•Bank branches close early, many customers stranded    

…Big companies trade cautiously at stock market amid 0.23% gain

By Isaac Anumihe, Abuja, Chinwendu Obienyi, Merit Ibe and Lukman Olabiyi

Nigeria’S Supreme Court ruling on Wednesday generated different views from lawyers, economy experts and other stakeholders, with some applauding the ruling and many calling it as a “political move” barely two days to CBN’s February 10 deadline for naira swap.

Despite the ruling of the court, Daily Sun investigations revealed that bank customers across Lagos metropolis still had a tough time accessing their cash with many of the banks’ branches closing early amid scarcity of new notes.

This was even as big companies appeared to be trading cautiously with a number of investors taking positions in small capitalised stocks during trading at Nigeria’s stock market.

 The Supreme Court on Wednesday temporarily halted the move by the federal government to ban the use of the old naira notes from February 10, 2023. 

A seven-member panel led by Justice John Okoro, halted the move in a ruling in an ex parte application brought by three northern states of Kaduna, Kogi and Zamfara.

The three states specifically applied for an order of Interim Injunction restraining “the Federal Government through the Central Bank of Nigeria (CBN) or the commercial banks from suspending or determining or ending on February 10, the timeframe with which the older version of the N200, N500 and N1,000 denomination of the naira may no longer be legal tender pending the hearing and determination of their motion on notice for interlocutory injunction”.

Delivering ruling in the motion, Okoro held that after a careful consideration of the motion this application is granted as prayed.

“An order of Interim Injunction restraining the federal government through the Central Bank of Nigeria (CBN) or the commercial banks from suspending or determining or ending on February 10, the time frame with which the now older version of the 200, 500 and 1,000 denomination of the naira may no longer be legal tender pending the hearing and determination of their motion on notice for interlocutory injunction.” the court ruled. He accordingly adjourned until February 15, for hearing of the main suit.

Reacting to the development, The International Monetary Fund (IMF) advised the CBN to extend the February 10 deadline for the use of old naira notes if the difficulties in getting new notes persist.

Ari Aisen, IMF’s resident representative to Nigeria, gave the advice in a statement on Wednesday.

“In light of hardships caused by disruptions to trade and payments due to the shortage of new bank notes available to the public, in spite of measures introduced by the CBN to mitigate the challenges in the banknote swap process, the IMF encourages the CBN to consider extending the deadline, should problems persist in the next few days leading up to the February 10, 2023 deadline,” the statement reads.

Also responding to the development, the Director/Co-founder, BudgIT, Seun Onigbinde, applauded the CBN’s idea to change the currencies, stating that it is within the apex bank’s statutory to do so.

He however said the implementation has not been properly carried out while adding that there has been an unfair politicisation of the naira initiative.

“First of all, the CBN has too much money out of circulation of the banking system and they want to bring more cash into the bank into the system so that they can control inflation and also be able to apply significant monetary tools but at the end of the day, this looks like you’re trying to solve a problem you are creating and as a result Nigerians are groaning under this hardship.

So, I think the implementation is faulty and I feel that the CBN should have looked at its capacity to print new notes. There was a time we moved from the paper to the polymer N20 and what we just found out then was that there was just an easing out process where the polymer just dominated the paper note and that was how we did not see the paper notes again. So you see that the CBN should have been more systematic about this. I personally feel this was a sudden decision and the planning was not enough, but I am also aware that there have been connotations of politicians stating that the policy was an attack on them or people stating this would contain massive vote buying but we will see how this plays out”, he said.

For his part, Partner/Senior Economist at SPM Professionals, Paul Alaje, said the ruling will give the CBN and Commercial banks time to rethink and rejig because it has been very challenging to use some bank networks.

Alaje noted that the real challenge all along has been money supply while adding this has made the policy unattainable at this time.

