Give CBN Benefit of Doubt on Withdrawal Limits
By Reno Omokri
I have been watching the reactions to the new Automated Teller Machine policy of the Central Bank of Nigeria, which limits ATM withdrawals for individuals to N100,000 per week and N20,000 per day, and quite frankly, it is a bit disappointing as to how people have allowed their own narrow personal interests colour their responses.
My understanding of the tenets of welfare economics is that this policy (like any good one) will have more gainers than losers, which is the objective of every public policy aimed at optimising societal gains. But the few losers are usually the wealthy, affluent and corrupt members of the society, who will make very loud noise to ensure that their unscrupulous gains are restored.
As a nation, we must understand that there are few, preciously few institutions that are non-partisan, non-ethnic, non-religious that project the greatness of Nigeria. The army is one (or should be one). The Central Bank of Nigeria is another. Whether you are PDP, APC, Northerner, Southerner, Christian or Muslim, it is in your personal interest that they survive and thrive!
That is the main reason why the Central Bank of Nigeria, like other reserve banks, is statutorily independent. Because a symbol of a nation’s independence and prominence, such as money, is too important to be left to the whims and caprices of things that are subject to sentiments.
This policy, and others like it, did not come out of nowhere. They did not arise out of a vacuum. Something or somethings happened, and they were responses to what some may even describe as existential financial threats to the nation.
The Naira was taking a big hit. It had to be controlled. Not influenced. Controlled. It took guts to do it. Because whatever you do, those benefitting from the status quo ante bellum will fight you. This new ATM limit is good. It will make cash scarce. And scarcity increases value!
Too many unnecessary things were affecting the Naira’s value. Spraying Naira notes at owambe. Politicians carrying around huge caches of cash for rallies. Kidnappers and bandits flush with cash ransoms. Salary payments in cash. Something just had to give.
With nearly N3 trillion of raw cash flying around outside the banking system, there is surely too much supply of physical cash. How can over 85 percent of currency issued be held physically? It shows too much abundance.
Someone at the Central Bank of Nigeria is a deep thinker. That person, or persons, understands the law of scarcity. The more an item is scarce, the more it rises in value, and the greater the desire to acquire it. This new ATM limit will increase Naira’s value, and make Nigerians work harder to acquire Naira, thereby increasing our GDP.
The policy will ensure that the motive for wanting to hold physical cash is limited to unavoidable necessities.
When you limit a people’s freedom of choice to access anything with innate value, the limited item becomes more sought after. And that is one of the economics of illusion that the United States Federal Reserve Bank uses to shore up the value of the dollar. And now, to my great relief, the Central Bank of Nigeria is proving that it too can play that game.
There are ATM limits abroad. Even beyond that, there are other limits to what you can do with cash. For example, in both the United States and the United Kingdom, you can’t pay cash into an account that does not belong to you. Heavens did not fall when they introduced that policy. Quite the opposite. Their currency rose in value.
Western nations do not exist for the benefit of developing nations. They keep telling you to allow market forces determine the value of your own currency. Do market forces alone determine the value of theirs? Last month, the Pound was collapsing. Did the Bank of England leave it to market forces alone?
Of course not. They panicked and intervened. The chief economist of the Bank of England, Huw Pill, said that the Monetary Policy Committee “cannot be indifferent” to the collapse of the Pound and warned the public of a “significant” monetary policy response to come before the end of the year to shore up the pound.
That response came in the form of increased interest rates (it went up by 0.75% on Thursday, November 3, 2022), and on Thursday, December 8, 2022, it was announced that they are about to increase interest rates again, by another 0.50% by some projections.
When the Bank of England noticed a run on the Pound, they responded rapidly by jacking up interest rates to increase the yield available to foreign direct investors on their British financial assets, which they hoped would lead to a rise in the value of the Pound. And it did.
We have seen a 13% rise in the value of the Pound between September 27, 2022 (when it exchanged for US$1.06 to £1) and December 9, 2022 (exchanging for US$1.23 to £1).
And the British government and people supported the Bank of England, because before their very own eyes, £500 billion was wiped out of their economy. With such colossal losses, you forget the free market and modern money theories, and do whatever is practically necessary for the survival of your currency and economy.
And that is what the Central Bank of Nigerians is now doing. Thankfully, the usually dull and economically clumsy President Buhari has seen it fit to not interfere. That shows that he definitely understands that the Nigerian economy must be strengthened in all ways possible, regardless of unscrupulous noises both from within and outside Nigeria.
The National Assembly is making grunting noises to placate the public. But this may merely be a misplaced bid to placate their constituents and secure another term in office.
But one of the main resistances to this patriotic act of the Central Bank of Nigeria in limiting ATM withdrawal is coming from the public, who do not yet understand that the policy is in their best interest. Specifically, bandits, kidnappers and urgent 2k girls may also scream as their cheap and iniquitous sources of income are terminated. They are pressuring their men, and we feel the pressure on social media and the traditional media!
The Naira is too readily available. It needs to be less available as cash and more available as credit in banks, which is the lifeblood of an economy. Money will not be scarce in banks as digital and electronic cash remains very accessible and available, even in the most remote parts of the country. It is only the physical holding of cash that is restricted. And anybody that says they cannot do business except via cash is deliberately ignorant. They can. They just choose not to for reasons best known to them!
