Implications of Naira swap crisis on 2023 general elections

 

Introduction

This weekend’s seventh consecutive general elections in this Fourth Republic has been imperiled by the ongoing Naira Redesign and currency swap crises. Not a few political juggernauts have read political undertone to what was initially considered sound economic decisions. In the ruling All Progressives Congress, things have fallen apart as some of the governors of the political party have openly disagreed with the president, Muhammadu Buhari on the handling or purported mishandling of the policy. Even a serving minister, Festus Keyamu, SAN has said openly that the president was misadvised by the Central Bank of Nigeria governor, Godwin Emefiele. Some APC governors have dragged the federal government to court on this matter while untold hardship has been visited on the Nigerian populace. There have been protests against the policy in many Nigeria states and lives have been lost and property worth billions of Naira destroyed. In fact, the standard bearer of the ruling party, Asiwaju Bola Ahmed Tinubu has accused a cabal in the presidency of hoarding Naira and fuel in order to make him lose the presidential race scheduled for this weekend, February 25, 2023. Therefore, should APC lose massively in next Saturday’s elections, the ready alibi is the lingering fuel scarcity and cash crunch.

The current currency crisIs has shown the nexus between economy and politics and vice versa. There is a field of Politics called Political Economy. An online source known as Cosmologically Insignificant in analysing Max Weber’s theory of substructure, superstructure and human rights says “Politics and law are parts of the superstructure which are determined by the substructure. They are formed by the interests of those who have economic power and they serve to defend these interests”

Brief History of Currency Redesigning in Nigeria

According to an Associate Professor of History at Obafemi Awolowo University who also hold a doctorate degree in Law, Adetunji Ogunyemi, significance of currency is six-fold, and they are as follows: Legal tender; Store of Value; Means of Exchange; Symbol of national sovereignty; “Supreme Ambassador” of a country’s financial relations and A pillar of freedom from labour oppression. Ogunyemi while presenting a paper titled “History of Currency Change and Redesigning in Nigeria Before 2023: It’s Merits and Demerits” at a Konrad-Adenauer-Stiftung and National Institute for Legislative and Democratic Studies Training Workshop for the Press Corps of the House of Representatives and Senate on February 6 and 7, 2023 traced the history of the first currency redesigning of the Naira to July 2, 1977 when N1, N5 and N10 were redesigned. The second redesigning took place in 1984 under the incumbent president when he was military Head of State. The issuance of N50 note by Gen. Ibrahim Babangida (Retd.) in August 1991; the redesigning of N5, N10 and N50 under Prof. Chukwuma Soludo as the Central Bank Governor in February 2007. President Olusegun Obasanjo’s administration introduced high denomination notes as follows: N100 (December 1999), N200 (Year 2000), N500, (2001) and N1000 (2005).

It will be recalled that on Wednesday, October 26, 2022 at a media briefing the current Governor of Central Bank of Nigeria, Godwin Emefiele announced the redesigning of some of the banknotes. He hinged the apex banks decision on the powers conferred on it by Section 2 (b) of the CBN Act 2007. According to Emefiele, currency management by CBN has faced a number of challenges for some time now. This include: Significant hoarding of banknotes by members of the public, with statistics showing that over 85 percent of currency in circulation are outside the vaults of commercial banks. At the end of September 2022, available data at the CBN indicate that N2.73tn out of the N3.23tn currency in circulation, was outside the vaults of Commercial Banks across the country; and supposedly held by the public. This, to my own mind, is indicative that Nigerians have not fully accepted the cashless policy of the Central Bank.

Other challenges are: Worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability; Increasing ease and risk of counterfeiting evidenced by several security reports. Although global best practice is for central banks to redesign, produce and circulate new local legal tender every 5–8 years, our existing series of the Naira has not been redesigned in the last 20 years.

CBN believes that the redesign of the currency will help deepen our drive to entrench cashless economy as it will be complemented by increased minting of our eNaira. This will further rein in the currency outside the banking system into the banking system thereby making monetary policy more efficacious. Also, in view of the prevailing level of security situation in the country, the CBN is convinced that the incidents of terrorism and kidnapping would be minimised as access to the large volume of money outside the banking system used as source of funds for ransom payments will begin to dry up.

Ab initio, citizens were asked to bring in their old naira notes from October to December 15, 2022 when they will start getting the new Naira notes of N200, N500 and N1000. There was no mention of withdrawal limit at that point. Nigerians were told that the new currencies will be printed by the Nigerian Security Printing and Minting Company better known as Mint. President Buhari proudly said Nigeria is one of the four countries in Africa that prints her own currency. The currency swap was initially meant to end by January 31, 2023. Unfortunately, things haven’t gone as planned. The new Naira notes were not available as at December 2022. It was not until mid-January 2023 that many Nigerians were able to site the new currencies. However, there was acute shortage of the new banknotes. Unfortunately, about three days to the end of January 31, 2023, many business owners stopped collecting old naira notes from their customers. I personally experienced this rejection of the old notes on January 27 and 28, 2023 when I couldn’t spend the old notes with me. Mercifully, on Sunday, January 29, 2023, the CBN governor after meeting with President Bujhari at Aso Rock Villa announced extension of the lifespan of the old notes to February 10, 2023.

