The Central Bank of Nigeria (CBN) secured the approval of President Muhammadu Buhari to redesign the three highest denominations of the naira notes. While some see the policy as a waste of time and resources, others reason that the policy is a welcome development in view of the abuse that the naira have been subjected to by currency traders and those who buy the currency to spray at parties. ADEYINKA ADENIJI takes a look at both sides of the coin in this report.
Despite the express criminalisation of all forms of trading in Naira, it subsists as another source of worry to fiscal and monetary policy formulators. Widely condemned, yet generally patronised in the mold of Prostitution – an illegal trade as old as mankind, manifesting in irrepressibility against every human machination to rid the society of them. Instructively, the CBN Act 2007, the law regulating banking activities and functions in Nigeria is unambiguous as regards the menace of currency trading, sections 20 and 21 of the law, in a review penned and released by the Legal Services Department of the apex bank “criminalises” all forms of trading in the national currency.
The law on trading in naira notes
The Legal Service Department of the apex bank offers an apt summary of the law on handling the Naira: “To stem the abuse that the Naira is constantly subjected to, increase the active life of Naira notes and coins and promote confidence in their usage as medium of exchange, refusal to accept the Naira, trading in Naira notes and coins, spraying of the Naira and all such abuses have been criminalised and appropriate sanctions imposed.” The unambiguity of these points out clearly that traders in bank notes are criminals. Nonetheless, the prescription of imprisonment of “not less than six months, or a fine not less than “N50,000 is considered one of the factors that have emboldened the continuity of street trading in Naira notes and this is economic sabotage. The penalty is obviously inadequate considering the grave consequences upon the system and never discourages crime.
Whereas, saboteurs are felonious and must be charged as “against the State”, the unchecked desecration of the national currency; the ‘living’ emblem of any civilization, which represents the integrity and dignity of such nations will flawlessly qualify for comparison with the national embarrassment of stealing a legislative Assembly mace, or an unprovoked scaling of the fence of the seat of power with the sole intention of kidnapping the Commander-In-Chief. How descriptive! Therefore, whoever holds banknotes with the motive to transact in them commits a felony and ought to be treated as such. But the reverse has always been the case here in Nigeria, where it appears the situation has come to stay in the society. Having crept into the culture and adopted even by religious bodies as a way to express certain identifiable emotions as dictated by self-imposed tenets; spraying money at parties will always be there as the occasion demands and this will also continue for the new banknotes. This in turn has created an age-long illicit industry of currency racers including actors from the lower, medium, and upper crust of society.
A nevermentioned syndicate with obvious links to the bank vaults. Through illegal transactions in Naira notes through discounting agreement between a seller and buyer that makes the latter forfeit as much as between 25 to 30 percent on a good day, and as high as 40 on excepontional occasions of the face value of any given amount of old notes in exchange for mint fresh sheets of the local currency, undoubtedly reduces the national currency to mere discountable paper instruments.
This however does not rob the Naira of its legal tender nature. While general acceptability is a prominent feature of any given currency, its rejection for transactional dealings for any reason whether for its looks or age is a crime and deprives the currency its right to acceptability. Discounting rate is generally determined by the availability of products (new naira notes), time and season, day of the week, and sometimes, observed desperation on the part of the buyer. Investigations revealed that hawkers and vendors seen at event enters and motor parks are mere retailers with allegiance to highly-placed wholesalers possibly with access to the National Security Printing and Minting Company (NSPMC), the CBN, (formulation of all anti-currency trading policies) and have large stashes of idle funds, usually outside of the banking vaults and part of which renders CBN’s monetary policies ineffective. The preposterous nature of this illegal business results in scarcity of new notes, thereby leaving plenty of new banknotes at the detrimental disposal of a few members of the Naira-hawking cabal, and a few old ones to scramble for the deprived majority.
This leads to pressure on the few accessible old notes and increases wear and tear chances and defacement and mutilation of those in circulation. As the yuletide period approaches, however, which invariably coincides with the ongoing currency management reforms of the CBN, parallel consideration of a Naira refacing and the effect of efforts to discourage the lawlessness of trading in the symbol of national sovereignty reveals, among other things, that perpetrators may remain unreachable whether directly by the long but seemingly shortened hand of the Law or by a correc-tive effect of any policy.
How role of hawkers may affect new naira notes
Sadly revealed, additionally is the fact that the faceless perpetrators of the criminal trade are unreachable and may have one of the strongest bearings on, the success, or otherwise of the currency management reforms of the apex bank. After the October 26, 2022 announcement of the conclusion of plans to remodel the Naira by the Governor of the Central Bank, Godwin Emefiele, President Muhammadu Buhari, in the presence of top government functionaries, unveiled the new Naira notes at the State House before the weekly National Executive Council (NEC) meeting. As earlier announced by the CBN Governor, the Naira appearance reform only affected the three highest denominations of the local currency: the 200, 500, and 1000 notes. It excludes the 100 naira note. Before the behind-schedule unveiling ceremony at the State House on Wednesday, November 23, 2022, by the President, Emefiele reiterated the duration of a hundred days allowance within which all old notes must have been deposited in the banks. “We will not shift any deadline,” he said.
