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By Christopher Uchenna Obasi
Nigeria is a great country. She is a great country not just because of her wealth in human or natural resources or her ability to experience perilous times and still remain strong – Nigeria is a great country partly because of her exceptional ability to stomach the absurd. To put it mildly, Nigeria’s penchant for tragicomic drama is legendary. One striking example in this regard a situation in which the 1000, 500 and 200 denominations of her currency are appearing in two different versions each, and nobody seems to care.
Without prejudice to the mainly politically-motivated criticisms that dogged the late Muhammadu Buhari administration’s Naira Redesign Policy of 2022, the inability of the Nigerian government to determine which of the versions of the concerned denominations that should be retained as legal tender appears to have become more embarrassing than the acclaimed failures of the Policy. To be sure, the Naira Redesign Policy was announced by the Administration through the Central Bank of Nigeria (CBN) on 26th October, 2022 with the claim that the move was in line with global best practices requiring currencies to be redesigned every 5 to 8 years, but mainly for the reasons of disrupting fraudulent activities and encouraging the return of large volumes of cash residing outside the banking sector to the system, tackling terrorist financing and frustrating ransom payments to kidnappers and other criminals, reducing inflationary pressures, enhancing the CBN’s control over money supply and buoying the effectiveness of monetary policies. Added to the aforementioned was the seemingly overarching aim to preempt vote-buying in the build-up to the 2023 general elections.
Despite the laudable objectives for embarking on the Policy, its implementation was fraught with a lot of problems conducing to deaths, protests and even court litigations which in themselves constituted a cycle of impediments to the success of the Policy, so that despite the initial pronouncement of 31st January, 2023 as deadline for swapping old notes with new ones and the subsequent extension of the deadline to 10th February, 2023, the replacement of old notes with new ones was not successfully accomplished mainly because of the Supreme Court’s restraint on the CBN from enforcing the deadline, coupled with a ruling on 3rd March, 2023 which declared that the old 1000, 500 and 200 Naira denominations shall continue to serve as legal tender until 31st December, 2023. This ruling was later ‘overruled’ by a subsequent ruling on 14th November, 2023 affirming the continued use of the old 1000, 500, and 200 Naira denominations as legal tender and their coexistence with the new notes until further notice. Thus, after more than 3 years since the last Supreme Court’s ruling on the issue, both versions of the affected denominations have continued to coexist in the Nigerian financial system, proving to be one of the greatest embarrassments to the Naira in her 53-year history. This is one way in which Nigeria ridicules her currency.
Another case of ridiculing the Naira suffices in the irresponsible handling of Naira notes by Nigerians of different walks of life, resulting in the proliferation of very dirty notes which could easily pass as harbingers of virulent pathogens capable of causing deadly infections.To better appreciate the social predicament of the Naira, let us imagine the fate of a typical 200 Naira note which leaves the vaults of the CBN in a neat and crisp condition to the deposit money banks (DMBs) from where it is withdrawn over the counter or via an Automated Teller Machine (ATM) to continue its journey into the society.If it is very unlucky, it falls into the hands of an individual enroute to a foodstuff market.At the market, this Naira notesuddenly finds itself tucked into a half-neat brassiereto temporarily coexist with the profusely sweating mammary glands of a middle-aged woman hustling under the heat of the scorching sun. Moments later, the now sticky and smelly note emerges from this unholy abode to serve as “change” or what is exactly the balance of a higher currency denomination tendered by another customer – a roadside mechanic – which exceeded the value of goods or services purchased. On returning to his shed, this mechanic quickly dives under a suspended vehicle requiring servicing and begins to drain its condemned engine oil from below. Suddenly, he notices a female soft drinks’ vendor nearby and requests a bottle of Coke. Then, with hands stained by grease, grime and condemned engine oil, this mechanic reaches into his pockets and produces the sameNaira note which has beentrying to recover from the ordeal it faced with the foodstuff dealer in the market. In the process, much of the grease, grime and condemned engine oil on the mechanic’s hands rub off on the Naira note. The soft drinks’ vendor may in turn reenact the drama at the foodstuff market or if she is ‘merciful’ enough, maysimply ensconce the Naira note in a humidwaist pocket serving as ‘cover’ for her money against the prying eyes of petty criminals. Ultimately, she could decide to buy ‘akara’for her children at the close of the day’s business with the same Naira note, portending further ‘inconveniences.’ This is just for one day. Unfortunately, when this dirty and harassed Naira note eventually returns to the vaults of any deposit money bank hoping to be ‘retired’ and put out of circulation vis-à-vis the CBN’s Clean Notes Policy after many months of societal rough handling, it finds itself being reissued to another customer, leaving it with no option but to resume the harrowing journey to ultimate destruction. This journey must continue until the beleaguered note is badly torn, unusable, and finally rejected by all and sundry.