Litigations over the currency swap

In the course of the time, the APC Governors forum sent representatives to the president to appeal to him to prevail on the CBN to allow the old notes to circulate concurrently with the new ones till the end of the year or at least six months. The President himself called for a meeting of the Council of States which met on Friday, February 3, 2023.  The National Council of State (NCS) tasked the Central Bank of Nigeria (CBN) to make the new Naira notes available or recirculate the old Naira notes to ease the current suffering of Nigerians. The governments of Kogi, Kaduna and Zamfara also headed to the Supreme Court and got an interim order to stay off  the deadline for circulation of the old naira notes. As at Wednesday, February 15, 2023, the Supreme Court joined nine states as parties in the suit filed by Kaduna, Kogi and Zamfara challenging the naira swap deadline. This is as the Governors Nasir El-Rufai and Yahaya Bello of Kaduna and Kogi respectively attended the court proceedings. The Justice John Okoro-led seven -member panel (Amina Augie, Adamu Jauro, Ibrahim Saulawa, Tijanni Abubakar, and Emmanuel Agim) joined the Attorneys General of Katsina, Cross River, Lagos, Ondo, Ogun, Ekiti and Sokoto States as co-plaintiffs. The Attorneys General of Edo and Bayelsa states were joined as co-respondents. The case has been adjourned for hearing on February 22, 2023. Meanwhile, the Socio-Economic Rights and Accountability Project has filed a lawsuit against the President over “the unlawful directive banning the use of old N500 and N1,000 banknotes, contrary to the interim injunction granted by the Supreme Court that the old N200, N500, and N1000 notes remain legal tender.” Joined in the suit as defendants are the Attorney General of the Federation and Minister of Justice, Abubakar Malami, SAN, and the Central Bank of Nigeria.

Impact of Naira Scarcity

Majorly affected by the cash crunch are micro and small enterprises whose owners do not have bank accounts and as such could not receive online money transfer. Many of such businesses have been recording low sales or fold up out rightly. In fact, many Pont of Sale Operators have ceased to operate as they could not access cash for their potential customers. Lawyers and litigants in the Federal Capital Territory, Abuja, have expressed frustration over their inability to file court proceedings as a result of the scarcity of new naira notes. The News Agency of Nigeria interviewed some lawyers and gathered that the lawyers in Abuja were worried as the situation is affecting their legal practice.

President Buhari’s appraisal of the policy

In his national broadcast on February 16, 2023, President Buhari noted that “Notwithstanding the initial setbacks experienced, the evaluation and feedback mechanism set up has revealed that gains have emerged from the policy initiative.  I have been reliably informed that since the commencement of this program, about N2.1 trillion out of the banknotes previously held outside the banking system, had been successfully retrieved. This represents about 80% of such funds. The president further noted that “this new monetary policy has also contributed immensely to the minimisation of the influence of money in politics. This is a positive departure from the past and represents a bold legacy step by this administration, towards laying a strong foundation for free and fair elections.”  He thereafter gave approval to the CBN that the old N200 bank notes be released back into circulation and that it should also be allowed to circulate as legal tender with the new N200, N500, and N1000 banknotes for 60 days from February 10, 2023, to April 10, 2023, when the old N200 notes cease to be legal tender.

Implication on the forthcoming 2023 elections

On Tuesday, February 7, 2023, chairman of the Independent National Electoral Commission (INEC), Prof. Mahmood Yakubu, met with the governor of Central Bank of Nigeria (CBN), Godwin Emefiele, over the new naira policy, at the CBN headquarters in Abuja. In his courtesy visit to the CBN, Yakubu expressed concern about the policy and how it might affect the 2023 general elections if not managed. He said some of the service providers, especially transporters, are required to be paid in cash and besides, experience has shown that emergency situations do arise on election day, which could demand the use of cash by the Commission. He, therefore, requested concessions regarding the naira redesign policy with specific reference to the limitations placed on cash withdrawals. Responding, the CBN governor assured INEC, as well as Nigerians, that the apex bank won’t do anything inimical to the successful conduct of the polls, assuring that the apex bank will provide INEC needed naira notes as required.

Views of Kano and Kaduna State governors

Governors Abdulahi Ganduje and Nasir El-Rufai have openly disagreed with the president on this issue and believed it is politically motivated to prevent Asiwaju Bola Ahmed Tinubu from winning the next presidential election.

Conclusion

Prof. Ogunyemi in the earlier referenced paper believed that “The current currency redesigning, though well-intentioned but the administration and management of the process has produced dire, unintended consequences for the system, and untold hardship for the citizens, It could have been better handled through careful planning and appropriate timing.” I totally agree with this scholar’s submission that the currency redesign and naira swap was a right thing being done at the wrong  time and it may hurt APC at the 2023 elections.