Eye on CBN after Supreme Court naira policy ruling

• Analysts, lawyers positive over redesign ruling

Economists and financial experts across the country continued over the weekend to hail the decision by the Supreme Court  to extend the validity of the withdrawn N1,000 and N500 currency notes until December 31, 2023 describing the ruling as a positive development and one that provides a relief from the cash crunch and help stave off the serious repercussions on businesses and socio-economic activities of Nigerians inflicted by the policy.

But given the conflicting directives and orders exercised by the judicial and executive arms of the government in relation to the naira redesign policy, many Nigerians are still in the dark as to what happens next days after the judgement; especially because the Central Bank of Nigeria (CBN) is yet to react, thus further raising the anxiety of Nigerians.

The CBN, headed by Godwin Emefiele, had in October 2022 announced the redesign of N200, N500, and N1,000 notes, and directed Nigerians to deposit their old notes before January 31, 2023 when they would cease to be legal tender. Though the deadline was extended by ten days to February 10, the extension failed to address the difficulties in obtaining the new notes.

Worried by the scarcity of old and new naira notes caused by the CBN’s naira redesign policy,  the governors of Kogi, Zamfara and Kaduna states, dragged the federal government to the Supreme Court to put a stop to the implementation of the policy.

In a suit filed at the apex court, the state governments argued against the short time limit of the currency redesign policy and the unpleasant effects on the residents of their respective states.

Consequently, they prayed that the apex court grants an order restraining the federal government and the CBN from implementing the policy. The three states were also joined by 13 other states bringing the total number of plaintiffs to 16, just as two other states, Edo and Bayelsa filed a motion in support of the federal government. The counsels representing both states indicated their support of the cashless policy regime and sought to be joined as respondents.

The Supreme Court, through a temporary judgement on February 8, issued an interim order against the federal government,  asking it to suspend the implementation of the policy, while it fixed  March 3 for final ruling on the case.

On March 3, the Supreme Court, through a seven-man panel presided by Justice John Okoro, ordered that the old N200, N500, and N1000 notes should remain legal tender and co-exist with the new notes until December 31, 2023.

The apex  court, in its judgement on the suit filed against the federal government’s naira swap policy, faulted the entire policy of the CBN, saying the timing and implementation were defective.

Furthermore, the court declared the naira redesign policy invalid on the grounds that it was not done with due consultation and in line with constitutional provisions.

The apex court held that “no reasonable notice was given as required by Section 20(3) of the CBN Act,” adding that the public only became aware of the policy through press remarks, which cannot qualify as a notice to the public.

Justice Emmanuel Agim, who delivered the lead judgement, said the directive issued by President Buhari to the CBN governor to limit access to cash was a violation of the right of the owners of  funds to their property.

Setting aside the cash limit directive given to deposit money banks (DMBs) by the CBN, the Supreme Court expressed disappointment that President Muhammadu Buhari failed to obey its February 8 order for parties to allow the old notes to co-exist with the new ones. It described the conduct as a disrespect of the constitution, the nation’s democracy, and a drift towards authoritarianism.

The legislative arm of the government applauded the Supreme Court’s ruling invalidating the deadline for the currency policy championed by the CBN.

Femi Gbajabiamila, speaker of the House of Representatives, in a statement, noted that by the decision, the apex court has once again proved that it is the highest court of justice in the land.

According to the statement, it has always been the position of the House of Representatives that despite the noble intentions behind the currency swap policy, the design and implementation of the policy have been fatally flawed and contradictory to the ends of law and public policy.

“The decision of the supreme court suspending the currency swap policy introduced by the CBN and extending the implementation deadline to December 31, 2023, validates the position of the House in its entirety,” the statement read in part.

Going forward, the speaker advised the CBN must respect the apex court’s judgement and act quickly to give it full effect.

Monday Ubani, a lawyer and former second vice president of the Nigerian Bar Association (NBA), said the  court’s judgement prevails over every other pronouncement either from the CBN or the president. “I am telling Nigerians that the supreme court order prevails and if you have old notes, you should spend it till 31st December,” he said.

