By Femi Adekoya, Geoff Iyatse (Lagos), Azimazi Momoh Jimoh, Collins Olayinka, Odita Sunday, Terhemba Daka (Abuja), Lawrence Njoku (Enugu) and Ann Godwin (Port Harcourt)
These are not the best of times for many Nigerians, who have, in the last few months, contended with lingering petrol scarcity amid deteriorating power supply and inflation, with the situation currently compounded by the rush to meet a new deadline for withdrawal of old banknotes from circulation.
Best described as chaos, many Nigerians, at the weekend, thronged petrol retail stations, banking halls and automated teller machines (ATMs) in search of scarce and overpriced petrol, as well as, new naira notes, having deposited old banknotes in line with directive by the Central Bank of Nigeria (CBN).
Specifically, Nigerians lamented the arduous search for petrol and new naira notes, as many commercial vehicle drivers, small businesses and market women rejected the old banknotes for fear of being unable to deposit same at the banks before the deadline was shifted.
While the N1,000 notes can be readily accessed at ATMs and banks that had the new notes, the reverse is the case for lower denomination notes of N500 and N200. The N100 notes that were not redesigned were also not available at the banks.
At the weekend, many Nigerians with old banknotes were stranded trying to board commercial vehicles, while those who went to the market could not conclude transactions nor receive their balance with the old notes.
With the N1,000 notes mostly available, old notes used as balance for transactions below N1,000 were rejected leading to so many incomplete transactions.
Though CBN claimed that its initiative was not designed to starve Nigerians of the currencies, but encourage cashless transactions, the alternative platforms of online transfers, point-of-sale (PoS) terminals and USSD are beset with challenges of failed and incomplete transactions, leaving many Nigerians frustrated.
The situation was no different at the fuel stations as motorists continue to buy petrol between N195 and N500 per litre depending on location and the retailer, prompting industry players to call for total removal of the subsidy scheme.
The CBN policy also worsened queues at the fuel pumps as stations refused collecting the old notes and most motorists resorted to PoS and transfer, just as network issues and confirmation of debited money caused more delay in the time taken to attend to motorists.
To quell the chaos created by the policy implementation, the CBN, yesterday, extended the timeline for returning old banknotes to February 10 with an additional grace of seven days. The extension takes the effective validity period of the old notes to February 17.
President Muhammadu Buhari, yesterday, in Daura, Katsina State, approved extension of the ongoing currency swap. He gave the approval at a meeting with CBN Governor, Godwin Emefiele, urging more time, discretion and order to enable Nigerians successfully change their currencies to the redesigned notes, and reduce the risk of loss, especially among the underserved in rural areas.
Briefing newsmen after the meeting, the CBN Governor said the currency swap had achieved more than 75 per cent success rate of the N2.7 trillion held outside the banking system, with evident drop in rate of inflation, more stability of foreign exchange rates, and noticeable impact on security, especially in banditry and kidnapping figures.
But some individuals familiar with the legality of the exercise and enabling act say the apex bank cannot, by fiat, deny Nigerians the benefits of their financial wealth by declaring old notes invalid.
Conveying the extension yesterday, CBN Governor, Godwin Emefiele, said N1.9 trillion has been returned into the banking system since the policy started three months ago from the N3.2 trillion currency in circulation.
Prior to the intensely disputed policy, the apex bank said N2.7 trillion was held outside the banks with only N500 billion available for intermediation.
The CBN boss said the currency-in-circulation was only N1.4 trillion but rose to N3.23 trillion as at last October.
“Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of the CBN time, it returns to the CBN, thereby, keeping the volume of currency in circulation under firm control.
“So far, and since the commencement of this programme, we have collected about N1.9 trillion; leaving us with about N900 billion,” he explained.
He claimed that CBN’s interventions to ensure the availability of new notes are yielding positive results and that “the exercise has achieved a success rate of over 75 per cent of the N2.7 trillion held outside the banking system.