“Maybe they (CBN) need to go back to their strategy table and come up with another solution because I doubt this judgement by the Supreme Court. This is because all of us here think money will start circulating tomorrow.  I do not think so because the CBN had already said they have withdrawn 80 per cent of the old notes from circulation and so the judgement did not say the CBN should release the old notes into circulation and so what is available is just 20 per cent which is already here and the new notes that will circulate the economy and so the judgement has not really affected money supply”, Alaje explained.

Chairman, Manufacturers Association of Nigeria (MAN) Frank Onyebu, said “To say that the implementation of the current currency swap has been a disaster is to say the least. It really beats imagination that the CBN cannot manage something other countries manage with very minimal disruption. So much chaos has been created with implementation of this policy that it’s beginning to erode the objectives. The Supreme Court’s ruling has provided little or no relief because the problem is not with the extension of the deadline but with availability of cash. It is sad that whatever cash that was released in the system was hijacked by a few individuals with the obvious connivance of high-ranking bank officials, and no one is being brought to book. The common man on the street is being made to pay for the acts of a few corrupt individuals. The situation is further compounded by the fact that most e-payment channels are not working optimally. When they work, some merchants reject them in preference to cash which is not available!

People are suffering. Industries are grinding to a halt because workers are unable to come to work due to absence of cash. We still operate in a highly informal environment. Most transactions are still done in cash. 

I do not understand what the objectives of the government is any longer. People are making all kinds of allusions but I do not want to speculate. 

The CBN needs to make more cash available because Nigeria is not fully ripe to go totally cashless. We do not have the infrastructure, neither are the people educated enough. The economy is already suffering as a result of the the cash squeeze and may collapse altogether if urgent action is not taken. 

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But above all, as we can all observe, the toll on the people is already creating some social disruptions. There are already instances of breakdown of law and order. This could lead to total anarchy if left unchecked.

Also responding, Director, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf said, The Centre welcomes the restraining  order of the supreme court on the timeline for the currency swap. We believe this would restore normalcy to economic activities especially in the distributive trade sector, the informal sector and rural economy. It would also douse current social tension and the risk of social unrest in the country.

The small businesses and the ordinary citizens were the biggest victims of the unspeakable disruption and hardship inflicted by the impractical deadline given by the CBN on cash swap.  They are the biggest users of cash.

The CPPE reiterates its position that given the huge population of over 200million,the large informal sector which accounts for over 40% of the GDP, the large rural economy and the over 30 million unbanked Nigerians, the CBN cash swap model and timeline was greatly flawed.  It is inappropriate to arbitrarily cut down on currency in circulation without due regard to data, empirical studies and global best practices.

We affirm our position that N2.6 trillion currency in circulation is not too much for the Nigerian economy with a GDP of about N250 trillion.  Any attempt to arbitrarily cut it will create a crisis.  It is unacceptable that citizens are denied access to their cash deposited for purposes of cash swap. This could undermine the confidence of the citizens in the banking system and pose a major risk to the financial inclusion objective of the CBN. 

Onboarding citizens unto the cashless platform should not be decreed or forced on them. It should be voluntary and incentive driven.

In Nigeria, Cash to GDP ratio is less than 1.5%; while Cash/Money supply ratio is just about 5%.  These are some of the best currency ratios globally and mark of the remarkable progress that has been made in cash-less policy drive.  Cash to GDP in United States is about 9%; in the Eurozone it is about 10%.

This underlines that fact that cash is not the problem of the Nigerian economy or monetary policy effectiveness. CBN Ways and Means financing of over N22 trillion is a much bigger problem for liquidity management.  It is regrettable that a purely monetary policy management issue has been profoundly politicized as witnessed in the past few weeks. This had obscured fundamental economic conversations.

Meanwhile, in compliance with the Supreme Court order, we urge the CBN to immediately allow the old and new currency notes to co-circulate until such a time when the old notes are gradually and completely withdrawn.  

