What started as a rumour has since become a reality, with the scarcity of naira spreading across the country. Banks’ customers who wish to withdraw cash with their ATM cards are unable to do so and where they are, are only able to get N5000, in some instances. Already, we have started witnessing queues at ATM points and bank premises.
This development is disrupting the lives of ordinary Nigerians who depend on low-volume daily transactions to keep their businesses and families going. This is also affecting businesses in parts of the country where banks have shut down due to insecurity. There is also the issue of poor networks in some parts of the country, which frustrates mobile transactions.
Sadly, no concrete reason has been proffered for this new round of naira scarcity.
This new round of suffering is a sad reminder of an experience that Nigerians are in a hurry to forget. Under a supposed naira redesign programme by the former leadership of the CBN, the monetary authorities unleashed upon the citizens months of anguish as the currency notes, both old and new, disappeared from the banking system.
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When this phenomenon appeared in October this year, the CBN blamed it on high volume withdrawals from the CBN branches by the banks and what it called panic withdrawals by customers from the ATMs. There is a lot wrong with this explanation. If indeed the deposit money banks were withdrawing high volumes of cash from the regulator, was the cash not meant to be passed on to the banks’ customers? How would that lead to panic withdrawals by the banks’ customers? Also, if the above reasons given by the CBN were truly the cause of the scarcity, why has the regulator not found a solution to it by now?
It is time for the CBN to come out clean on this issue. If there is a problem with the economy, different from what is generally known, Nigerians have a right to that information. It would be recalled that when a similar issue occurred in the early part of this year, we saw huge queues at bank premises, Nigerians experienced untold hardship and some persons even died because they could not access cash for medical care or to purchase the necessary drugs. Also, the economy suffered a significant loss during that period, which both the citizens and the country are yet to recover from. It is, therefore, worrisome that this phenomenon has returned. Something must be done urgently to address it, especially as we approach the festive period.
It is curious that despite the Supreme Court’s ruling recently that both the new and old naira notes remain legal tenders in the country, we are having this problem.
If the authorities claim that bank customers are withdrawing large amounts of money, does this also apply to some sections of the northern region, where there are no banks at all, due to the insecurity prevalent in those places?
Or, could it be that the central bank is mopping up currency in circulation as part of its efforts to fight inflation? This is a common refrain that monetary authorities have used over the years, though its effectiveness in curbing inflationary pressures remains debatable. This is a classical, textbook example of managing inflation by reducing money in circulation. In addition, this could also be designed to curb the demand for foreign currencies by reducing the cash availability that drives the demand for such currencies, leading to the depreciation of the naira.
We acknowledge the fact that maintaining a stable price level is a key function of the central bank. Yet, we also advocate that in light of current developments globally and domestically, other policy tools as well as a mix of policies should be applied in tackling inflation. The belief by central banks that mopping up liquidity in the economy is an appropriate tool to fight inflation has serious limitations, especially in an economy like Nigeria’s with all the structural rigidities and other obvious causes of inflationary pressures.
We are inclined to believe that the current naira scarcity has arisen due to CBN’s mop-up of cash from the system, but we call on the bank to stop it and reverse the trend. It should release cash to the public as there is no justification for this round of squeeze.
We have had several rounds of tightening measures this year, including raising the Monetary Policy Rate, currently standing at 18.75 per cent. Yet, inflation has defied all of them and stands at 27.33 per cent currently. And we must note that the economic policies of this government such as petrol subsidy removal and floating of the naira contributed in no small measure to the inflation rate. So, the authorities should address the real factors responsible for inflation, rather than impose further suffering on Nigerians.
We counsel the authorities, therefore, that as the nation looks forward to the new year, all efforts must be channelled towards reflating the economy, rather than continuing with this tightening, hawkish stance. It is choking Nigerians. For now, CBN, release cash to Nigerians.