“Nigerians in the rural areas, villages, the aged and vulnerable have had opportunity to swap their old notes; leveraging the Agent Naira Swap initiative as well as the CBN senior staff nationwide sensitisation team exercise.
“A seven-day grace period, beginning on February 10 to February 17, in compliance with Sections 20(3) and 22 of the CBN Act will allow Nigerians to deposit their old notes at CBN offices nationwide after the February 10 deadline when the old currency would have lost its legal tender status,” Emefiele stated.
The CBN Governor said the excuse of security threats pushed by the Kano State governor, Abdullahi Ganduje, had no bearing on the swap. “I don’t understand the relationship between the CBN policy and security challenges in Kano,” he added.
He noted that all new currencies had security features that make it easy for tracking to bank branches, and the process had begun to deal with defaulters and those who breached the programme. “Even if they are CBN staff, they will be sanctioned,” Emefiele warned.
INDEED, the Centre for the Promotion of Private Enterprise (CPPE) has described the new deadline as grossly inadequate, noting that the currency swap could put N100 trillion component of the national GDP at risk.
CPPE Director, Dr Muda Yusuf, said: “Failure to extend deadline for the currency swap could put the N100 trillion component of the national GDP at risk.
“Just got the news that the deadline for the currency swap has been extended by 10 days. CPPE believes that 10 days is grossly inadequate to make up for the glaring shortcomings of the apex bank in this process.” He noted that two critical sectors are particularly vulnerable – trade and commerce; and agriculture.
“The crippling of business transactions at the distributive trade end amid the currency swap crisis would not only undermine the trade and agricultural sectors but would have a knock-on effect on the manufacturing value chain and the services sectors. This is because whatever is produced has to be sold.
“The trading end of the chain has been greatly disrupted by this currency swap crisis. The trade sector contributes about 14 per cent of GDP valued at an estimated N35 trillion; the agricultural sector contributes 25 per cent, valued at an estimated N62 trillion. Most of the activities in these sectors are either in the rural areas or in the informal sector of the economy.
“These are the sectors that have been driving the resilience of the Nigerian economy amid numerous domestic and global headwinds. Any policy measure that would negatively disrupt these sectors should be avoided,” Yusuf further stated.
BUT a professor of applied economics and expert in monetary policy intervention, Godwin Owoh, said the apex bank cannot, as a matter of legality, deny Nigerians who have acquired money the right and privilege of their financial asset. He referred to Section 20 of the CBN Act, which was earlier cited by the Nigerian Bar Association (NBA) in a letter to CBN.
The section specifies the process of demonetising banknotes, while subsection three states that banknotes or coins that cease to be legal tender “shall be redeemed by the bank upon demand” subject to Section 22 of the Act.
Section 22 states that “a person shall not be entitled to recover from the bank the value of any lost, stolen, mutilated or imperfect note or coin.”
Based on the clauses, Owoh argued that the goal of the policy, which is to bring big-ticket money hoarders and election buyers to their knees would be defeated as the process would be thwarted by litigation.
Besides, the economist decried the knee-capping of the policy on production and other economic activities, saying thousands spend productive hours in bank queues while many more cannot process transactions owing to limited access to cash.
Another economist, Kelvin Emmanuel, said CBN complied with sections 20(3) of the CBN Act, which gives it constitutional power to re-issue new notes upon obtaining permission from the President, and after giving reasonable notice to the public. But he argued that the 90 days window is a violation.
“The 90-day window is a violation of the CBN Act that gives legal foundation to re-issue new currency. And this is because in the UK for instance where 50 and 100-pound notes amounting to 17 billion pounds is in circulation, the Bank of England gave a 24-month window.”
Emmanuel, who is also the Chief Executive Officer of Dairy Hills Limited, added that the panic that followed the January 31 deadline was injurious to businesses and the public good.
