Nigeria: When fiscal and monetary authorities clash

The outright disowning and public deprecation by Zainab Ahmed, minister of finance, budget and national planning, of the recent innocuous policy of the Central Bank of Nigeria (CBN) regarding the redesigning and re-issue of some Naira notes now stands as the height of mudslinging amongst Nigeria’s topmost public affairs managers. The minister, during a meeting with the Senate Committee on Finance, not only disowned the currency redesign policy of the apex bank, but also warned that it would unleash negative consequences on the country’s ailing economy.

Said she: “Distinguished Senators, we were not consulted at the Ministry of Finance by the CBN on the planned Naira redesigning and cannot comment on it as regards merits or otherwise.”

Continuing, she said: “However, as a Nigerian, privileged to be at the top of the country’s fiscal management, the policy as rolled out at this time portends serious consequences on the value of the Naira to other foreign currencies. I will, however, appeal to the Committee to invite the CBN Governor for required explanations as regards the merits of the planned policy and rightness or otherwise of its implementation now.”

Godwin Emefiele, the CBN governor, had on Wednesday, October 26, 2022, at a special press conference, announced that the apex bank would redesign Nigeria’s currency, from N200 denomination to N1,000 notes. He said that the action was being taken in order to take control of currency in circulation, stating that the bulk of the nation’s currency notes were outside bank vaults and that the CBN would not allow such a situation to continue.

The CBN boss also noted that the planned policy was in tandem with Section 19 (sub-sections a and b) of the CBN Act 2007, upon which the management of the CBN sought and obtained the approval of President Muhammadu Buhari to redesign, produce and circulate new series of bank notes of N200, N500 and N1,000 levels. He further explained that the planned redesigning of the notes normally should take place within the interval of five to seven years. The last time Nigeria embarked on such an exercise, however, was in 1984 (about 38 years ago) under a military regime. But following the loud ‘Disclaimer’ voiced by the Finance Minister barely 48 hours after the policy was announced, during her meeting with the Senate Committee on Finance, disowning the Naira notes re-designing and re-issuance, a cacophony of criticisms and negative commentaries by variegated stakeholder-groups as well as the general public erupted. Some queried the timing of the exercise, even as others dismissed it as unnecessary and a “distraction” at this time in the Nigerian polity when the only issue on the front burner of public affairs ought to be the 2023 general elections.

Against a forced recanting, the CBN authorities re-asserted their position, insisting that they got the President’s approval for the exercise. And apparently to save the apex bank and its leadership from unwarranted public derision and opprobrium, the Office of the President had to issue a statement asserting the Presidential endorsement of the CBN policy. According to a statement by the Presidency: “President Muhammadu Buhari on Sunday said that the decision of the Central Bank of Nigeria (CBN) to launch new designs and replace high-value Naira notes had his support and is convinced that the nation will gain a lot by doing so.

“Speaking in a Hausa radio interview…President Buhari said reasons given to him by the CBN convinced him that the economy stood to benefit from reduction in inflation, currency counterfeiting and excess cash in circulation.” He said he did not consider the period of three months for the change to the new currency notes as being short, adding that “people with illicit money buried under the soil will have a challenge with this but workers, businesses with legitimate incomes will face no difficulties at all.”

Even with these Presidential assurances and endorsement, the earlier statement by the putative head of Nigeria’s fiscal authority — the Minister of Finance — had triggered an ill wind that is already blowing nobody any good in the economy. And so, rather than seeing the envisaged gains of the Naira notes redesigning, the ‘announcement effect’ of the policy has unwittingly sent the Naira on a freefall against the dollar in the foreign exchange market. In a matter of days, the national currency that was N670/$ has crashed to N865/$ in the ‘black market’ or bureaux de change (BDCs), and is still declining. Though this is surprising, the point is that persons with huge ‘illicit funds’ stashed away in various locations, are now unleashing these humongous sums to mop up every available dollar. These persons, especially politicians, had hidden these monies in readiness for Nigeria’s money-guzzling general elections in early 2023.

As it is, instead of taking the monies to the banks for official lodgement (and proper recording), the money bags will rather collude with BDCs operators to acquire hard currencies at the detriment of the Naira. Thus, whether at the Investor and Exporter (I & E) official window or at the BDCs, the Naira is losing value massively against the dollar. The ‘illicit money’ bags are bent on ways and means of evading the ‘eagle eyes’ of the Economic and Financial Crimes Commission (EFCC) that is furtively trailing the movement of money launderers. Already, some of these shady characters are getting hooked by the EFCC nets, as several reports indicate. Some of the reports run thus: “A prominent Nigerian politician hoarded N500 Billion cash in his house because of the 2023 elections;” “A flamboyant South-South Governor hoarded N150 Billion in his State Government House because of the N2023 elections.” Others include: “A North Central Governor who refused to pay salaries for 12 months in his state, hoarded N130 billion because of the 2023 elections;” and “A former Governor who stashed IDPs money during his tenure as Governor, hoarded N80 billion to achieve his dream in the 2023 elections.”

As all this is going on, the real estate industry is also getting a windfall, courtesy of the desperadoes who are also looking for people who are willing to accept (volumes of) cash as opposed to electronic transfers for purchase of properties. Through this ‘barter trade’, billions of cash are being ‘dumped’ on property owners in highbrow places, who are willing to accept cash payments. All these are in the effort to escape official records of the huge cash transactions and scrutiny of the EFCC.

It must be said, however, that all these are avoidable ‘panic measures’ instigated by the alarm from the headship of the fiscal authorities. The pronouncement of the minister of finance generated unimaginable negative reactions to the CBN policy that really has a whole three months implementation timeline. But the minister’s ‘bombshell’, as it were, actually exposed the ‘disparate enclave’ mode of operation of the Ministries Departments and Agencies (MDAs) of the Federal Government. Over the years, more often than not, the utterances, policies and initiatives of the fiscal authority run as counterpoise to the stance of its monetary counterpart. When the apex bank, for instance, goes for a tight monetary environment, the fiscal authority would embark on massive deficit budget financing that ensures the system is awash with liquidity—and vice versa. So, Minister Zainab Ahmed’s unreserved disowning and condemnation of the CBN’s planned redesigning of Naira notes can only be said to be in sync with their pattern of relationship or lack of it. It is also symptomatic of the absence of an overarching roadmap as guide for the Administration.  But soon, very soon, things will come to a head!

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