I t came like a bolt from the blue. To change the colour, shape or the structure of the Naira were not part of the ideas on the minds of an average Nigerian by October 26. Not even the most inventive journalist or a mendicant economist could hazard any guess towards that direction. The seriousness of that thinking was considered by many when it was obvious that the development came only ten days after the 2022 annual Meetings of the World Bank and the IMF in far-away Washington DC; a financial outing given to the emergence of new monetary and fiscal policy ideas across the world, ruled mainly by the Bretton Woods institutions. But the new policy was not an IMF or a World Bank idea in any manner. It was an idea already sealed before the Central Bank of Nigeria (CBN) team left for the annual ritual in Washington. The nitty-gritty of what goes into the plan, according to experts are things that involve a lot of stratagem; political, economic and philosophical. The determination to have a currency redesign may have really been over-due. So many very odd things have happened to the Nigerian financial system that warranted the action, but the will to give the economy the real right-of-way tended to be so much on the mind of the apex financial institution. The incidence of fraud, corruption, insurgency, money laundering and other financial vices had tormented the soul of the financial sector which had put much of its thinking towards the battle against inflation, forex, unemployment, low productivity and even poverty. When the announcement came and quickly followed by sharp opposition from few responses, the project was almost set to become entangled in serious debates, but the intervention from the presidency offered the gusto that indicated that the CBN was on top of the project. It was a very appropriate intervention, otherwise numerous political and clannish attributes would have derailed the purpose as designed by the bank. From what we understand, the project was one of very serious security implications and was executed as such. For once in a very long time, the Federal Government quickly stood behind a purpose without allowing any possible erosion through a cacophony of voices that had always been the case. The fact remains that the issue at stake could be considered as a move to save the economy of which the federal Government could not afford to continue to sit on the fence. The claims by the minister of Finance, some senators, accredited financial experts and commentators, some of who are members of the Presidential Economic Advisory Council, became quickly quashed as the voice of the President made an air of finality in support of the project. Just like an order, no more opposition came into play and the project has taken full circuit, with the regulatory authorities rolling-out plans which Nigerians have fallen in line to absorb. If not the seriousness and promptness with which the presidency came into the matter, the debate against the development would have been the wildest in the economic history of the country, considering the obvious interests the dissenting voices were billed to protect. Obviously the interests could be segmented into various groups like those speaking for the various groups of money launderers, armed robbers, bandits and kidnappers, consultants and contractors to insurgency groups, counterfeit kingpins, corrupt politicians and election manipulators. The fact that about 85% of money that should be in circulation is already outside the financial system created a situation where the apex bank has lost control of what happens in the system was more than enough for the country to quickly acknowledge the redesign program as a matter of urgency. It is obvious that the project was well-intended to curb the various identifiable and unidentifiable vices in the currency-fraud-ring that has created so much opportunities for economic failure within the Nigerian system. What was so worrisome to many Nigerians is the level of intrigue levied by the somewhat knowledgeable Nigerians to put down the redesign project. To the Central Bank of Nigeria, the adverse efforts were akin to “corruption fighting back”, but this time it lost.
