By Victor Ogiemwonyi
The ongoing Naira redesign and currency swap policy of the Central Bank of Nigeria (CBN) was controversial from the very beginning, dividing both commentators and analysts and has kept the whole country talking. While many were willing to give it a chance, most saw the policy as more political than economic, others however, including this writer, saw it as a reset for the CBN.
The CBN admitted upfront when it announced this policy’s overarching objective, especially the fact that it had lost control of the currency in circulation, lamenting that up-to 80% of it remain outside of the banking system.
For this writer, this was a good enough reason to offer the policy support, and indeed a chance.
It was thought that the large cash in the system has implication for inflation, and also thought to be, the major fuel for much of the corruption we see around us as a nation, as well as the kidnapping industry that has thrived for years, and even grown in leaps and abounds in recent times. It was also seen, to some extent, as a way to reduce the vote buying tendencies of our politicians.
No matter what side of the debate you are on however, no one foresaw the large scale mismanagement and the wide spread suffering that this policy was to create, except for a fellow at one of my forums, who warned of confusion ahead. He had expressed his fears over the policy in reaction to a write up of mine in support for the policy.
I give him credit for his prescience, but even then, he could not have predicted the level of dislocation this was going to cause. Some of the scenes on social media, clearly depict all the suffering and associated problems this has engendered.
Adding to the chaos are the plethora of conflicting court orders, policy challenges and litigations. It is taking us back to 1993, when justices of Nigeria’s Supreme Court said they lacked jurisdiction to entertain the case brought by Alhaji Moshood Abiola seeking to reclaim his mandate after his June 12 election he was widely believed to have won was annulled by the then military junta. The rest is history as they say. If that decision had been otherwise, Nigeria may have taken a different trajectory from that time.
Today, Nigerians are again seeing a situation where the highest judicial officer in the land, the Attorney General and Minister of Justice says the Supreme Court has no jurisdiction to intervene in the currency exchange matter.
What is the import of the AG’s statement? We are not yet sure of what that means.
However, does that statement translate to that the government will not obey the ruling? If so, what will be the implication? Is the Supreme Court no longer the final arbiter on any dispute in the land, no matter how ridiculous the position of the justices may be? Are we not heading for anarchy with this posturing? I think, we should obey the Supreme Court, no matter what the technical legal position might be.
This was more a social ruling needed to give respite, in the midst of the confusion and the suffering all around. What is legally right at this point has to take everything happening into consideration.
The confusion the CBN has caused by their mismanagement of the currency swap policy can only be remedied by a temporal halt on the deadline, allowing the old notes to remain legal tender. Moreso, the fact that the new notes are not available and may not be in the few days left means that unless there is a shift in the position the crisis and suffering will continue and the economy will take a huge hit, and may even lead to another recession, something we cannot afford right now. The economy is already in trouble, any recession will have very terrible implications, the effect of which will be felt for a long time to come.
The amazing aspect of this mismanagement is the fact that all the information we are now getting was available to help the CBN in its planning from the onset. For example, the apex bank is aware that there is a large population of the unbanked, as well as the telecom infrastructure that is already stretched beyond its elastic limit by the sheer number of persons forced to migrate on such platforms within such a short timeframe, all of which were bound to create more problems.
We have since become aware of how overwhelmed the system and bank official became over the last few days. Even those who would normally bank on their phones were unable to. Also, the CBN knew the capacity of the Nigerian Security Printing and Minting Company, and should have made adequate preparations to match the capacity with the expected amounts of the new Notes to be swapped.
The information that the Mint does not have sufficient papers to print the new notes has now been denied by the CBN. The CBN should have been prepared to match the printing of the new notes with the amounts the banks were taking in in old notes in real time.
In today’s world of instant data availability, the CBN was in a position to get reports from banks that could have aided the Mint in reacting to the demand for new legal tender to continuously match what the banks were taking into their vaults daily.
If the information that only N500bn was available on the day of the first deadline to replace over two trillion Naira of the old notes the CBN said was already with the banks, then its management is responsible for this manufactured, or artificial chaos.
There is no way to explain such bad planning. It was also bad planning that no special arrangements were made for the large unbanked population- those without bank accounts, who account for an estimated 66% of the population as reported by the media. That they were not taken into consideration in the CBN planning, was ridiculous, besides the fact that only 9% of the population use digital banking outlets which necessitated the need for special outlets, like setting up several cash points in every Local Government Area, especially those with no bank branches.
Even in the 1984 currency swap exercise that was also very difficult to manage, there were opportunities for the rural populace with no banking facilities to go to their Local Government offices to swap their old notes. Why did the CBN not even think of this, and instead refused completely to learn from history.
The emergency recruitment of 400 PoS operators was an afterthought and would have worked better, if it was part of the strategy from the onset to give the unbanked population the opportunity.
The initial instructions to banks to restrict their disbursement of the new cash via ATMs only was also a bad strategy. No one knows what that was supposed to achieve. There are not enough ATMs as it were and most function poorly. Therefore, relying on this for wide distribution was a one way thinking, to fight the black money in the system and deter politicians from stacking money to buy votes.
This thinking completely forgot, or ignored the fact that the Nigerian economy remains a much bigger deal to worry about.
The statement credited to the Mr. Godwin Emefiele that the CBN did not anticipate the challenges and the ensuing crisis is a clear indication that no impact assessment was done before the policy was implemented.
That again is unforgivable, because public policy options that are capable of affecting everyone in the country needs proper assessment and impact measurement to help policy makers with proper preparation against all what ifs, and possibly put alternatives in place.
Let’s hope this will all be sorted out quickly. The mistakes were, indeed, avoidable.
Notwithstanding, this huge disruption to our lives and the impact it will have on the economy, there are still some benefits derivable from the policy when it all unfolds.
•Ogiemwonyi, a retired Investment Banker writes from Ikoyi, Lagos.