“What we have done is not against the law. It is in tandem with the law. We announced this program on October 26, 2022. And we said that upon release of the new currency, the legal tender status will run concurrently with the old currency till 31st January, 2023. That is almost 100 days. 100 days is enough for any person in any part of Nigeria to deposit his money in the bank and get ready to withdraw cash when the new notes are released.” The unveiling by President Buhari in November of the redesigned Naira notes unarguably marked a new twist in the fight, hitherto, lame fight against the sovereign degradation in form of demands to buy and noggin for sale of the economic symbol of national heritage.
Two major reasons were cited for the refashioning of the Nigerian currency, first, to enhance its security and halt economic and financial sabotaging and also, discourage kidnapping and other forms of violent crimes and its characteristic cash ransoming. There is an urgent need to salvage the falling Nigerian economy. Every index points to a nation at the tip of the precipice and on the verge of economic tipping. An ineffective monetary policy had succeeded in the enrichment of a few who hold on to large sums of cash in domestic vaults.
More currency outside the banking system
According to the CBN Governor, out of about N3.3 trillion issued bank notes, banks in the country could only account for a paltry N600 billion, representing less than 20% of the total volume of money supposedly in circulation. Speaking on the justification for the Naira redesigning policy, the CBN Governor said; “a significant hoarding of banknotes by members of the public, with statistics showing that N2.72 trillion out of the N3.26 trillion currency in circulation as of June 2022 was outside the vaults of commercial banks across the country, and supposedly held by members of the public.” This statistic continued by Emefiele shows that 84.71 percent of the currency in circulation is outside commercial banks’ vaults, with only 15.29 percent in the Central Bank and Commercial banks’ vaults. Emefiele also cited a ‘’worsening shortage of clean and fit banknotes with an attendant negative perception of the CBN and increased risk to financial stability among other reasons for the remodeling.” It however remains to be seen how what has been termed a mere “recoloration” of bank notes would affect the daily earnings of influential financial criminals and economic saboteurs engaging in street hawking of the naira. No wonder the array of reactions that greeted the unveiling of the remodeled naira notes. While many expressed disappointment over what they described as mere ‘discoloration’ of the currency, others hailed the Federal Government in the fantasy that a 100 hundred day window for the expiration of old currency notes will expose the perpetrators of currency hoarding. This they concluded would be made manifest in the apex bank’s determination to monitor for suspicious deposits within the period.
Activist, others react
However, this public fantasy has been invalidated by the position of rights activist and Coordinator of Democracy Vanguard (DV) in the Naira redesigning policy and its likely effects on currency trading. In a chat with New Telegraph, Adeola Soetan opined that the exercise, lofty as they may sound requires beyond lip service and mere pronouncement, if the intention is to effect change in the system. He is of the view that a serious CBN must first do away with the multi-modal FX market system. This, he says, would greatly reduce, if not eradicate hoarding and aid the effectiveness of fiscal monetary policies. Expectedly, another section of the public defended the policy, positing that the new policy is more about improving security and not about appearance.
Despite the varying dimensions of reactions over the potency of the redesigning policy to correct the systemic anomalies in the currency management endeavour of the apex bank, particularly when the ongoing exercise has manifested some of its gains, a valid argument in the public now centres on the near impossibility of effectively stemming the tide of Naira debasement through its buying and selling. Consequently, upon the provision of this section of the extant laws, it was expected that policymakers at the CBN would consider a policy with an all-encompassing effect; on not only hoarding, counterfeiting, and excess liquidity, but ought also to discourage desecration through spraying, matching, and trading of the currency at parties and motor parks.
However, interaction with these illicit traders in bank notes suggests that the latest banking policy is either insensitive to all important needs to curb the economically inimical degradation of the Naira. At a major event in Ikeja, Lagos, a fifty-something-year-old woman who had been in the business for almost two decades who refused to mention her name or her suppliers, obviously as a matter of a secretive conduct code of the currency trading industry, feels unconcerned about how the policy may affect her business, because according to her, “unless there are no parties again” “Whatever policy is introduced, so long as there are parties and social gatherings, people will always demand for new notes.”
While averring that the policy may bring about a lull in sales, she said it would be temporary, adding that the effect of a remodeled 200, 500 and 1000 will be minimal on business, due to the exclusion of 100 and 50 naira notes. This she says absolves the traders and shields them from the risk of having trapped unchangeable banknotes at the close of the exchange window. She revealed that the choice of the highest three denominations of 200, 500 and 1000 Naira notes, leaving out 100 notes, was believed by all involved with the illicit traders as the most sought after. They are unwittingly excluded and their cost, if any, is greatly minimised. From the foregoing, it is obvious that the remodeling procedure will have little or no effect on currency trading, due largely to their technical removal from the web of scrutiny hoisted by the policy. The expiration of old notes for new ones will also not address the issues of concern to sections 20 and 21 of the Banking laws that bother on handling, trading and spraying of the naira. It is however worthy of note to state here that the evil perpetrated against the Naira, implication, the Nigerian Economy, and by extension, her image is not a result of a dearth of laws and regulations, but the lack of will to enforce them.