Ubani reasoned that the CBN’s policy is one that would be appreciated by the generality of Nigerians in the long run. He, however, opined that it was poorly implemented by the government as the deadline was unnecessary.

“It is something that has brought so much hardship, making nonsense of a good policy. The implementation was not well thought out and adversely impacted Nigerians,” he added.

Commenting on the argument on whether the Supreme Court has the right to entertain the matter or not, Tope Fasua, founder and CEO of Global Analytics Consulting Limited, noted that section 232 sub. 1 of the constitution, stipulates clearly that the Supreme Court to the exclusion of any other court in Nigeria shall have original jurisdiction in any dispute between the federation and any state,or between states.

Fasua also cited Section 19 and 20 of the CBN Act which says that the president is the final arbiter in the matter of currency redesign,and also gives the president authorisation to take some currencies out of the economy given a certain reasonable notice.

According to the economist, on a monitored programme on Channels Television, the Supreme Court judgement this time around, has several implications for monetary policy.

“What the judgement clearly states, and which is actionable now, is that anybody with the old currency should bring them into circulation and spend, maybe that would provide some reprieve, while the CBN looks at whatever options it can find within its own purview and capabilities,” he said.

Fasua also added that the Supreme Court’s judgement would  enable the CBN to have enough time to print the required number of new notes needed  in circulation.

Going forward, he said: “Given all the rhetoric we’ve heard about politicians grabbing all the money printed by the CBN, people are hoping that money would return into circulation when elections are over. We are also hoping that people will continue to spend and the monies that have been pushed out will come back into circulation. I am also hoping, personally, [that] the Central Bank will do everything that it can to ensure that the pains of the people are eased up.”

Taiwo Oyedele, fiscal policy partner and Africa tax leader at PriceWaterhouseCoopers, noted that the N1000 and N500 notes constitute over 80 percent of the value of currency in circulation. This, he explained, is why what the president said earlier about the temporal circulation of the old N200 notes did not solve the problem as the value of the N200, both old and new, is not sufficient to address the gap created by the redesign policy.

Oyedele  further recalled that the CBN disclosed that out of N3.2 trillion in circulation, N2.7  trillion had been withdrawn, leaving about N500 billion in circulation of the old.

“If they have destroyed the N2.7 trillion naira withdrawn, then this judgement of the supreme court in my view, has very little or no effect because I do not see the CBN going ahead to print the old notes. They can as well go ahead to print more of the new notes,” he said.

The Centre for the Promotion of Private Enterprise (CPPE) commended the position of the Supreme Court on the use of old naira notes as legal tender, and hoped that the federal government and the CBN would comply with the court order.

Muda Yusuf, chief executive officer, in an interview, said the judgement was in the interest of the ordinary Nigerian.

He added that the ruling, besides being in the interest of the rule of law, good order and public interest, would protect the citizens from the disruptive implications of the cash swap policy.

Yusuf acknowledged that the CBN has the right to redesign currency, but does not have the right to deprive the citizens of their cash.

“It is a flagrant violation of the rights of citizens for the CBN to withhold the cash of citizens under the guise of currency redesign as the CBN act does not give the CBN that right.

“The act cannot be superior to the constitution of the country and CBN cannot request the citizens to bring their cash for a swap, only to deprive them access to it,” he said.

Yusuf described the entire exercise as a needless disruption of economic activities, especially among the most vulnerable segments of the economy.

He also lamented that 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.

Segun Ajayi-Kadir, director-general, Manufacturers Association of Nigeria (MAN), remarked that while the Supreme Court order must be respected, the independence of the CBN could be in contention.

Ajayi-Kadir said the back and forth on the naira swap exercise was not without implications on the business community, on manufacturing and the ordinary Nigerian.

He highlighted the need for the CBN to outline means of compliance so as not to further confuse Nigerians.

Given that the CBN manages monetary policy, Ajayi-Kadir said the process of reintroduction,  particularly in rural areas, should be addressed as the public does not deserve the back and forth this matter has generated.