There are still strong indications that other frantic efforts are being made within to enerize some push, using legislative windows or judicial hatchets to arm-twist the CBN. Much as these are options available to the dissenting groups, the common denominator is that a greater number of Nigerians have agreed that the precarious circulation structure of Nigeria’s Naira has remained largely inimical to the realization of the various growth plans which obviously cannot function under the current fraudulent money supply framework. The fact that the CBN cannot track a good volume of the cash to be able to identify where they are and what they are doing makes so much nonsense of the development plan even as such amount of cash has failed to be part of the critical assets for development, rather they have formed the tools so much undesired for negative activities in the larger economy. The redesign which gives the CBN the opportunity to try to recall its cash in the system, offers it an opportunity to know the position of such funds in an effort to decide to cut them off from the system. This will be fully known as banks have started receiving huge deposits into their system. This level of cash may have been the reason for the rise in real estate exchange which bankers believe has encouraged new transactions that enable the fraudulent holders pass the cash through third party holders. To ascertain the appropriate quantity of money in the system is possible, but very difficult as new rings may develop in an effort to conceal transactions that can help in tracking the nature of the original holders who had evaded the Know Your Customer (KYC) tracking in the banking sector. Now that the CBN has prepared an index for the proper management of the perceived irregularity in the system, it is simply proper for the banks and the customers to work with them to achieve the proper level of flow for money in banks and outside banks. The redesign will eventually help the institution to take care of dirty or mutilated/damaged cash. This becomes important in a situation where cost of moving cash around and that of reproducing the currency have remained so difficult to be attained without letting some very important needs to give way. If a country has put some N3.2 trillion into its system, only to wake up to find N500 billion available, there must be serious moves to look for the remaining N2.7 trillion because this is a huge gap in the system. If that sum was not discovered, it opens up the country to a lot of frauds, criminalities and worries; and if only a little fraction of it is identified, the country still remains as worried because that situation could torment any new effort to tame the scourge. For the apex bank, this is part of her on-going intervention efforts even though it also remains a monetary policy drive. It is obvious that counterfeiting alone are not able to create the colossal gap in the amount of money in circulation but some other thing very awful must be happening to the Nigerian supply. Questions such as whether they keep the money away, just like that and for what reason, why are they not re-circulating the money through the banking system, why don’t they give the money to anybody for use, or why have they decided to waste the money which must be shredded are so intimate and need very serious economic intelligence approach if the country can effectively avoid a future occurrence. However, the effort the CBN has put in place will offer the country an opportunity to estimate the level of re-depositing after the Yuletide, so as to be able to arrive at an appropriate replacement
criteria and volume, going forward. By that time, they would also have been able to find what is actually wrong with Nigerians. Of course, Nigerians know that the illicit kidnapping trade, or the forex round-tripping exercise or the banditry activities that have been on for the past fifteen years have been conducted using the Naira as a factor and the supply chains of these trades have remained largely very criminal since their financial contents are also hidden from the system. No bank questions customers with huge cash call into their floors, but the fear of intelligence has forced these funds to be kept away and even be exchanged across the border. Such funds do not return to the system. This development causes inflationary pressure because the supply flow will affect how judiciously your money is being put into use. The decision to put money into the appropriate use is considered the major effort in preserving the integrity of money. The CBN has noted that it has to use all tools within its reach to deepen the payment system for the good of the economy over a very long period. According to Godwin Emefiele, Governor of the CBN, “we cannot continue to allow a situation where over 85% of our money is outside the banking system. We are the biggest economy in Africa and this has to be reflected on all we do. The banks have received the new currency and have continued to dispense them…” This deliberate effort to control the currency in circulation is believed to have been seriously considered to be a project that will be repeated once within an eight year period as the case may be, or a little less, to avoid very huge volume of money to be outside the banking system for a long time. The redesign which affects only the higher denominations of N200, N500 and N1000 will definitely reduce huge cash transactions which have been known to have run into billions and which have sidelined the country’s very robust electronic platforms. It is not known if the entire money already outside the system will return to the banks, but what is sure is that some very good plans have been made to make sure that the future of the Nigerian currency would now become even more controlled going forward. As a matter of fact, Nigeria as a country should have the control of what is in circulation and that confers her the capacity to be on top of developments around the areas of inflation, counterfeiting, laundering, kidnapping, insurgency and efforts to check corruption. With an effective currency management, the