Mixed reactions trail CBN’s fresh deadline on currency swap

By Onome Amuge

The Central Bank of Nigeria (CBN) has extended the January 31 deadline for the exchange of old naira notes by 10 days, meaning that Nigerians plunged into a state of panic over the earlier deadline can now heave a sigh of relief,albeit temporarily as they struggle to meet the new February 31 deadline.

Godwin Emefiele, the CBN governor, announced the extension following a meeting with President Muhammadu Buhari in Daura, Katsina State.

In a press statement issued on Sunday, Emefiele explained that the new deadline as approved by the president, is to enable the cash swap policy to achieve more success especially  in rural  and underbanked communities, after which all old notes outside the CBN loses their legal tender status.

According to Emefiele, the naira redesign and cash swap exercise has so far achieved a significant success rate ,which has seen the CBN recover N1.9 trillion which is over 75 per cent of the N2.7 trillion  previously held outside the banking system.

“Aside from those holding illicit/stolen naira in their homes for speculative purposes, we do aim to give all Nigerians that have naira legitimately earned and trapped, the opportunity to deposit their legitimately trapped monies at the CBN for exchange.

Our CBN staff currently on mass mobilization and monitoring together with officials of the EFCC and ICPC will work together to achieve these objectives,” the statement said.

In furtherance to this, the CNB said a  7-day grace period, beginning on February 10 to February 17,2023, has been established in compliance with Sections 20(3) and 22 of the CBN Act allowing Nigerians to deposit their old notes at the CBN after the February deadline when the old currency would have lost its legal tender status.

The recent development is an aftermath of protests from several quarters who clamoured for an extension of the deadline. This saw the country’s lawmakers, traditional rulers, financial analysts, among others, voice their discontent concerning the economic implications of the deadline, while arguing in favour of an extension.

The CBN’s turnaround decision to extend the deadline date for the currency swap, has however been greeted with  mixed reactions by Nigerians, as some assert that the new date for ending the use of old naira notes nationwide is not enough to achieve the desired, while others consider it a welcome development.

Reacting to the news, Muda Yusuf, the chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), argued that the  10 days extension  is grossly inadequate to make up for what he termed the “glaring shortcomings” of the CBN in the process.

The former director general of the Lagos Chamber of Commerce and Industry (LCCI), warned that failure to further extend the deadline for the currency swap could put the N100 trillion component of the national GDP at risk.

In a statement, Yusuf  noted that the crippling of business transactions at the distributive trade end amid the currency swap crisis would not only undermine the trade and agricultural sectors but would have a knock-on effect on the manufacturing value chain and the services sectors.

This, he explained, is because whatever is produced has to be sold, but the trading end of the chain has been greatly disrupted by the currency swap crisis.

Yusuf pointed out that the trade sector contributes about 14 per cent  of GDP valued at an estimated N35 trillion, while the agricultural sector contributes 25 per cent, valued at an estimated N62 trillion.

Dwelling further on this, the economist explained that  most of the activities in the aforementioned  sectors are either in the rural areas or in the informal sector of the economy.

“These are the sectors that have been driving the resilience of the Nigerian economy amid numerous domestic and global headwinds.  Any policy measure that would negatively disrupt these sectors should be avoided,” he said.

Yusuf also dismissed the CBN’s argument that currency swap would enhance monetary policy effectiveness and curb inflation, noting that it has no strong basis in economic theory being that  money supply is a more critical variable in the inflation equation.

He recalled that total money supply in the Nigerian economy as at December 2022 stood at N52 trillion, while  total currency was N2.6 trillion. In his assessment of the figures, he noted that cash as a percentage of money supply was only 5 per cent, with the implication being that 95 per cent of money is still within the banking system.

“It is, therefore, a gross misrepresentation to give the impression that 85% of money is outside the banking system. Currency is only 5 per cent of money in the economy and should therefore not warrant the scale of energy and resources being dissipated around it. The focus of monetary authorities should be on regulating money supply, not on mopping up currency notes,” he said.

