Cashless policy, naira redesign, response to emerging economic realities
Recent happenings in the global economy have made it clear that a reorganisation of countries’ economic policies is mandatory. Nigeria, like some nations, has been negatively affected by the recent economic challenges and as a result, plunged into rising inflation and currency speculation; which if left unchecked, will ultimately take the country back to another […]
Recent happenings in the global economy have made it clear that a reorganisation of countries’ economic policies is mandatory. Nigeria, like some nations, has been negatively affected by the recent economic challenges and as a result, plunged into rising inflation and currency speculation; which if left unchecked, will ultimately take the country back to another recession.
High inflation is precursor to depreciation of currency which in turn makes a currency more attractive, at a low inflation rate. This reality is the major factor driving the Nigeria’s central bank to redesign the Naira with a view to pursue its cashless policy. This is an agreed international economic norm that also addresses currency counterfeiting with attendant durability and improved security features. Moreover, the policy in the long run will address the emerging rampant kidnapping (ransom payments) challenges through its cash withdrawal limit thereby mopping up excess liquidity in circulation. In this regard, the CBN forecast the mopping up of at least N2 trillion unbanked liquidity from circulation.
In spite of the enumerated merits and several other benefits, protests were recorded in some parts of the country due to either the desire to sabotage the policy or frustration occasioned by sudden change from the norm. Either way, there is no justifiable reason for vandalising banks’ facilities and maltreatment of the staff. However, both opponents and proponents of the policy argued for or against the policy. While the latter based its argument on the merits (short, medium and long terms), the former based its argument on the timing and implementation which obviously have created wide gaps in the banking system as well as the delay by the CBN, in rolling out the new currencies so as to quickly address the observable challenges.
In theory, the reasons advanced are no doubt genuine and seem to be effective in arresting the current economic situation if genuinely over N2 trillion has been mopped up within this period and that the rate of kidnapping has dropped to a minimal level due to the inability of the criminals to have access to the ransom demand. On the other hand, a lot of rural dwellers (especially traders), do not own bank accounts and where banks exist, the main challenge is network and system failures. These are just among many other reasons advanced by the sincere opponents of the policy.
It is noted, that public policies are usually difficult to adopt: while a policy might be excellent in its true sense, public confidence takes time to build. At times, public confidence may not be won initially, and where won; it may drop due to improper implementation.
Accordingly, and in order to achieve the aims of the policy, the CBN must address the followings:
- Awareness campaigns – in partnership with the National Orientation Agency the CBN should intensify awareness campaigns in order to boost people’s confidence in opening accounts and ultimately adopt the policy.
- Network enhancement – today, many banks are either not working due to network failure or huge traffic on the banks’ server. Banks should be made to address this with a timeline.
- Roll out super agents – before December, the CBN claimed to have licensed and posted super agents to some states. Due to the current realities, the CBN should roll out more in all states, especially in rural areas. This should be done within the shortest period of time.
- Minting more notes – the bank should print only the quantity it intended to have in circulation. Otherwise, the aim will be defeated.
The politicisation of the policy by a few, limits public ability to see the good in it. This confirms the saying of the international community that Nigerians are the only ones that can solve their problems. Else, how can this policy push someone that doesn’t have up to N10, 000 weekly spending capacity, to vandalize banks due to lack of funds? It is also possible to see a lot of activities in those 45 million bank accounts not linked to BVN. THIS SHOULD ALSO BE CHECKED.
It is futile to ascribe any single policy change to criminality. A lot of those involved in such criminality behave well once they step out of the country, all in the fear for the law of the country they visit. It is thus, necessary for more equipping of the police and for more support to the Nigeria’s security agent by the government and its citizenry.
In addition to the cashless policy, this administration, will only do good to Nigerians by fully executing the E-Governance policy amongst MDAs and totally removing the so-called fuel subsidy, as a parting gift to Nigerians.
One thing for sure, is that Nigeria is bedeviled by economic and security exigencies that warrant for this kind of policy change which should be well implemented by the CBN. Report shows that the US Federal Reserve accomplished a feat in testing a design for a U.S. digital dollar that in one of two tests, managed to handle 1.7 million transactions per second. This is an indication of the possibility for the Nigerian banks to within a short period enhance their software and also for the CBN to liaise with the NCC in addressing the network failures.
Overall, the CBN cashless policy is an excellent solution to the emerging economic and security realities, and should be allowed to stay. In addressing the lingering issues, the CBN should work with all relevant stakeholders and should extend the date with which the old notes will cease to be legal tender. Also, the old notes should be used to temporarily fill in the gap of the amount aimed for circulation.
Abdulkarim (PhD) is the Executive Director, Dela Sustainability and Resource Institute, Abuja