CBN’s policy paralysis

 It’s nearly two weeks since the Supreme Court overruled the Central Bank of Nigeria (CBN) on its naira swap policy, but Nigerians yet struggle with scarcity of cash and gridlock in digital banking for daily transactions. The regulatory bank is playing dumb on the apex court’s verdict, and so is the Federal Government despite that President Muhammadu Buhari took frontal ownership of the policy through a broadcast on 16th February approving the use of old N200 notes till 10th April, out of the currency denominations declared to have ceased to be legal tender since 10th February. In other words, the authorities appear to have found a convenient turf in a brutalised citizenry to test the limits of obduracy against judicial supremacy.  

CBN Governor Godwin Emefiele had on 26th October, last year, announced the policy by which he said the N200, N500 and N1,000 denominations were being redesigned and the old notes withdrawn from circulation. The regulatory banker cited as a major reason for this measure the need to mop up some three trillion naira outside of the banking system said to have deluged the economy with rogue liquidity – with attendant dislocations such as runaway inflation and heightened criminality like kidnappings for which ransom payments were being made by victims. Emefiele gave an initial deadline of 31st December, 2022 for the old currencies to expire, be retrieved into bank vaults and replaced with the redesigned currencies. 

A crucial plank of that policy was a weekly cash withdrawal limit for individuals and corporates purportedly aimed at tightening the noose against fresh liquidity surge in the economy. With the 2023 general election looming, many Nigerians argued there was more than just economics to the timing of the policy and its rushed implementation. But Emefiele, with backing from the presidency, insisted on the policy timelines; even when there were glaring shortfalls in projected circulation of new notes, he only slightly adjusted the expiry date for old notes to 10th February. Meanwhile, an acute crisis played out in the economy as many Nigerians couldn’t access their funds with deposit money banks. Routine business activities took a hit and have stalled, even until now. Irate bank customers vented their frustrations on the banks as a good number of banks were attacked and automated teller machines (ATMs) vandalised. The banks in turn shuttered their doors and ATM facilities against customers, apparently for need for self-protection, leaving in the lurch many depositors desperately seeking access to cash.

The governments of Kaduna, Kogi and Zamfara states strongly took issue with the CBN policy over the impact on citizens in their respective domain and instituted a suit at the Supreme Court against the Federal Government to stop its implementation. Along the line they were joined by about seven other state governments including those for Lagos and Rivers, while Edo and Bayelsa governments joined on the Federal Government’s side to defend the policy. The Supreme Court on 8th February issued an interim injunction restraining the Federal Government from implementing its 10th February deadline for expiration of old notes. It was despite the injunction that President Buhari, on 16th February, made a broadcast laying out the benefits of the naira swap policy and  announcing isolated extension of the validity of old N200 notes to 10th April – implying that the old N500 and N1,000 notes remained expired since 10th February in line with CBN schedule.

After a couple of adjournments in the suit before it, the Supreme Court  gave a verdict on 3rd March overruling CBN’s timeline and extending the validity of old currencies including the N500 and N1,000 notes to 31st December, 2023; these are to circulate alongside the new notes, the court said. It also set aside the cash withdrawal limits stipulated by the CBN. The apex court ruled that although President Buhari had authority to act as the federation’s chief executive, he was yet required to give federating units adequate notice before implementing the new monetary policy through the CBN. It observed that before the old naira notes were withdrawn, the states had not received reasonable notice as required by Section 20(3) of the CBN Act, and consequently it ordered that Buhari’s authorisation for CBN to withdraw the old banknotes was illegal, null, void and of no effect.

“The naira swap policy has been one unmitigated disaster that it is shocking Emefiele isn’t seizing the respite offered by the Supreme Court verdict  to recalibrate.”    

Since the Supreme Court gave that verdict, it has been mum by CBN, leaving the economy in confused pendency and disarray. In the absence of new notes, deposit money banks delayed on easing the cash crunch being experienced by citizens with re-issuance of the old notes they had retrieved into their vaults. They claimed they were yet to receive CBN’s directive to that effect. Some people wondered whether the regulatory bank was on its part awaiting orders from the presidency to act on the Supreme Court’s verdict, which would be sheer rigmarole since the judicial orders were explicit, definitive and mandatory in themselves unless government contemplated disobedience to the highest court of the land. But even that possibility seemed far-fetched for the CBN because when he was approached by journalists on the Federal Government’s next steps, Justice Minister and Attorney-General of the Federation Abubakar Malami (SAN) was reported saying monetary policy rules weren’t the government’s call. 

Lately, some deposit banks resumed dispensing the old N500 and N1,000 notes to customers at their ATM terminals and over the counter, citing tacit nod by the CBN. There is, however, resistance to the old notes in the citizenry, complicating the chances of an early return to normalcy. Some bank customers were reported to have refused collecting the old notes over bank counters, while business operators including fuel stations are rejecting the notes for transactions on the strength of CBN’s earlier policy declaration and President Buhari’s national broadcast that have not been openly recanted. People were reported saying they were in no hurry to accept the old notes for transactions until Mr. President or at least the CBN gives the go-ahead. Late last week, Thursday, Ondo State Governor Rotimi Akeredolu made a statewide broadcast in which he berated the refusal by some residents to accept the old notes for transactions despite the Supreme Court’s verdict validating the notes.

The naira swap policy has been one unmitigated disaster that it is shocking Emefiele isn’t seizing the respite offered by the Supreme Court order to recalibrate. The redesigned notes under the policy remain hard for many Nigerians to come by, never mind that same notes have featured in rogue abundance at vanity fairs – in the hands of currency sprayers, for instance. The CBN touted the policy as aimed at deepening cashless transactions in the economy, but the digital platforms of most banks have been gridlocked by uptick in usage traffic without commensurate expansion of load capacity. Many times, the banks’ digital platforms are down and transactions simply don’t go through. At other times – and this is worse – you make a transaction and you get debited without the intended transaction beneficiary getting credited. You would have to go to the banking hall in-person to get it sorted out by customer service staff, as customer service contact channels are no longer responsive to call-ins, mails and messages. And because such failed transactions now frequently occur, customers are forced to frequent banking halls more than before for resolution. The awful part is that bank personnel, who by service culture used to be solicitous, have become resentful – possibly owing to increased pressure on them. All these isn’t to talk about the high level of illiteracy in this country that precludes many from resorting to digital banking. Whereas the CBN said it hoped for greater financial inclusion of Nigerians, it has ended up encouraging exclusion, because when many small holders who banked their cash hitherto get the cash out, they are likely to hold it outside of banks to avoid the ordeals incurred by the cash swap policy.

Go to open markets where the bulk of transactions are done in cash and you would find an extremely low keel of activity. The street economy is in paralysis, and all that redress takes is for Emefiele to openly announce that his CBN is complying with the Supreme Court’s order. It really doesn’t take much to do that, only a dented ego.