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Sometimes, it’s easy to lose perspective in the moment. That says much about the disposition of some people not to commend the Central Bank of Nigeria for the efforts it made in the recent Naira Redesign Policy. That is what happens when politicians try to hijack a key financial policy for political gains. The economy loses when the legitimacy and effectiveness of a prestigious institution like the CBN and the professionalism of its leadership are unduly criticized. But that will not remove the bright spots of any monetary policy initiative.
In what is certainly one of its most consequential monetary policy decisions in more two decades, the CBN had on October 26, 2022, announced plans to redesign the nation’s currencies in the variation of N200, N500, and N1000 denominations. The plan took effect from December 15, 2022. The announcement was made by the CBN Governor, Godwin Emefiele at a press briefing in Abuja. Under the plan, the new naira notes and existing currencies were to remain legal tender and circulate side by side until January 31, 2023 when the existing currencies would seize to be legal tender. Mr. Emefiele had also explained that the decision was in line with the relevant provisions of the CBN Act 2007, in particular, Section 2(b). Also, in compliance with sections 18 (a), and 19(b), the apex bank duly sought and got the approval of President Muhammadu Buhari in writing, to redesign, produce, release and circulate the new series of the banknotes. Besides, the CBN boss did explain that the redesigning of the currency was necessitated, among other reasons, to check the hoarding and counterfeiting of the currency, and mop up the huge funds outside the vaults of the banking system. By CBN’s estimate, prior to the redesign, there was about 85 percent of currency in circulation outside the banking channels. As of September 2022, out of N3.2trn in circulation, N2.73trn was said to be outside the vaults of the banks. What some people still don’t understand is the fact that the redesign of the new naira notes was a strategic monetary instrument to improve and strengthen our national security. This will enable the CBN to effectively monitor the flow of funds in the system.
I agree with Prof Okey Ikechukwu, founder and coordinator of Development Specs Academy, Abuja, that even though the Naira Redesign encountered some systemic and human difficulties during its implementation, which resulted in the new currency scarcity, and necessitated the extension of of the deadline from January 31 to February 10, 2023 for the completion of the process, and further extended till the end of this year by the Supreme Court. Nonetheless, the gains of the policy should not be lost on us. The benefits are many, he says. According to CBN data, in 2015, currency in circulation was N1.4trn. It increased to N3.23trn in 2022. Of this amount, only N500bn was within the banking system, N2.7trn reportedly remained outside the system. This clearly distorted the financial policy and efficient management of inflation, hence the need to mop the excess liquidity in circulation. By end of February this year, statistics from the CBN showed that about N2.1trn held outside the banking system had been retrieved. It bears repeating that currency functions are a core part of any Central Bank’s mandate. It needs the support of the people. It is, therefore, necessary to ask the following questions and provide answers to them. Was the initial 90-day deadline too short for the policy to be implemented? Some had said, it was. But, my answer remains that three months was not too short a time to make the necessary swap. It’s not unkind to say that even if the CBN had given a 6-month window, most Nigerians would have still been caught ‘unawares’. They would have asked for more time. It is part of our nonchalant, fence-sitting attitude towards crucial government policy initiatives until the ‘eleventh hour’ comes upon us. Again, was the timing of the policy implementation close to the elections, wrong? This is a question you will most likely get different answers depending on where you stand on the matter. Clearly, it’s beyond question that the naira redesign policy has served a key national security measure without which vote buying during the elections would have been far worse than what we saw. Expectedly, politicians who felt the policy was targeted at them complained loudly, even threatened to use a key security agency of the government against the CBN Governor. It failed. Some state governors went to the Supreme Court seeking a reversal of the policy and President Buhari’s firm position on the matter. The Supreme Court yielded to their request, even though monetary policies are the exclusive mandate of the apex bank as provided in CBN Act 2007. However, the judgment of the Supreme Court was democracy and the rule of law in action. But that has not negated the significant economic benefits of the policy. By far, the naira swap policy has strengthened the macroeconomic parameters, reduced hefty money in circulation, resulting in a deceleration of the volume in the economy. It has moderated inflation rate as a result of the accompanying decline in money supply. The truth is that, the present inflation rate of 21.9 percent would have been higher without the intervention of the CBN.
