The state governors’ success in suppressing the implementation of the naira design at the Supreme Court is taking effect as it has been announced that old notes remain legal tender until the end of the year. However, the slow response to the court order and the lack of coordination to inject cash quickly into the economy remain a concern.
It is common knowledge that Buhari and Emefiele are hell-bent on making a point unknown to the naked eye. To be fair to them, there is doubt about the objectivity of the Supreme Court’s judgement by Justice Agim. In the ruling, the judge faulted Buhari for approving the redesign after a personal conversation with Emefiele. He said the correct process was not followed to redesign the naira. However, in his judgement, he ended up making a similar decision by not consulting with the stakeholders before ruling. Essentially, he copied Buhari and Emefiele’s unconventional method to make his ruling.
Had the court consulted with the stakeholders, they would have provided quality information that would benefit the economy and the wider public. For example, they would be able to know whether the printing and minting company has the capacity to print the required amount of cash between now and the end of the year. They would have known how long the commercial banks need to build capacity to cater for the increased demand for their services. Overall, if they had consulted, as they accused Buhari of not doing, they would have known how long the suffering citizens were required to adopt the new currency swap.
If care is not taken, we may return to square one by the end of the year when the old notes cease to be legal tender because informed decisions were not made to make this judgement. The judge was in haste and decided to take it upon himself to act as the apex bank governor with little information about the macroeconomic environment. The judge should have ordered the CBN governor to follow the process by appropriately consulting with the stakeholders and then reporting to the court to make a ruling. But rationality is taken out of the equation in a political season like this.
Objectively, using the naira redesign policy to create a cashless society is not optimal because it mainly creates cash scarcity. Emefiele has respected the law and made the necessary announcement, but the economy will need an additional policy to recover from this shock. An immediate injection of cash into the economy matters for the court order to be effective and to allow the economy to breathe because the cash crunch is choking it.
The ongoing cash crunch confirms that cash is still the preferred option. When it comes to everyday budgeting, cash remains the trusted, stable, and fundamentally secure means of transaction. On the other hand, digital payment maintains its position – a close option for transactions and is expected to remain so for the foreseeable future.
Unlike the rest of the world, the digital transaction option is glorified in Nigeria; seen as a method used by superior individuals and entities. Some consider it a signalling tool for their social status, elegance and literacy level. It should not be. Those who demand cash are judged as less educated, backward, and of a lower social status. They are not, and such discrimination is myopic. If the CBN extracted its sample from this group of people, it would explain why the economy is here.
Evidence of this forceful transition to a cashless society shows that the economy and all its players were unprepared for this unsolicited event. The deficiencies of the banking sector are clear as the economy is struggling with high demand for cash. The banks are overstretched as they do not have the resources to cater for the high volume of digital transactions. They cannot manage a high inflow of customers, and they do not have enough branches across the country.
The inadequate services of the digital payment system have made people lose money, directly and indirectly. People pay around 15 per cent to retrieve cash from POS providers. Numerous transactions have failed, reducing customers’ cash needlessly and consumers being billed for failed POS transactions. The banking applications are also affected as they are overwhelmed with many users beyond their capacity. The failure of e-payments worsens the situation, making new users revert to demanding cash. Hackers and criminal gangs are also exploiting the system’s vulnerability.
The CBN is also unprepared. Just last week, they released an operational guideline for commercial banks to share data between themselves. It ought to be done long ago if they were rational and truly understood the goal of the cashless policy, which has choked economic activities. The lack of economic activities in the country may dip into another recession as Buhari leaves office.
Voters will be interested to know what the three losing presidential candidates would have done in hindsight. Atiku, Obi, and Kwankwaso commanded over 60 per cent of the votes in the last election. Their voters are still disappointed as they either supported the cashless policy with their silence or made a public announcement supporting it.
In a nutshell, implementing this naira redesign to achieve this cashless fantasy has created more economic problems than the solution it thought it would achieve. Individuals and businesses find it difficult to make transactions for their daily needs, and small businesses are suffering because they prefer to use cash as their main transaction means.
If there was any doubt that cash is king – preferred over e-payment – this event has debunked it, and a cashless society remains a distant prospect.
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