In reactions to the Supreme Court’s verdict, Senior Advocate of Nigeria, Mr Seyi Sowemimo, described the apex court’s verdict as welcome development.

He said: “ I have not read the ruling but speaking as citizens of this country, I see it as a welcome development, it means that the ssue of deadline for old naira note has been suspended temporarily”.

Human rights activist and lawyer, Dele Igbinedion, said the Supreme Court has the final say  on the issue of interpretation of  Nigerian constitution .

According to him, the apex court’s verdict was temporary and not final because it is yet to decide on the merit of the case. However, the senior lawyer said the apex court’s verdict was a welcome development and that the court should be commended for rescuing citizens of the country.

For his part, Kabiru Akingbolu , said Supreme Court is right to have temporarily halted the move by the Federal Government to stop the use of the old naira notes.

Akingbolu said the apex court’s verdict was no infringement on Central Bank of Nigeria (CBN), Act.

He said: “ First, the law according to the realist school of thought is what the judges say from the bench. 

“In other words, the interpretation given to the law in it’s practical sense or functional definition is exactly what the law means. 

That apart, the Supreme Court of any country is a policy court which determines matters in line with law for the betterment of the people and not to inconvenient them. 

“Also, the verdict is not final but an interim order to forestall breakdown of law and order because if this scarcity of naira notes and its attendant consequences continue to linger, it is dangerous for the society. We should, as a matter of fact, thank the Supreme Court for saving the nation from total breakdown of law and order because things are getting out of hand. As to the issue of breaching the CBN act, the court will decide it when it hears  the substantive matter. But the order is a welcome and fantastic one”.

A lawyer and an economy expert, Mr Eze Onyekpere, has blamed the CBN for taking an extreme position in the introduction of redesigned naira notes, stressing that the CBN took extreme position that caused businesses to close down, says Onyekpere

According to him, the apex bank did not introduce new naira notes into the system as it should but caused a cash crunch that made  some  businesses to close down because lack of patronage.

“The determination of civil rights and obligations between individuals and government and between government and government, the court has the jurisdiction to settle disputes in according with section 6 of the constitution. So what has happened is that you evoke the jurisdiction of the Supreme Court to entertain dispute between states and the Federal Government because under the law, disputes between the state and the Federal Government goes straight to the Supreme Court because it’s considered a matter of urgent national importance that must not be delayed by going through the federal high court. It may take years. So, that’s the situation. You can understand that this is an exparte application. Now there’s an interim injunction of February 15 has been given which is a date when all the parties would have been served and they now have to return for the legal fireworks to begin. 

“So, the implication is that the old notes will still be legal tender until any further directive. Until that February 15, if they (CBN or Federal Government)  are able to vacate the order, that will be good. But if they are not able to vacate it, it is at the discretion of the court to make further comments on that. That’s the situation now. So, it has left the domain of the CBN.

“And I guess what happened is that the CBN to a great extent is responsible for the turn of events. The idea of banking is built on the foundation of trust. The fact that you put your money in the bank with the assurance that whenever you need it, you go and collect your money. People who have money in banks are no longer able to access them. They can’t access cash. The electronic payment  systems are not working efficiently. So, people are cash-trapped not because you don’t have money but because you can’t access your money in the bank not based on any fault of yours but based on CBN policy. It was an extreme position by the CBN who had come to the conclusion that there was excess money outside the system. You move from that position to the total squeeze. After saying that you have recovered about N2.1 trillion you now started squeezing it to the extent that people started finding difficult to run their businesses especially in the informal sector. Many people selling perishable foods have lost those goods because there’s no patronage and electronic banking system is not what you use to buy tomato or onions or pepper or goat meat or whatever. What I am saying is that the CBN went on extreme. Assuming it was releasing new notes there may not have been any need to extend the deadline from January 31 to February 10. It would have been a seamless exercise. Everybody would have been happy. By now nobody would have been talking about it. But it’s a cash-sqeeze,” he said.