There is hardly any transaction that you need (not want) to do via cash that you cannot do with the new ATM limits. You can pay a bus conductor to get from point A to B, and you can buy groceries from the market. In fact, less cash will drive the cost of food and transport down!
To some thinking people, the N100,000 weekly limit is even too much. How many honest, ordinary, and poor Nigerians require that amount consistently every week for a year? Many market women and men, artisans and MSMEs whose weekly transactions exceed the N100,000 limit already operate bank accounts. All of us have paid our mechanics, welders, carpenters, tailors, etc. via bank transfers. Even in the remotest villages, we have sent money to parents and relatives through their banks.
We must understand that what was happening with the Naira was a very desperate situation, and desperate illnesses sometimes require desperate remedies.
The ASUU strike was beyond the control of the Central Bank of Nigeria, however, the consequences of that strike shook the very foundations of that bank. Almost overnight, Nigerians seeking foreign higher education increased by almost a 1000%.
And then the supply chain crisis caused by the Russia/Ukraine war set in at a time Africa was already trying to grapple with the Ethiopia-Tigray crisis. Oil prices became unpredictable. The profligate Buhari administration was borrowing left, right and centre. And politicians were stockpiling cash for 2023.
Of all the responses that they could have taken, the Emefiele-led Central Bank of Nigeria took what in my opinion is the best decision. They frustrated speculators, politicians, and criminal non-state actors, like bandits and kidnappers, with the Naira redesign.
Of course, politicians who are used to using bullion vans to influence elections will not take kindly to the new CBN ATM limits. Bullion vans were their main election strategy. Now, Emefiele has frustrated such plans. It is only commonsensical to expect them to fight back. We all saw the photo behind the son of a notorious politician which said “Money Inducements”. Those are the enemies of ATM limits.
It goes without saying that where there are ATM limits, “money inducement” will be almost impossible. That is why they are fighting the CBN’s new ATM limits. It has nothing to do with the poor. The poor do not need to have over ₦100,000 cash weekly. Election riggers do!
And now this new ATM limits will ensure that we do not return to the same situation that necessitated the redesign of the Naira. We too as citizens must show some patriotic discipline. Our financial actions have consequences on the Naira. It is not left to the Central Bank of Nigeria alone.
Do not play with money. Devaluation and untamed inflation are dangerous. If you study history, almost all revolutions and epoch-defining social upheavals have always been ignited by devaluation and untamed inflation.
The French Revolution was sparked by the price of bread. The Bolshevik Revolution was set off by the economic policies of Tsar Nicholas II, which led to spiralling inflation, leading to mass starvation. The rise of the National Socialist German Workers’ Party, which inevitably led to the Second World War, was due to the hyperinflation of the German Papiermark.
And whether or not we want to acknowledge it, the stated reason for the EndSARS protest may have been police brutality, but the real reason was food inflation. If you doubt me, ask yourself what police brutality had to do with the storming of palliative warehouses, which was a hallmark of the EndSARS protest.
Today, food inflation in Nigeria is over 23%, do we wait until we match the 99% food inflation in Turkey before we act judiciously?
You and I can afford to be shortsighted. However, those in control of our monetary policies cannot. The Central Bank of Nigeria has continued to impress me recently with their penchant for lateral innovative thinking and unconventional solutions to Nigeria’s unique challenges.
I have met Alan Greenspan, probably one of the best central bankers in history. I sat for lunch at a restaurant with him. And believe me when I say that the actions of a country’s central bank often matter more than the actions of its President.
I urge Nigerians to have faith in the Emefiele-led Central Bank for now. He and his team have continued to act in good faith for the betterment of Nigerians. Believe that they have the best interest of you and your families at heart. Allow them the freedom to find homegrown solutions to our unique economic challenges.
Nigeria is at a critical stage. We must allow those institutions that must work independently go on with their independence if we want to retain and maintain our own national independence from those institutions that have kept Francophone Africa independent only in name.
While the jury is still out, we can nevertheless tell what type of day it is going to be by the morning we see. Things are looking less heady than they were two months ago. There is a lot less Naira instability.
We await the November Consumer Price Index from the National Bureau of Statistics. Although this is the time of the year when festivities affect inflation, I am still optimistic that the Central Bank of Nigeria’s policies will show a year-on-year improvement.
And even if it does not, let us give them the benefit of the doubt until we see the Q1 figures for 2023.
On the issue of the so-called order by the House of Representatives to the Central Bank of Nigeria for it to suspend the new ATM limits, Governor Godwin Emefiele needs to demonstrate courage. First of all, these are politicians. One of the very classes of people targeted by this patriotic policy. They cannot be judges in their own case.
And the ‘order’ itself is not even worth the paper it is written on. Any high court of law should be able to set it aside. And it is unenforceable by the police or any other law enforcement body for the simple reason that the House of Representatives lacks the power to order the Central Bank of Nigeria or its Governor. Section 1 (3) of the Central Bank of Nigeria Act, 2007 provides that “The Bank shall be an INDEPENDENT body”. Thus, I will counsel the CBN Governor, Emefiele, to ignore them!
Never tell your weakness to anyone, except God, your parents, or a professional therapist. Friends can quarrel with you, and the weaknesses you told them will be used by them against you. If anyone is not part of the solution, they don’t need to hear your weakness. Be like a One-Time Password. If somebody uses you once, then the password that they used to open your weaknesses should not work again. Don’t give people the master key that unlocks your vulnerabilities. Refuse to be an open book that can be read by anybody!