banknotes in grades N200, N500 and N1000,” he said.
In November last year, Buhari launched the new naira notes and said they will go into circulation from 15 December and the deadline for exchanging old coins for new money in the Deposit Bank (DMB) has been fixed on January 31 of this year. But public outcry and the inability of banks to swap the money forced it to be extended until February 10, 2023. On February 17, the old notes were no longer recognized as legal.
To add to the woes of December 6, apex bank, in an effort to boost the cashless economy, introduced a limit on cash withdrawals and directed subordinate banks to limit the amount of money that is not needed. prescriptions are withdrawn by individuals and corporate entities at N100 000 and N500,000 (approximately USD 207 and USD 1085.5) per week. The order is expected to go into effect on January 9, 2023, and ATMs and point-of-sale (PoS) terminals will distribute up to (N20,000) ($43.4) per time.
The no cash policy The first phase was introduced in April 2012 in Lagos to encourage electronic transactions and improve the efficiency of Nigeria’s payment system. It was successful there and the policy was later extended to other states in July 2013. To expand financial inclusion and financial access points as well as popularize electronic transactions. , CBN had a full rollout in September 2019 before the recently announced nationwide rollout will begin on January 9 of this year.
Like many other developing African countries, Nigeria’s economy was hit hard by the Russia/Ukraine war. In 2016, the country fell into recession, causing its economy to shrink by 1.6% due to the drop in international oil prices.
At the same time, in the third quarter of 2020, the country’s economy fell into recession due to the negative impact of the COVID-19 epidemic on tourism and the supply chain of goods around the world.
Moreover, the growth of her inflation rate climbs to 21.82 percent in January 2023.
CBN justifies the cashless policy in the banking system, saying it can defuse kidnapping for ransom, armed robbery, terrorism financing bribery, extortion, advance fee fraud and other crimes, while the mandatory withdrawal limit would deflate the country’s economy.
Inflation occurs when there is too much money in circulation. The central bank’s findings show that as of October last year, the currency in circulation was 3.23 trillion naira, but only 500 billion naira was deposited by different banks and 2.7 trillion naira. permanently unsigned. Observers predict that with the decision to withdraw money from circulation, inflation will decrease.
Not enough money in circulation
News analysts have questioned whether the Nigerian Security Mint and Printing Authority (NSPM) can print money. It was established in 1963 with the authority to produce currency and confidential documents for ministries, government agencies and companies.
In additiona World Bank The survey found that there are 16.15 ATMs per 100,000 adults in Nigeria by 2021 – meaning that for a population of more than 200 million people in Nigeria, there are only 32,000 ATMs across the federation. Each ATM will need to dispense a minimum of 1 million naira daily.
But the problem is exacerbated because commercial banks are short of cash and cannot receive newly printed naira from the central bank because NSPM can only print 4 billion bills per year.
The central bank’s deputy governor, Aisha Ahmad, said in December that 500 million new banknotes had been ordered, which a financial analyst described as insufficient.
“The purpose of redesigning naira and adopting cashless transactions is to reduce vote buying and domestic terrorism, but CBN needs to release more cash into circulation,” an analyst from KPMG Lagos-based Babatunde Babajide told IPS in an interview.
Since cashing in voters was a phenomenon in previous elections in Nigeria, CBN insisted on keeping the bills in the bank and resisted any further extension of the old currency swaps. to test vote buying in the February election.
However, many members of the ruling All Progressive Congress (APC) Party said the cash crisis was a conspiracy against their Bola candidate Ahmed Tinubu. Last week Tinubu is declared the winner of the election – despite accusations that the poll was flawed, and is currently contested by both main opposition leaders, the People’s Democratic Party (PDP), Atiku Abubakar And Peter Obi of the Labor Party.
A political scientist from the University of Nigeria, Adilieje Chukwuma, also asserted that the redesign of the naira was mainly for economic gain but could also be politically conspiratorial.
“In terms of timing, it can be political. But I’d rather see the situation as mostly economic recovery,” he told IPS.
While some believe that the naira replacement program is designed to affect the poor, financial analyst Babajide sees it as benefiting the majority.
“Nigerians only need to accept electronic transactions,” Babajide said. “CBN’s actions are intentional, mainly to reduce the cash supply and curb inflation.”
However, the analyst added that it is hoped that after the country’s general election, things will start to return to normal.
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© Inter Press Service (2023) — All rights reservedOrigin: Inter Press Service