Politics, Economics And Nigeria’s Trudging Economy

Specifically, the Central Bank of Nigeria (CBN) came up with the seemingly innocuous Naira redesign initiative to deal with a number of obvious challenges facing the trudging Nigerian economy

The Supreme Court ruling on Friday, March3, 2023 that all redesigned Naira notes and the old ones will remain legal tender and in circulation till December 31, 2023 climaxed the lingering titanic struggle between political power brokers and managers of the Nigerian economy.

Since the announcement of the Naira redesign policy on October 26, 2022, some sort of ‘war’ had been raging between the drivers of political ‘expediency’ and economic imperatives of the Nigerian polity. For the first time in living memory, wielders of political power openly confronted and stoutly stood against economic management policies of the Federal Government. In what looked like an incestuous confrontation, top political officeholders of the same party took opposing positions on a single monetary policy.

Specifically, the Central Bank of Nigeria (CBN) came up with the seemingly innocuous Naira redesign initiative to deal with a number of obvious challenges facing the trudging Nigerian economy. Some of these stubborn challenges included a very high and steadily rising inflation rate (standing at almost 22 per cent as at end-January 2023), huge illicit and counterfeit funds and large volumes of cash in circulation—yet outside the banking system.

The policy was also aimed at fast-tracking the attainment of financial inclusion and cashless economy objective of the Federal government. The apex bank therefore gave a timeframe for all existing Naira denominations of 200, 500 and 1,000 to be returned to the banking system (deposited). This was to be achieved within about one hundred days— October 26, 2022 to January 31, 2023.

However, as the end-January deadline was approaching, powerful political power brokers and their cohorts were perfecting both clandestine and obvious moves not only to scuttle the currency initiative but to have it fully reversed and jettisoned. Thus, to effectively pre-empt the deadline, three state governments sued the Federal Government at the Supreme Court; and the apex court pronto gave an ex parte ruling, suspending the stoppage of the old currencies (200, 500 and 1000 Naira notes) from being legal tender. This was even after the CBN had extended the earlier deadline from January 31 to February 10, 2023.

Surprisingly, even before the unprecedented move of the three states (Kaduna, Kogi and Zamfara) in suing the Federal Government over its monetary policy, both arms of the National Assembly (the Senate and the House of Representatives) had harangued and arms-twisted the CBN to push forward the deadline for the stoppage of the use of the old currency notes.

Similarly, state governors under the aegis of the Nigerian Governors’ Forum (NGF) had applied several tricks and persuasion to get the CBN to cave in to their stance of not stopping the use of the old currency notes as scheduled. The NGF equally carried their ‘appeal’ to Mr President who asked them to give him a ‘reprieve’ of seven days!

On Thursday, February 16, 2023, however, President Muhammadu Buhari made a nationwide address in which he ordered the CBN to “allow the old 200 naira notes and redesigned 200, 500 and 1000 naira notes to coexist” until April 10, 2023. This meant that even with the pendency of the ex parte ruling of the Supreme Court, the old 500 and 1000 Naira notes have ceased to be legal tender courtesy of the Presidential order. However, rather than assuage frayed nerves, this conflicting scenario created more tension and confusion in the polity. By this time, the apex bank, apart from re-introducing the ‘old’ 200 Naira notes as ordered by Mr President, had practically mopped up all ‘old’ notes and stuck to its new policy of ‘minimal’ cash withdrawal limits by all economic agents.

Yet, the suspicion remained high that many top and desperate politicians still had huge volumes of the old Naira notes stashed away in their strong rooms and private vaults to keep ‘oiling’ their electioneering towards the Presidential and National Assembly elections slated for February 25 as well as the Governorship and State House of Assembly elections scheduled for March 11, 2023. This desperation apparently led to some state governors making public addresses, largely direct counterpoise to Presidential orders on the way forward in ensuring the success of the Naira redesign initiative. Some even told their constituents not to bother about doing away with their ‘old’ Naira notes as directed by Mr President.

All these played out as the total ‘drying up’ of liquidity in the economy—as neither the ‘old’ Naira notes were available nor the ‘new’ ones in circulation enough to facilitate commerce and business generally. Either due to sabotage or systems failure, bank electronic channels that were to be used as alternatives to cash payments—all virtually collapsed. In this milieu the apex court refused to vacate its ex parte stance but instead adjourned its ruling to March 3, 2023. As February 25 (elections) got closer, the polity got asphyxiated, financially—and virtually every bank branch across the country was mobbed by deluge of customers who wanted to have some cash. In not a few locations, crowds of bank customers (perhaps infiltrated by hoodlums) went wild and razed and/or vandalised bank buildings and other properties.

Apparently laden in all of these was the devious ways of the politicians in applying their very long and strong ‘tentacles’ to have a tight grip on the new bank notes rolling out of The Mint. Thus, as the CBN was assuring the polity about the volume of cash being minted and circulated, the ‘scarcer’ the currency got. This scenario did not only lead to the closure of many bank branches but also put point-of-sale (PoS) operators out of business—they had totally lost access to cash for their trade.

Covertly or overtly, branch heads of not a few banks in collusion with top politicians in their various localities, hoarded volumes of the new naira notes available to them. In many localities across the country, the masses took to some sort of trade by barter; in fact, in some boundary locations, foreign currencies like French Franc (CFA) were for a while adopted in Nigerian territories as means of exchange—just to keep business going!

As backdrop to all these, President Buhari kept reiterating his determination, through the Naira redesign and allied policies, to create and sustain a level playing field for the politicians—by ensuring that “nobody holds so much resources to enable him to intimidate opponents or use money to influence voting in any locality.” This shows without equivocation that the currency policy was also frontally directed at ‘sucking’ away or rendering waste, huge sums of Naira widely believed to have been stashed away by politicians, their cronies and other economic saboteurs. This way, the largely destabilizing role of money in elections and electioneering would be minimized and curtailed substantially.

However, the monetary policy had also come up with a motely of unintended sequels and ripples, including the stifling of the economy and diminishing of the quality of life of the citizenry. In point of fact, the acute cash shortages across the country since February 2023 practically grounded the Nigerian economy. For instance, Stanbic IBTC Bank, in its February Purchasing Managers Index (PMI) report has disclosed that the PMI data dropped below the 50.0 no-change mark to 44.7 per cent in February, from 53.5 in January, reflecting a decline in both micro- and macroeconomic activities.

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