Yet another occasion for ridiculing the Naira is the phenomenon of Devaluation. In a very plain and narrow sense, Devaluation is a country’sdownward adjustment of her currency’s value to improvebalance of trade (BOT) through increased exports. Political economists usually consider devaluation to be best suited for very productive and heavily export-oriented economies as a way of improving their capacities to compete with the domestic economies of importing countries. For example, there are allegations that China quietly and regularly devalues her currency to outcompete other industrialized nations in the international market. To understand the phenomenon, let us assume that the United States (US) and China both have 10 warplanes eachon the shelf for sale (which is not usually the case). The US intends to sell 10 B52 Stealth Bombers while China is aiming to sell what comes acrossas the best and closest alternative to the US’ B52. Let us further assume that the American-made B-52 Stealth Bomber is to be sold for US$2billion with a production cost (or cost price) of about US$1.9billion and therefore, a profit expectation of US$100million. Let us also assume that China’s cost of producing what appears to be the closest alternative to the same bomber is also US$1.9billion. This means that if a country like Senegal is seeking to acquire 10 pieces of the product, China would have to drag the deal with the US because to make the same profit as the US, it has to sell at the same price. However, it cannot sell at the same price with the US and expect to carry the day because under ideal circumstances, Senegal would naturally prefer US-made weapons to Chinese ones. It cannot also sell below cost price because that would chase her out of the market in no time. However, she can opt to devalue her currency so that its real value in the international market becomes lesser. Therefore, after devaluation, China’s cost of producing the closest alternative to the B-52 Stealth Bomber could come to US$1.2billion instead of the original US$1.9billion prior to devaluation. The implication is that while more Yuans are required to produce the aircraft in China, lesser US dollars are required to sell it abroad. At this rate, China could sell each aircraft at US$1.4billion making US$200million as profit per aircraft instead of the initial US$100millionit could have dragged with the US. However, the dramatic effect of devaluation is such that Senegal may not see any economic reason to buy an aircraft at US$2billion when it could procure its closest alternative at US$1.4billionipso facto, saving enormous money for use in other ventures. The result is that if Senegal finally decides to procure the 10 aircraft from China in one single sweep, China instantly makes a profit of US$2billion, which it could quickly redeploy to manufacture more aircraft. This time, rather than reproducing the 10 aircraft it sold, the profit made could enable her manufacture 11 aircraft, and still have a balance of about US$800million which is enough to take a 12th aircraft to advanced stages of productionceteris paribus.Interestingly, there is no guarantee that China would still sell the newly produced batch of aircraft at US$1.4billion despite cost price remaining constant at US$1.2billion. Meanwhile, the 10 aircraft that the US is willing to sell may still not have been paid for at this time, so that by the time a buyer country is finally available, prevailing adverse conditions in the international economy could have necessitated a marginal rise in production costs, with attendant increase in the selling prices of US B-52s, and therefore, increased preferences for the much cheaper Chinese alternatives. In this case, while the emergence of adverse conditions in the global economic environment may force the US to increase production costs for its next batch of aircraft resulting in increased selling prices, China which was lucky to escape these adverse conditions due to faster turnover may decide to exploit the opportunity of marginal increases in the US’ cost and selling prices to sell the latest batch of aircraft at US$1.6billion each, raking in a 100 per cent profit increase at US$400million per aircraft.This is how devaluation enriches a productive economy. Sadly, Nigeria has continued to devalue her currency despite a history of declining economic productivity, resulting in unnecessary spike in the prices of consumables many of which are imported, with concomitant negative consequences for household income and expenditure.According to a study conducted by Elvis Ozulem Wokekoro and two others titled “Currency Devaluation and Nigeria’s Trade Balance” (published in the Social Science Review Vol. 3 (No. 2) of August-December 2024), successive currency devaluation policies in Nigeria since 1990 have not yielded the desired results. Furthermore, Nigeria’s lingering inability to solve the problem of compradorization in the oil sector has created despicable contradictions in the system resulting in a rather awkward situation in which the rise of crude oil pricesin the international market elicits phenomenalrise in thepump prices of petrol and other refined products in the country. Consequently, instead of higher crude oil incomes ameliorating the sufferings of Nigerians, the social conditions of the ordinary Nigeriansinexplicably worsens.
Given the foregoing, there are quite a few points which are worthy of note about Nigeria’s management of the Naira and allied monetary policies. The first point is that Nigeria’s reluctance to take a firm decision on the ‘duality’ of the 1000, 500 and 200 denominations of the Naira by withdrawing one version in favour of the other portrays her as a country of unserious people. Accordingly, the Nigerian government ought not to be reminded that in international political economy, the smallestfiscal and monetary lapses usuallypossess the tendency to create the most profound impressions. More importantly, there is a sense in which one could consider government’s disinterestedness at solving the problem of double versions of one currency denomination as emblematic of a culture of insensitivity which features prominently inNigeria’s policymaking circles. In this regard, we may considerthe continued existence of the old 1000, 500 and 200 Naira notes as a cold testament to the fact that those who slumped and died in banking hallswhile trying to replace their old notes with new ones actually died for nothing.
The second point is that the CBN has to be resolute about enforcing its Clean Notes Policy. One cannot explain the often higher likelihood of coming in contact withscruffy and smelly Naira notesin Nigeria when the US dollar and other foreign notes in circulation in the same Nigeria tend to usually retain their clean and crisp conditions.Additionally, the CBN should liaise with the National Orientation Agency (NOA) to intensify advocacy on citizens’ responsible handling of the Naira. What is more, it could provide incentives for union and market leaders to enable them insist on responsible currency handling in their domains.
The third point is that the Nigerian government should consider strengthening the Naira by discarding the current devaluation policy. This should be immediately followed up with aggressive subsidies to the country’s manufacturing sector to ramp up productionfor exports. The policy could return when the country’s productive capacity has improved.
.Obasi, Lecturer, Department of Political Science, Coal City University, Enugu
