The National Council of State is meeting today to address a series of crises affecting the country. Commerce is dying and the economy is likely to go into recession because of a cash crunch the government decided to create. By ensuring people with cash in their bank accounts cannot get their money, the intention of the policy is to raise the level of anger and frustration in society. Government timed the policy move to coincide with an existing fuel shortage that is also annoying citizens. Thirdly, all this is fabricated at a time of unprecedented cost of living crisis. My reading of the multiplication of vexatious policy interventions at the same time is conceived as an experiment to see how far Nigerians can be pushed before they explode.
Government must be beaming with smiles as they see evidence that the experiment is working. Mass demonstrations have started in many cities as the people march against banks and filling stations. Sad and humiliating videos are circulating as people on the edge who are mentally challenged flip and strip themselves naked in banking halls and filling stations. Banks are closing as furious customers beat up their bankers for the problems caused by Government. The non-government members of the Council should have one question only for government – why the hell did you cause this mayhem. They should recommend one way forward – stop the madness. Nigerians must not be forced to spend countless hours struggling and fighting on never-ending queues trying to get money which belongs to them and they are not getting.
The crisis was initially marketed as a sane currency change policy of the Central Bank of Nigeria (CBN) to replace the soon-to-be-decommissioned N200, N500, and N1000 notes with new versions. Reasons given for the change ranged from fighting counterfeiting, kidnapping, corruption, money laundering and other forms of illicit financial flows. To seal the deal, Nigerians were further told that the policy will end the disturbing vote buying practice that has been affecting elections. Everyone nodded in agreement.
As Lawal argued recently in AGORA however, the actual policy being implemented was not simply a change of the currency but a sort of “demonetisation” process. The expectation of the CBN was that cash being deposited would not be withdrawn one-for-one, but that customers must adopt other non-cash payment systems. The decision is to force Nigerians into an immediate transition to a cashless economy without proper preparation and knowing fully well that Nigeria’s huge informal economy cannot survive without. Cash.
As Lawal points out: Nigeria is of a dual economy with a significant informal sector and informality and cash use tend to go hand-in-hand. He points out that a report by the National Bureau of Statistics (NBS) estimated that informal activities accounted for 41.43% of all activities, or of GDP, in 2015. The World Bank similarly make the case that up to 80.4% of employment in Nigeria in 2021 was in the informal sector. A central bank that knows this and empties the economy of 80% of its cash in three weeks is not making an honest mistake, it is enemy action.
Lawal also points out that from the Multiple Indicator Cluster Surveys published by the NBS last year, only 35.4% of women and 47.2% of men aged 15 – 49 as at 2021 had bank accounts or any other similar set up in any financial institution. The implication of this is that the non-account-holding population use/need cash to survive on a day-to-day basis. In fact, in states such as Bauchi, Jigawa, and Kebbi, less than 8% of women had bank accounts. The implication is clear, the Central Bank by deciding to force everybody into bank transactions only, is excluding a significant part of the society from economic transactions.
The crux of the matter is that on the real policy front, the Central Bank has already succeeded in its cashless policy drive as shown by the AGORA article. The percent of cash to all money in Nigeria has fallen from 11% in 2007 to about 5.6% as at June 2022. The percent of cash to GDP has similarly fallen from over 2% of GDP in 2007 to 1.67% as at the end of 2021. For context, a study by the IMF suggested that countries such as the UK, the US, China, and Japan had about 3.5%, 7.5%, 9%, and 20% currency in circulation relative to their GDP.
In other words, the “drive for a cashless society” had been achieved substantially and Nigeria does not have a cash problem and was already moving in the digital direction even before the currency change. There was no problem to solve but there was a decision to make Nigerians suffer. That was why although they knew that the Nigerian Security Printing and Minting Company Limited – the government owned corporation responsible for printing currency locally – only had the capacity to print about N200 billion by the end of January 2023 and they had withdrawn N2.73 trillion cash in circulation as at September 2022, they insisted on maintaining the cash crunch policy.
Now that we have all suffered and there is a real risk of complete breakdown of law and order, the National Council of State should step up and save the situation. Government must immediately stop the narrative that the problems we have is due to corrupt bankers who are hiding the new Naira. If there is enough new Naira, no one will hide it. They should stop these ridiculous stories that security agencies have “discovered” eight million Naira hidden in a bank vault or that N200 million Naira a bank is trying to send to its branches was proof of economic sabotage. Do they have any idea of the billions of Naira that are normally exchanged in major markets every day? Are they aware that the function of money is to be in the hands of people and traders and kept in banks to please a CBN Governor that wants all monies to be in banks?
The currency swap policy must be suspended immediately and only resumed when the equivalent of the money withdrawn from circulation has been printed and is available to replace the old currency. Let us ALL remember that general elections are holding in two week’s time and we need peace and a functional economy to ensure its success. Our rulers who are saying we must continue to suffer so that they do not lose face should consider the extremely high cost of blowing up the entire system.
They should also remember their Economics 101 that people must have the trust that they can collect their money from their bank accounts when they want if they do not want a total run on the banks in the coming days and weeks. Already, most Nigerians are saying that henceforth, they will ensure as little of their money as possible goes back to the banks. The dream of most Nigerians now is to ensure they block all roads taking their money to the banks. We must not forget mattresses were invented so that people could hide their banknotes under it. It’s called protecting your interest, and I confess, maybe the interest of the thief as well.
