Emefiele: Naira Redesign Not Targeted at Anyone, Politicians

The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, during an interactive session with journalists in Lagos, at the weekend, gave an update on the naira redesign project and the ongoing cash swap. He appealed for understanding from members of the public and bank customers, even as he highlighted the benefits of the project. Obinna Chima and Nume Ekeghe present the excerpts:  

Why the naira redesign policy?

As you all know, currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2(b) of the CBN Act 2007. Indeed, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great central bank. Besides, the general practice across the globe is that a central bank should normally redesign its currency within five to eight years. From the on-set of this currency redesign program, we made it clear that for over 19 years, the CBN has not been able to undertake this important currency and liquidity management function that has important ramification for the effectiveness of monetary policy.

Our principal aim, with the currency redesign initiative, is to make our monetary policy decisions more efficacious and like you can see; we have started to see inflation trending downwards and exchange rates relatively stable.  Secondly, we aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the Military are making good progress in this important. Available data at the Central Bank of Nigeria showed that in 2015, Currency-in-Circulation was only N1.4 trillion. As of October 2022, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the Banking System and N2.7 trillion held permanently in people’s homes. Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN.

It should also be noted that the Notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth. So far and since the commencement of this program, we have collected about N2.1 trillion; leaving us with about N900 billion.  To achieve effective distribution, of the new currency the CBN has taken the following steps: We held several meetings with Deposit Money Banks (DMBs) and provided them with Guidance Notes on processes they must adopt in the collection of old notes and distribution of the New Notes to all Nigerians.  These includes specific directives to DMBs to load new notes into their ATMs nationwide to ensure an equitable/transparent mechanism for the distribution of the new notes to all Nigerians. This approach was initially adopted following reports that some DMBs were favoring their Prime customers at the expense of their small account holders at bank branches. After sometime, and in a meeting with the DMBs, we decided to allow withdrawals over the Counter but subject to no more than N20,000. We also gave instructions that bank branches be kept open on Saturdays and Sundays. At our last meeting held this morning, the CEO of the banks reported that although calm was beginning to return to their banking halls, there were still some areas of pressure and everything is being done to divert more resources to such pressure points in order to ease the tension.

The meeting further resolved to extend the Cash swap initiative nationwide and expand the number of participating agents as well as formally include some microfinance banks in the cash swap initiative. We commenced a nationwide sensitization through the print and electronic media to create an awareness on the redesigned notes to Nigerians including collaboration with the National Orientation Agency to reach all Nigerians across multiple channels. We deployed 30,000 Super Agents nationwide to assist in our Cash Swap initiative in the hinterlands, rural areas, and regions underserved by banks in the Country to ensure that the weak and vulnerable ones amongst us can swap/exchange their old notes. We deployed all our staff, particularly the Assistant Directors, Deputy Directors, and Directors in Abuja to proceed to all CBN branches Nationwide to join the mass mobilisation campaign and monitoring programs, working with the Deposit Money Banks, Agents, and our Branch Controllers across the 36 states of the Federation.  This is meant to ensure compliance with all our guidelines already issued for smooth implementation of the program.

The CBN welcomed the participation of the EFCC, and ICPC who joined our monitoring teams nationwide and this has further enhanced compliance at bank branches and agent locations. We are happy that so far, the exercise has achieved a success rate of over 80 percent as about N2.7 trillion held outside the banking system has been returned. Nigerians in the rural areas, villages, the aged and vulnerable have had the opportunity to swap their old notes, leveraging the agent naira swap initiative as well as the CBN senior staff nationwide sensitisation team exercise. Generally, currency redesign policies (sometimes called demonetisation policies) are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties. Chiefly, it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation.

The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth. The macroeconomic impacts of currency redesign are multidimensional and could seem uncertain especially at this early stage when its inconvenience is widespread. By spurring more people to use bank accounts, this policy will further increase bank account ownership and increase the use of accounts by enhancing people’s saving behavior. It could encourage some hitherto informal business operators to formalise the pattern of transactions and adopt more formal settlement channels. In addition, the short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government. In the long-term, the policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance. As experiences from other jurisdictions have shown, effective currency redesign can support regulatory reform, increased legislative reach and coordinated fiscal and structural policies.

