Confusion over old naira notes crippling informal economy
Last week, some money deposit banks began to dispense the controversial old naira notes following the latest Supreme Court ruling. Some bank customers and members of the nation’s informal sector, like fuel station attendants, supermarket owners and commercial vehicle drivers refused to accept the notes pending the release of an official statement from the federal government, as analysts warned that unless the issue is urgently resolved, the informal sector of the economy will pay a higher price for the current confusion, as cash shortage bites harder.
As confusion reigns over the federal government’s noncommittal response to the Supreme Court’s recent ruling on the status of N200, N500, and N1000 notes, economic affairs experts have warned that the informal sector of the economy will suffer the most unless the government breaks its silence on the issue, which is already pitting customers against money deposit banks.
Capturing the agony of small-scale sector promoters from the current cash crisis, the Centre for the Promotion of Private Enterprises (CPPE) said the authority should say something about the fate of the old naira notes without further delay.
In a statement by its Chief Executive Officer, Muda Yusuf, the organisation welcomed the Supreme Court ruling as it protects the citizens from a policy which is, “by all accounts, disruptive, repressive and draconian.”
“To date, the CBN had mopped up about N2 trillion cash from the economy, thereby paralysing the retail sector, crippling the informal economy, stifling the agricultural value chain, immobilising the transportation sector, and disrupting the payment system in the economy.
“The CBN indeed has the right to redesign currency, but it does not have the right to dispossess the citizens of their cash. The choice of the mode of the store of value is a fundamental right of citizens. The CBN has no right to impose that choice on citizens,” the statement added.
The Director-General of the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), Mr. Olawale Fasanya, echoed the CPPE’s concerns, lamenting that cash scarcity is frustrating the efforts of many small-scale entrepreneurs, particularly those who rely on daily sales to run their businesses.
Fasanya, who spoke with THISDAY in a telephone interview last week, said although the agency is already in the field gauging the impacts of the cash scarcity on the activities of SMEs operators, he explained that initial feedback has shown that many informal sector operators have been forced to either close shops or suspend operations.
A financial expert, Gbolade Idakolo, said President Muhammadu Buhari should immediately direct the CBN governor to revert to the status quo. “The naira redesign policy has shrunk the economy by over a trillion in business losses. Many SMEs have closed shops due to their direct dealings with cash.
“The policy increased hardship for the already stressed population, and the Supreme Court judgment is a great relief,” he said.
The argument is that consumers are more cautious with their spending due to the limited availability of cash, which has led to a decline in sales for many businesses, especially small and medium-sized enterprises (SMEs) that rely heavily on consumer spending to stay afloat.
The confusion in the nation’s banking industry was compounded by the decision of some banks to start dispensing the controversial bank notes of N200, N500, and N1000 while others stuck to their guns, waiting for a pronouncement from the apex bank in that regard.
A random market survey conducted by THISDAY in Abuja, Lagos, and Ibadan, for instance, shows that even those who were able to withdraw old notes from their banks may not be able to spend the money as market women, some filling stations and even banks are still refusing to accept the old currency.
Given the decision of some money deposit banks to dispense the controversial old notes, there were speculations last week that the apex bank might have conceded through the back door, a claim that the spokesperson for the bank, Mr. Isa Abdulmumini, described as incorrect. He explained that the CBN was yet to take a stance on the issue as of last week.
Findings showed that more commercial banks nationwide had dispensed their customers the old N500 and N1000 notes. One of them, Guaranty Trust Bank (GTBank), reportedly began dispensing the old notes across its branches nationwide last Monday.
There were also reports that some banks have started issuing the old notes to customers at their various Automated Teller Machine (ATM) terminals and over the counter.
For instance, in Lagos, the Zenith Bank branch in Festac Town paid customers over-the-counter old notes last week. The ATMs at the United Bank for Africa (UBA) branches close to Agege-Pen Cinema Bridge and GTBank in the Ikeja area of Lagos were also dispensing the old notes.
It was also gathered that WEMA Bank had instructed its branches to start dispensing the old N500 and N1000 notes nationwide.
However, unlike GTBank, Zenith, UBA, and Wema, it appeared First Bank, Polaris, and Unity bank branches were yet to comply, as findings showed that they were only dispensing the old N200 as directed by the CBN.
Some commercial banks had not disbursed old Naira notes since the central bank phased them out on 10 February 2023. Despite multiple rulings by the Supreme Court, the CBN insisted that the old naira notes had ceased to be legal tender. Instead, it freed up the old N200 notes after President Muhammadu Buhari’s approval.
However, following a ruling by the Supreme Court of March 3, 2023, Nigerian commercial banks began to roll out the bank notes on March 6, 2023.
But the disbursement has not convinced traders of the legality of the old naira notes, as it was gathered that the traders are awaiting public confirmation from the federal government.
The traders said President Buhari has not publicly addressed the judgment, so they are not ready to risk accepting the naira notes.
Also, fuel stations, including those operated by a government-controlled firm, the Nigerian National Petroleum Company (NNPC) Limited at the Alagbole area of Akute and in the Ojodu Berger area of Lagos, rejected the old notes last week.
Fuel attendants in NNPC, MRS, and Oando said they only accept the redesigned naira notes or customer transfers. On Wednesday, a similar scenario occurred at MRS Filling Station opposite Ikeja General Hospital.
However, there has been a new twist to the crisis as supermarkets, eateries, and grocery stores in Ikeja and Ikoyi bluntly refused to accept the old notes last week. They insisted customers should do bank transfers.
When THISDAY visited Ojodu Berger interstate bus parks on Wednesday, commercial drivers were seeing rejecting old notes, claiming that banks were not collecting old N500 and N1000 from them.
Reports from different parts of the country also showed that the retailers are badly hit by the cash crunch, with some suspending their business because of extremely low patronage.
Food sellers who usually bring their commodities from the northern parts of the country complained at the Lagos popular Mile 12 market that the lack of cash is causing them to incur heavy losses because some of the retailers who buy in small quantities from them now find it difficult to pay for the goods.
Given the perishable nature of farm products like pepper, tomatoes, yams, and cows, they are being forced to sell their products on credit. They feared that this arrangement may result in heavy losses because of the difficulty of forcing retailers to pay back, especially since the problem of cash scarcity is yet to abate.
Alhaji Suleiman Abba, a tomato seller from Kano, said that before the problem of cash scarcity, he used to bring his farm products to Lagos regularly because he had regular buyers who sold to retailers; he usually spent one week in Lagos.
With the current challenges, he lamented that he had to beg people to buy his products, as some were already rotting due to low patronage. Following the latest pronouncement of the Supreme Court, the CPPE, it is unfortunate that Nigerians are still experiencing difficulties accessing their money.
The organisation noted that Nigerians deserve an apology from the promoters and proponents of the policy, especially the ‘arbitrary and uninformed’ mopping up of cash in the economy.
“Hopefully, President Buhari, the Central Bank Governor, and the Attorney General of the federation would comply with this court order in the interest of the rule of law, good order, and public interest,” it said.
The CPPE noted that it is a flagrant violation of the rights of citizens for the CBN to withhold citizens’ cash under the guise of currency redesign. The CBN act does not give the CBN that right, it argued.
“A swap presupposes that whatever the banks received old notes must be replaced with new ones instantly,” it said.
Analysts said the onus now lies with the government to resolve the issue in the interest of the economy urgently.
By Festus Akanbi
