Taking Stock of Nigeria’s Ruinous Experiment with Cashlessness

Earlier this week,  Dr Yemi Kale, Nigeria’s immediate past Statistician General, made a thread on Twitter focusing on the potential damages caused by the Central Bank of Nigeria (CBN)’s ongoing cashless policy. Kale, who until recently was the head of the Nigerian Bureau of Statistics and now works as the Chief Economist of KPMG Nigeria, estimated that the policy had cost Nigeria’s GDP between 10 and 15 trillion naira.

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The Centre for the Promotion of Private Enterprise (CPPE) estimates the losses to be higher. The CEO, Dr Muda Yusuf said, “Since the onset of the cash crisis, the Nigerian economy has lost an estimated N20 trillion. These losses arose from the deceleration of economic activities, the crippling of trading activities, the stifling of the informal economy, contraction in the agricultural sector and the paralysis of the rural economy.” Nigeria has come to learn the hard way lessons we could simply have learned from India’s own experiment with demonetisation in 2016.

My friend, Dr Adamu Tilde, a farmer and agricultural consultant, has been lamenting the impact of the cashless policy on farming communities in the North where he lives and works. His Facebook profile since January has been dominated by stories of farmers who were losing it all. He told me, “Most vegetables consumed in Lagos are produced in Sokoto or Maiduguri (separated by about 1,000km). As a result of insufficient cash in circulation, buyers from Lagos stopped travelling to the northern part of the country. This caused a glut which further led to a massive drop in prices. A basket of tomatoes dropped to N600.00 from N2,500.00”. It does not take a genius to imagine this impact on the farmers.

The poultry industry also faced a similar issue: eggs, like vegetables, are perishables. “An egg begins to lose its quality two weeks after production. It can be earlier in a hot environment like Northern Nigeria,” he said. Wholesale buyers of eggs could not get cash to run their businesses, so they stopped going to farms to buy eggs. At one point, Tilde had over 8,000 crates of eggs on his farm waiting for buyers. As this happened across the industry, poultry owners were forced to sell off their eggs at a price lower than the cost of production. A massive loss ensued.

Tilde lamented that the policymakers who foisted the cashless policy on Nigerians had failed to consider the agricultural sector where the present government has invested trillions of naira over the years. They failed to consider the vast number of Nigerians who could not afford the transaction charges and the inconvenience of using bank transfer to pay for the N50.00 or N100.00 eggs they wanted to buy. They also failed to consider the large number of daily income earners most affected by any slight economic disruption. “As a result of low economic activities which the cashless policy caused, most people lost their earning ability because they can no longer do anything to earn income. Thus, buying and selling stopped in many communities nationwide,” Tilde added.

Also Read: Cashless Nigeria, an idea of immeasurable beauty?

But how did we get here? By March 26, it would have been five months since Nigeria embarked on its naira redesign project, but the impact of the hydra-headed policy has been far-reaching and primarily negative. On October 26, 2022 when the CBN announced the introduction of the new naira notes, many Nigerians might have assumed it would just be like they experienced in the past. But right from the announcement, one could have seen the signs of trouble to come. The CBN’s initial deadline of January 31, 2023, for depositing old notes was a clear indication. The deadline was too short and impractical.

The Nigerian Security Printing and Minting Company (NSPMC) has been accused of lack of capacity to print sufficient naira notes to immediately replace the ones withdrawn. More importantly, the CBN had no plan to provide the new notes in commensurate quantity to what was withdrawn from commercial banks. This is a result of the CBN’s simultaneous introduction of its cashless policy that limits the amount of cash individuals and businesses can withdraw.

Good implementation or not, rolling out the cashless policy same time as the naira redesign project was a recipe for disaster. The disaster has been raging since January, but the CBN and other government agencies have been busy chasing shadows. The Independent Corrupt Practices and Other Related Offences Commission (ICPC) especially has allowed itself to be used to demonise banks and POS operators as the cause of the cash scarcity that has gripped Nigeria.

After a few arrests in February, the agency has gone quiet, perhaps realising its folly at last. The cash scarcity is all CBN’s fault and not for a good or worthwhile reason. CBN’s incompetence, confusion and attempt at election interference using monetary policy (to prevent vote buying) have left Nigeria’s economy in a tight spot. We have the Supreme Court to thank for being the voice of reason in all this quagmire, extending the validity of the old naira notes until the end of 2023. It would take the CBN ten days to implement the ruling of the Supreme Court, yet another lawless conduct by the central bank.

Also Read: Nigeria’s E-Payment Transactions Reaches an All-Time High of N387 Trillion in 2022

While the Supreme Court’s March 3 judgment has given Nigerians some relief, it is important to emphasise that without releasing more new notes into the economy, Nigerians will likely be grappling with cash scarcity for a while. In the meantime, it is time to start taking stock of how the country has lost to this poorly-thought and poorly-implemented project.

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