A cashless policy in an economy is an important, strategic roadmap to 21st century global commerce. It is a policy the nation’s financial system needs to follow and implement to a successful conclusion. Virtual monies, including crypto currency, are trending in the commercial space globally; although some economies take this financial technological advancement with a pinch of salt. The international trading systems recognise the importance of incorporating this means of financial operation in today’s business transactions.
Many advanced and large economies, like China, have seamlessly been operating cashless transactions for many years, without hiccups. It works out successfully for these economies because they are fully organised and well equipped by an adequate computerised financial system that is affected by technical hitches, like power failures, during transactions. These explanations make it very difficult, but not impossible, for it to work in a business climate like Nigeria. It, therefore, requires adequate preparation by nations to be able to successfully key in and operate it as we have seen in developed economies, where the cashless policy works effortlessly.
Last October, Godwin Emefiele, the governor of the Central Bank of Nigeria (CBN), announced a project to redesign the local currency, the naira. Although this policy received full support and was personally backed by President Muhammadu Buhari, it immediately became controversial when Zainab Ahmed, the minister of finance, said she was not privy to its development. The naira redesign, which was eventually done, turned out to involve only the change of the colours of the affected notes — N200, N500 and the N1,000. Directives were subsequently issued by the office of the CBN governor on deadlines when the old currencies would cease to be legal tender in the economy. Nigerians strictly adhered to the instructions given, by turning in the old notes in their possession to the commercial banks as directed. They only found out shortly afterwards, that the high command of the CBN had suddenly thrown Nigerians into a strange and unprepared mode of full cashless economy. The hardships that the majority of Nigerians have faced over the currency redesign have been because of inadequate preparations by the apex bank. It did not first equip commercial banks with the commensurate quantities of cash back into circulation as depositors had turned in old notes for exchange.
This became glaring when millions of citizens trooped out, after the expiration of the deadline for the usage of old notes, only to start forming unending, lengthy queues for several hours in all the banks when demanding to withdraw money on the new currency. The hours turned into days, then into weeks. Out of frustration and in desperation, Nigerians resorted to and started trading on their own currency, when point on sales (POS) machine operators and vendors started exchanging and transferring funds at ridiculously exorbitant rates and charges; due to scarcity of the new currency notes. The new naira notes were being openly traded by every Tom, Dick and Harry at black market rates due to its scarcity; which, indeed, is an indictment on the apex bank, for such unfortunate irresponsibility on their part.
Back in my MBA class at university in the 1990s, a topic from an American author was presented to us for discussion by the lecturer in Business Finance – “without money, we are dead”. At first glance, most of us could not decipher any meaning out of it, until we started treating the content of the material (from a practical point of view, no longer speaking in parables). This actually means that cash-flow for every business or any financial engagement is of essence, if any action taken was to be meaningful. We witnessed a lot of funny developments in the banks, to the extent that some depositors who were frustrated in lengthy queues went naked in protest inside some banking halls, demanding to withdraw their money after several days of trying. Most families were deprived of having even a few naira to buy foodstuff or transport themselves!
This painful experience of millions of Nigerians, even during a general elections period, elicited divergent opinions, including from the ruling class, especially among state governors and senators, with threats of litigation against the CBN governor on the stoppage of the usage of old notes. At a point the president reintroduced the old 200 naira notes for 60 days only. The saga was finally put to rest by the Supreme Court ruling that has allowed the usage of the old notes until the end of the year (31st December, 2023); which the CBN has finally, reluctantly, obeyed.
This embarrassing policy and futile exercise has left much to be desired about our monetary policy management. It has seriously set the economy backwards, considering the huge man-hour losses incurred by millions of Nigerians who thronged out in their numbers, and wasted precious time, pushing and struggling in vain on harrowing queues, away from their businesses. One believes that a nation requires a well thought out plan of operation and engagement for whatever policy with potential consequences on the nation, especially her sustainable economic well being, than what we have all passed through in this unfortunate back and forth monetary policy.
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