According to the CPPE CEO, a minimum of six months’ window ought to have been given for the currency swap exercise. This is said, in consideration of the country’s large population which stands at over 200 million; dominance of the rural economy; the huge informal sector; and the over 30 million unbanked Nigerians; and capacity gaps in the management of the process.

“The reality is that presently in many parts of the country, more than half of the currency in the hands of citizens are still old notes.  And it is on record that the banks were still giving out old notes even a few days to the CBN deadline.  The citizens should not be made to pay for the incompetence, inefficiency and ineptitude of state institutions,” he said.

He, therefore, called on President Muhammadu Buhari to as a matter of  urgency,  intervene in addressing the issue to save millions of Nigerians from the anguish and pain of the current stampede of currency swap inflicted by an unrealistic timeline and glaring incompetence of the CBN.  Yusuf maintained that the cash swap programme should be extended by a minimum of six months to allow for seamless currency swap by the populace.

Alhassan Doguwa, the majority leader of the House of Representatives,condemned the CBN’s 10-day extension for the exchange of the old naira note, stating that it is not a solution to the current situation. And could  frustrate the forthcoming general elections.

Doguwa explained that security agencies and their operations especially at the state level are generally funded through cash advances and direct table payments of allowances to operatives during elections.

“We as a legislative committee with a constitutional mandate of the House would only accept clear compliance with section 20 sub-section 3, 4, and 5 of the CBN Act and nothing more.

“Nigeria as a developing economy and a nascent democracy must respect the principle of the rule of law. And the House would go ahead to sign an arrest warrant to compel the CBN Governor to appear before the Ad hoc committee,” he said.

On the other hand, the minority caucus in the House commended the CBN for listening to Nigerians and extending the cash swap deadline by 10 days.

Ndudi Elumelu, the minority leader described the 10 days extension as a welcome decision to ease the suffering as well as social and economic discomfort being faced by many Nigerians in accessing the new naira notes within the earlier stipulated deadline.

“As lawmakers and representatives of the people, our caucus commends the CBN for being considerate towards the wellbeing of Nigerians; which is the essence of democratic governance all over the world,” he said.

Uche Uwaleke, president of the Association of Capital Market Academics,in his remark,  said the new extension was adequate to allow Nigerians to swap their old notes with new ones.

According to the professor of finance and capital market, the extension of the cash swap deadline with the addition of a seven day grace period, is an indication that the CBN is a responsible organisation which listens to public outcry.

“The extension of the deadline for notes swap by the CBN till February 10 2023 with additional 7 days grace period is a welcome development and portrays the CBN as a responsive organisation that is sensitive to the yearnings of Nigerians.

One recalls that when the CBN first placed a cash withdrawal limit of N20,000 per individual per day, it saw the need to revise it upward to N100,000 following reports that the limit was too low and causing a lot of hardship to the people,” he noted.

Uwaleke further expressed optimism that the deadline extension will reduce the queues at the ATM, reduce panic and uncertainty among small business owners in particular.

He added that the decision will allow more time for the new naira notes to circulate and more of the old ones returned to the CBN given that about N900 billion is still outside the banks as disclosed by the CBN Governor.

Uwaleke also noted that the extension clarifies the allegation that the CBN and the Buhari led government initiated the policy to inflict hardship on Nigerians.

“I commend the CBN for this move as well as the President for giving approval for an extension. It goes to demonstrate that the currency redesign was not designed to foist hardship on Nigerians.

The fact that the new deadline is before the February 25 election is laudable as the measure will help reduce vote buying,” he said.

Having extended the deadline by 10 days, Uwaleke advised the CBN to ensure that the banks are strictly complying with its distribution guidelines for new notes. He added that the CBN should equally, through sensitization efforts, discourage the current practice of rejection of old notes while they are still considered legal tender.