There have been calls for further extension of the deadline for cash swap. Specifically, the state governors are demanding for a one-year extension, is it something the CBN is open to?

I would say no. I am sure that people are going to say only last week Tuesday, I had said no further extension before the deadline was extended. But I want to say unfortunately again that this time we would not be looking at an extension of the deadline because the CBN, the banks and other important stakeholders are looking at areas where there is pressure and we are doing everything possible to address those areas of pressure. We have had cases where in some areas, some bank branches had some cash in their vault because there was no demand for them. When CBN officials reported, we had to move those monies from those locations to areas where there is pressure. So, those are some of the logistical challenges that we face and we are doing everything possible to address it. So, I am not going to make any promise to anyone that there would be any further extension of this deadline.

We have 179.2 million individual account holders in the banking industry as at the end of 2021, based on statistics from NIBSS. Assuming that 25 per cent of this population are to collect N20,000 per day maximum, the CBN and the bank would have to release N896 billion into the system daily, are they getting up to that? Also, the reality on the ground is that in many bank branches in Lagos, they don’t have cash to give, in some, customers are getting N1,000 and Nigerian will like to know why. If the CBN is saying we have more than enough, why are Nigerians not getting this? In addition, there have been a lot of electronic channels’ hiccups, what is happening?

It doesn’t work the way you are analysing it. If for instance we told you that in 2015 currency in circulation was N1.4 trillion, which is less than double of what you said we should inject into the banking industry in one day and indeed, as at October 2022, currency in circulation was N3.2 trillion out of which N2.7 trillion is outside the banking system. So, it doesn’t work the way you have analysed it. But what we are still saying is this: Your analysis does not mean that because N896 billion is not issued by the CBN into circulation in a day, that does not mean that there isn’t adequate supply of currency in circulation. What we are only saying, and we have to admit it, is that at this initial stage of the issue and circulation, we can’t put N896 billion in one day into circulation. So, that is the reason that we said we are begging people to show understanding and they should be calm. In our meetings with the banks, we have told them to set up tents and chairs, give people numbers, which I am sure some people would say is old fashion. But at this time that we are trying to get the currency circulate amongst everybody, people have to have numbers and they can come in under a queuing arrangement and when you come in you get served. If it finishes, just be patient, by tomorrow, when you come back, the bank would start from where they stopped. You will not be cheated. Let’s just be calm and adopt a good queuing system. The assurance we give is that it will eventually go round, eventually the cash withdrawal limits would be raised and also removed eventually and people would be able to conduct their business transactions or exchanges in a way that it has always been in the past. But the point is this: If out of N3.2 trillion in circulation, at least N2.7 trillion is hidden in peoples’ homes, it does not augur well for the economy and the growth of the Nigerian economy. It does not augur well for macroeconomic policy decisions that we take at the CBN. That is the reason we are appealing. We understand the pains. I have received several calls myself; some members of my family have complained, but we all have to show some understanding. It does not mean that when you queue and it doesn’t get to you, that you now begin to descend to wanton destruction of bank properties. Those bank properties are meant to serve, you chose the institution because you have trust in them, so at this time they are facing this temporary and transient situation, we crave everybody’s understanding. Please, be calm. We are monitoring all the situation 24/7, both the cash channels and electronic channels. I even had to call some banks whose systems were down. We can’t run away from the fact that banks’ electronic channels sometimes have down time. I called a bank this afternoon and within 20 to 30 minutes, they restored it. I understand the agitation, but I am appealing in God’s name that we should be calm. Let’s take things easy. I am appealing to petrol stations to continue to accept PoS, you will get your money. If you were getting your accounts credited instantly, it is possible that because of the deluge in volume, they would have delays, but that doesn’t mean you will not get your money. You will get your money and your account credited. If your account is not credited, you have a right to complain. I am sure those who know what we are doing in consumer protection know that we have always shown sympathy towards those customers that have complaints against their banks. We are committed to this; we just need your understanding. I am not going to pretend; it is a difficult time that we are adopting this ambitious programme. But if we have not done this for 19 years, what we are supposed to do every five to eight years, we should expect that there would be some hiccups. But we are assuring all of us that those hiccups are being addressed.