It is clear from the recent happenings that the new naira redesign significantly reduced the incidence of kidnapping and banditry which was commonplace before the policy implementation. Emefiele strongly made that point clear when he appeared before the House of Representatives in January, 2023. He maintained that the redesign has indeed, curtailed the incidence of insecurity in the country. He sought their understanding. But, did they give him that? They failed to understand that currency redesign is not peculiar to Nigeria. Their political interests superceded national interest. They were not patient with the policy to harvest its full benefits. The Attorney General and Minister of Justice Abubakar Malami, spoke in similar vein in an interview with Radio Nigeria before the general elections. Facts bear this out. According to figures from the Nigeria Security Incidents Tracker, N650 million was paid as ransom to bandits between July 2021 and June 2022, by families of the victims. Between February 2022 and August 2022, 7,222 Nigerians were reported killed by bandits across the country. 3,823 people were abducted. In 2021, 3,000 Nigerians and foreigners were kidnapped in the the first half of that year. Just last week, former captain of the national football team, Mikel Obi, told a radio station that he paid a hefty amount as ransom to get his father, Pa Micheal out of kidnappers’ den in 2018. All of this took place before the new naira redesign. According to a recent report by Beacon Consulting, a security risk management and Intelligence company, between December 2022 and January 2023, incidence of kidnapping and other crimes reduced drastically by 70 percent, courtesy of the naira swap policy. However, kidnappers are back on the prowl.
Only last week, bandits abducted 80 children and 20 women in Zamfara state. In Benue, gunmen killed over 70 people in two separate attacks on some villages. Also, in Lagos, kidnappers took their victims to a forest, demanded N20 million each from the families of the victims. However, some of the victims were rescued by security operatives, but they had terrible tales to tell. This might not have happened if the new naira policy had not been hijacked by politicians. Available statistics show that due to the currency redesign, the country witnessed the collapse of illegal economic activities perpetrated through money laundering. Financial experts also agree that the naira redesign has helped stabilise the exchange rate, make availability of loans easier and interest rate even lower. It has also resulted in greater visibility and transparency of the financial activities that has translated to efficient enforcement of anti-money laundering legislations. This much is also evident from the new naira redesign. The policy has been able to increase digital payments in the country. It is unfortunate that the gains of the policy was not allowed to manifest seamlessly as it should be, because some politicians, acting in cahoots with some misguided bank managers, were not ready to accept the fact, that such a monetary reform often comes with some inconvenience and pain. Nonetheless, its significant long-term benefits are not in doubt.
From the point of view of the Economic and Financial Crimes Commission (EFCC), and the Independent Corrupt Practices and Other Related Offences Commission (ICPC), some bank managers tried to sabotage the policy. Recall that in February, the EFCC arrested a manager of a commercial bank in Abuja for allegedly ‘hoarding’ N29 million of the new naira notes. He was arrested after reportedly refusing to load the bank’s ATM despite receiving the said amount from the CBN. Also, two managers of a new generation bank in Abuja, were arrested by the ICPC for hoarding N258million of the new banknotes in the bank’s vault. The money was dispatched to the bank by the CBN for payment to customers to ease the scarcity of the naira. According to the ICPC, the bank managers released only N5 million to each of its branches and ‘hoarded” the rest for personal gains. That the scarcity of both the new naira notes and old banknotes still persist is as a result of such unprofessional conduct. There were similar such cases across the states.
The CBN Governor was right when he countered the allegation of Gov. Ganduje of Kano state who alleged in January that the currency swap would be a threat to the visit of President Buhari to the state. And you ask: where’s the relationship between the CBN policy and security breach in Kano? I find it most disingenuous that Governor Bello Matawalle of Zamfara state would claim as he did recently that he lost his re-election bid because the federal government “punished” him for going to court to challenge the CBN over the new naira redesign. He told a German DW Hausa radio that prior to the general elections, there were plots to punish him, Ganduje and Gov Nasir el-Rufai of Kaduna state over their stance on the naira policy. That amounts to playing fast and loose with the facts that lead to his defeat at the polls on March 18. He was simply rejected by his people.
That was the ridiculous extent some politicians went in trying to turn a good monetary policy into political football. In the same vein, contrary to claims by Nobel laureate Prof Wole Soyinka, that the naira swap policy has wiped out President Buhari’s achievements, Nigeria’s economy is better for it, regardless of the systemic and human difficulties in the implementation. Always playing God, Soyinka’s mystique is gone. Only few people take him serious. All said, whatever setbacks experienced in the naira redesign, our economy will be the better for it in the long-term, regardless the attempts by some politicians and other vested interests to hijack and subvert the CBN as an institution from serving the Nigerian people, to serving their personal and political agendas. By all measure, the CBN remains a key institutional prism through which foreign countries and investors, both at home and abroad, assess the functioning or otherwise, of the Nigerian state. The apex bank needs our support, not condemnation.