“The panic and frenzy created by this deadline have led a lot of commercial establishments to reject the old notes several days penultimate to the deadline, which is a violation of sections 20(5) of the CBN Act. The lack of coordination will slow down the velocity of money, place undue pressure on the financial system infrastructure and only affect trade,” he said.
HOWEVER, the House of Representatives’ ad-hoc committee on the new naira redesign and swap policy has rejected the 10 days extension granted by CBN. In its swift reaction, the committee, chaired by leader of the House, Alhassan Ado Doguwa (APC, Kano), rejected the extension, insisting that CBN must comply with Sections 20, subsection 3, 4, and 5 of the CBN act.
Doguwa said: “The 10-day extension for the exchange of the old naira notes is not the solution. We, as a legislative committee, with a constitutional mandate would only accept clear compliance with section 20, subsection 3, 4, and 5 of the CBN act and nothing more.
“Nigeria, as a developing economy and a nascent democracy, must respect the principle of the rule of law. And the House would go ahead to sign arrest warrant to compel the CBN Governor to appear before the ad-hoc committee.”
Describing the extension as a mere political gimmick to further deceive Nigerians and worsen their economic and social livelihood, Doguwa said the CBN Governor must appear before it today (Monday) or stand the risk of being arrested on the strength of legislative writs signed by Speaker, Femi Gbajabiamila.
He also said the policy is capable of frustrating the forthcoming general elections. “Security agencies and their operations, especially at the states level, are generally funded through cash advances and direct table payments of allowances to operatives during elections.”
MEANWHILE, Southeast youths, yesterday, shelved its planned five million-man protest at the CBN headquarters, following announcement of the 10 days extension.
The youths under the aegis of Southeast Youth Leaders (COSEYL) had last week threatened to occupy the CBN headquarters in Abuja on February 1 should the apex bank fail to review the January 31, deadline for deposit of old naira notes.
Following the extension, the youths said yesterday that they would no longer embark on the protest and asked their coordinators in the 36 states and Abuja to shelve the idea.
A statement by the National Coordinator of COSEYL, Goodluck Ibem, which hailed the apex bank for the extension, however, urged it to use the period to make the new naira notes available to Nigerians to reduce their sufferings.
The statement also urged Nigerians to continue accepting and transacting business with the old notes before the new deadline of February 10 when the old notes will cease to be a legal tender.
THE apex bank has, however, accused some banks of making the process of exchanging the new naira notes with old ones and depositing old notes very cumbersome.
Sequel to this, CBN officials in Rivers State said they would start entering the strong rooms of banks in the state to check how they are dispensing the new notes given to them.
CBN’s Branch Controller in Rivers, Maxwel Okafor, announced this yesterday in Port Harcourt, during the bank’s direct cash swap for citizens. Okafor said: “It is sad that some banks are making the process very cumbersome for citizens. Some places we monitored, we noticed that before residents enter the banks, they are compelled to write names, queue on line for hours, yet at the end, some will still not be attended to.
“For hoarding the new notes, we will start going into their strong rooms to check how they are dispensing the money we give to them. From our findings, the process is slow and we are pleading with banks to make the process easier.”
Okafor disclosed that the direct cash swap could go on until the last day of the new deadline, adding that the exercise will be carried to various parts of the state, including Igwurita, Buguma, Omoku, Oyibo, Onne, Eleme and all the hinterlands.
As some banks seem to have compromised in the timely disbursement of the new naira notes, a security consultant and Managing Director of Badison Security Limited, Mr. Matthew Ibadin, has called for an urgent setting up of a presidential task force to monitor the banks.
Speaking with newsmen in Lagos, Ibadin noted that even though the newly redesigned notes were yet to circulate in the public space, it was obvious some of the deposit banks have embarked on dubious transactions.
He pointed out that bundles of the same new notes, which are not yet adequately in circulation could be seen being abused at weddings and other parties, as revealed in a video currently trending in the social media.
“How did such naira abusers get the bundles of the new notes if not for the corruption of bank officials,?” he asked.
Source: The Guardian