A lot of Nigerians easily assess the PoS agents, so is it possible to include them in the plan to make the circulation easier and faster because presently they are charging exorbitant fees?

We are going to go back and I am sure when we meet, if those charges are being charged through the banks, we are going to have an arrangement with the telcos to see how those charges can at this time be stopped because we don’t want this to continue to create pain on those who want to use alternative channels when they cannot have cash in their pocket. We would go into this and we are going to call a meeting of the banks, mobile networks, that at this time nobody should be charged outrageously. We want this service to continue to be offered; whatever it is in terms of volume and number that you have carried out; we would look for ways to pay you your money. But please let’s render this service so that those who are moving from cash into electronic channels can enjoy seamless transactions on these channels.

So far, how many banks that breached your guidance on the circulation of the new notes have been sanctioned?

I have seen nauseating videos about people who spray money at parties. It is extremely annoying and you feel like vomiting when you see these things happen. If you have earned your money properly, you will not be spraying money the way we see people spraying money. Some of them have been arrested, those who went to Twitter to announce the sale of the money are currently under ICPC. The lady who was spraying packs of money in the viral video has also been arrested. We would find all of them and some of them are with the EFCC. They would go to jail because they have broken the law. We would not allow you to create pain on Nigerians when others are suffering.  You cannot collaborate with bank officials and be causing pain to Nigerians. I have told ICPC, I have pleaded with EFCC and other enforcement agencies that when they find the culprits, they should trace them down to the bank officials or central bank officials, my hands are clean and I am not going to be involved. Nobody should get themselves involved in colluding with anybody to be involved in giving money to people to go and spray at parties or to be using multiple ATM cards. It is a pain to all of us and I am appealing to everybody that we should show understanding. I repeat, this policy is not targeted at anybody, we are doing our job in line with the line that set us up and we should please be allowed to do our job in a way that benefits Nigerians and the Nigerian economy. I can assure you that these people – either those caught in Kano by the Nigeria Police or EFCC in Lagos or Abuja, they would go to jail. We are going to monitor to ensure that they go to jail because they broke the law.  

Some have in the ruling party have said this policy is targeted at a them, what is your take on that? Also, you have repeated accused banks for trying to frustrate the policy, don’t you think this will affect the confidence in the financial system? The directive was that banks should pay N20,000 over-the-counter. But in Lagos, some pay as low as N1,000 over-the-counter. What is responsible for that because we have started seeing protest?

I want to appeal. We are bankers. The point is this. I heard the minister of information, Alhaji Lai Mohammed, he addressed that matter that nobody is being targeted and nobody is going to be seen to be preferred and I think you should please accept that as an explanation from me as well. Would this not affect confidence? I don’t think it will affect any confidence in the banking sector. The monies are in the bank and they are safe. At this initial stage we have admitted that there are some hiccups, it is expected and it is transient. We can only just appeal that what is happening now should not result in loss of confidence. That is the reason we are appealing that if for instance you go to the bank, you go on a queuing arrangement and they pay N20,000 to some, if you can just show understanding, come back the following day. If for instance the number stopped at 500, we have told the banks that the following day, they should start from 501, which means tomorrow you will get. But what you see is that those who are from 501 and above, they begin to fight the bank manager. So, what will the branch manager do? He will as well reduce the amount for it to go round. That is why you see instead of the N20,000, some banks have reduced the threshold. Those are the kind of dilemma in decision-making that the banks face. Yes, we have given them a mandate of N20,000, but if they use their discretion because they are afraid that if they don’t give everybody present, it will result into wanton destruction of their properties, then they don’t have a choice but to lower the threshold and to see that they pay a substantial number of people so that they don’t destroy their properties. So, everything boils down to people showing understanding and I will like to plead with members of the public to please show understanding.

Now, you talked about protest, again I want to say that this policy is not targeted at anybody. We are doing our work in line with our laws. We are appealing that those who are involved in protest should not allow themselves to be used. We know for a fact that one of those who carried the protest banner in Lagos was sponsored, but there is no need for us to go into that. We are just pleading because we understand the pain. I am not saying the person who carried the banner doesn’t have the justification, he has a justification because he wants his cash, but we are doing everything possible to make sure that we release the cash. So, please show understanding. We appeal to you all for understanding so that we can have a peaceful transition from the old to the new currency.