various bouquet of financial activities spanning the hub of the new technology will make currency in circulation much easier to control. The intentions for the availability of the new Central Bank Digital Currency (CBDC) will limit the level of need for cash or currency and speed up financial transactions while discouraging cash and all the associated vices. The demand for financial inclusion has made digital money so flexible and important to the extent that those who have the intention of employing digital money for fraud would better think again. What this means is that the society would be better with less cash as well as avoiding the usually very humongous costs of producing currencies, managing them and tracking them over a long time. Whichever way the current CBN decision is weighed, the development has become a clarion call to expedite efforts to join the growing array of economies that would have a good portion of their financial activities based on digital financial system. Because digital economy is the future, corrupt and fraudulent individuals and institutions would gradually reduce their presence in the economies that
stringently employ the new technology. Much as the new currency harbours some good security qualities, the tendency to circumvent them will still be there and its high presence will continue to invite new fraudulent ways against them. It has been seen that a huge dependence on currency will continue to heighten the act and pose more difficult times to the economy as the financial system will continue to be operated in fear and dire straight. However, it is understandable that huge global merchants are still fighting to maintain the dominance of cash in financial transactions, especially the currency, but central bank managers across the world have discovered the folly in keeping that standard based on their frequent battles with criminals, inflation and costs of production. My interaction with a currency minting firm in France indicates that huge funds may have been deployed by such companies to fight the diminishing interest in currency but for the global efforts by the World Bank and the IMF to keep the journey to full digital transformation in process. According to the two representatives of the companies I met in Washington , on the sidelines of the 2022 World Bank/IMF Annual Meetings, a digital transformation may not be the answer to financial inclusion for the emerging and under-developing economies who are still battling with the issues of electricity, education, other infrastructure and sovereignty. For them, Currency should be about choice not an over-Lordship legislation. They were visibly not happy with the tremendous unison with which the central bank governors at the meeting voted for the immediate operation of Digital currency bank all countries of the world. Their position explains the extent at which merchantalism has been at loggerheads with financial integrity and innovation. This also is the reason for the growing tendency for cash fraud across the world, including Nigeria. According to the World Bank in its release, tagged Money Reimagined, “the future of money is undoubtedly digital. The question is, What is it going to look like?”. Some top economic experts across the economies have tried to answer the question. They believe that the new essence of digital finance is to make money cheaper and democratic, especially now the central banks are having their own digital money, having seen that the crypto is no money. Many economies including Nigeria can now try as much as possible to develop their eNaira in such a way that it engages more operators while other pedestrian electronic platforms like ATM enlarges the commercial markets much faster with the various agencies that offer the Point of Sale (POS) to a teeming segment of the population, especially in the rural and urban communities. The World Bank and the IMF still feel that it is too early to imagine how the digital landscape will evolve, but the fact remains that it can imagine a future with a mix of government and privately backed currencies safely in the digital wallets of billions of people. With less emphasis on currency within the Nigerian landscape, that time has really come. The very good thing about the currency redesign project of the CBN is that, if fully evolved in line with the unfolding scenarios involving new cash access guidelines, the quick demand to meet huge financial transfers and payments must be the digital currency option. What now remains is that, there is an urgent need to educate and reeducate Nigerians about the entire gamut called digital currency. But the regulators must see if their terms and conditions are in line with the interest of banks, some of whom already see loss of income as against what they usually earn from cash transactions. They must be made to understand the long term benefit of banking innovations. This become important because what most Nigerian banks see is profit and not innovation. This can be seen from their very poor handling of KYC in their transactions and the selective aspect of their privacy priorities. Most big Nigerian banks have been exposed by the current demand for transparency and it is only punitive actions that can make the travails of the currency redesign something of the past. The CBN must put its guidelines very clear and definitive because “digital central bank money is only as strong and credible as the institution that issues it”. If the banks do not want to educate and encourage their numerous clients or customers to fall in line, a possible process for its failure may have commenced. The CBDC can work better if the deposit money banks (DMBs) can also inform its customers that, ”any legitimate transaction that can be carried out with crypto can be accomplished better with central bank money (such as eNaira)”. Today 97% of the central banks in the world have accessed various levels of compliance for the implementation of CBDC. If this happens soon, Nigeria’s seeming control and application of currency must have been like seeing the future of money and pioneering the real money revolution.
