Nigerians are facing the reality of scarcity of cash and everything else inbetween, literarily. Banks are overwhelmed by angry customers demanding money, their money for that matter. The Automated Teller Machines (ATMs) are flooded with furious Nigerians shoving and struggling to withdraw cash, and some spend several gruelling hours and in some cases, the whole day, hoping to get a few Naira notes for their needs.
POS operators complain of a lack of money; a few of the operators charge up to 20% to customers to get some cash. For example, if you want to cash out N5,000 you will pay an operator N6,000. Most Nigerians are stranded because the various banks’ platforms for transfers need to be fixed, and most cannot make or receive transferred money. There is confusion everywhere, and people are coming to terms with this unnecessary ‘nation-inflicted’ chaos.
However, the pressure this exerts on Nigeria’s fragile socio-political and economic conditions is enormous and gradually heading to a dangerous tipping point. Various Social media platforms are awash with harrowing videos of people’s reactions in various parts of the country, and they all point to the pervading anger, frustration, and hardship people are going through. Without being the intendment, it is a recipe for potential political and economic upheaval if not checked promptly.
The political ramifications of the Naira redesign are evident, but the implications, intended and unintended consequences, are unfolding and quickly, too.
Money and politics are like the Siamese twins. Money enables politics, and politics determines who gets what, when and how. Money in politics is both a force for good and, at the same time, can be an opposing force. I did not want to say, a force for bad! Whenever cash is under any form of threat, politics reacts. Politics is reacting vigorously and vehemently, and claims and counterclaims have been made about the Naira redesign’s impact on society, the economy, and politics.
The Buhari administration and the CBN are orchestrating a demonetisation policy that has become the centrepiece of Nigeria’s monetary policy. Although it may seem that this demonetisation policy is a continuation of CBN’s push for a cashless economy driven more by technology than the use of old fiat notes, however, the real meaning is lost in reality and translation, and people need clarification, albeit answers, immediately, too! Promises by government that the situation will resolve itself soon, does not wash.
Is this Naira redesign exercise, a cash swap exercise, or a policy for proper currency management , addressing inflation, illegally destroying counterfeit notes and cash stockpiled for illegal political activities? Or is it all of these things put together? Or is it just motivated by politics ? The problem is that everybody understands and interprets the actions differently, with unclear and dichotomous interpretations of what is happening. The critical question is:
did the CBN effectively communicate this policy’s aims, goals, process and intended impact to the people? How did the media frame this policy, and how did Nigerians interpret and make sense of it all? Just as the 2023 general election is around the corner, is this new policy of the CBN politically motivated?
In recent times, other nations have done some currency redesigns, and we can learn from their experiences. The UK and India have redesigned their currencies lately. But I will use the example of India for obvious reasons that it is closer to Nigeria as a developing nation than the UK. In 2016, Prime Minister Narendra Modi declared that the country’s two highest-denomination currency notes (Rs 1,000 and Rs 500) would be withdrawn immediately from the market. The plan, termed demonetisation by the press, was announced dramatically as Modi’s masterstroke against “black money”. However, the exercise proved not to be a key determinant of the outcome of Indian elections. Unlike the case of India, will this exercise have more significant political implications, some unintended, that are capable of determining the outcome of the elections or truncating our democracy? Let us examine five ways the Naira redesign will affect our politics this year.
First, it will reasonably minimise vote buying and other forms of financial inducement to the voters, INEC workers or election entrepreneurs bent on rigging the election. Some have argued that this policy is a master stroke by the government against vote buying and a blow to the corruption of the electoral process. With the introduction of BVAS and INEC’s resolve to conduct a free and fair election, the window for rigging has become very narrow. Only vote buying is the significant leeway to election rigging. Arguably, some candidates and political parties have stockpiled cash for this purpose.
This sudden Naira redesign and swap may have dislodged the use of this stockpiled money to buy votes and bribe INEC workers . The CBN statistics have it that over 80% of the nation’s currency is outside the bank vaults and possibly stored in private vaults by corrupt members of the elite class who are involved in one crime or the other and who wouldn’t be able to defend the source of such huge funds if brought to the bank.
Read also: Naira policy series: Prices of perishable produce fall on naira scarcity
However, some Nigerians are bemoaning their fate because of the hardship this new Naira redesign palaver is causing in the country, and they feel that the timing of the implementation is wrong or at best suspicious even if the intention is genuine. The real threat is that elections are major logistics venture that is capital intensive . Another dimension is that elections will hold without money both in politicians’ and in people’s pockets. As a parting gift to most Nigerians, President Buhari, in his wisdom, has decided that the current generation of Nigerians must also suffer the trauma of emergency currency change which the older generation suffered in 1984. The problem then, as it is today, is that whatever the approach’s merits are, there is massive collateral damage among the masses.
Second, the Naira redesign stops the inflow of illicit money used for political purposes, especially proceeds of money laundering and financial crime. Often, cash facilitates illegal and criminal transactions because they are not easy to trace. These illicit monies always find its way in the system during elections for different unlawful purposes and can influence electoral outcomes.
Third, the Naira redesign has strangulated economic activities and added to citizens’ financial pressure. This may cause anger against the government and the ruling party, and at this crucial time of the general election, it may be costly. Economic hardship often leads voters to punish the ruling party and are prone to favouring the opposition. This happened in Greece and Italy. Therefore, experiments in macroeconomic policy are rare, especially in an election year.
Fourth, the Naira redesign crisis is exacerbating the existing excruciating inflationary trends. This may seem paradoxical given that scarcity of cash should have a deflationary tendency instead of an inflationary one. However, this case is different because of the combination of other inflationary elements within the context of the Nigerian economy. These inflationary tendencies are seen in the high cost of fuel, food, and other necessities, and these forces are so strong that the naira redesign crises have not dented the inflationary trend. Inflation at the peak of campaign and elections is definitely not a good mix.
Fifth, the Naira redesign crisis, added to fuel scarcity , and pervasive insecurity , amongst other national woes, is leading to alienation of the populace which can lead to a rise in anger, frustration, a series of protests and social dislocation. This could threaten public peace and ultimately lead to the abortion of the elections.
Now is the time to rein in the excesses of the Naira crises, deal with both the intended and unintended consequences and give the Nigerian electorate a reasonable chance to vote based on their conscience and elect leaders that will make a difference in their lives.
