The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, is not new to criticisms concerning his choice of unorthodox measures in addressing monetary policy issues – and he stands tall over this approach.
Emefiele had often told his critics not to judge his tactics but evaluate the positive results produced by such unconventional interventions.
During the recent global financial crisis and the recession, unorthodox monetary policy interventions helped salvage the economy where conventional practices have failed.
Recently, the central bank’s efforts at curtailing rising inflation had proved nearly fruitless amidst growing food and commodity prices.
In the same vein, attempts to stabilise the naira against the US dollar had been difficult partly due to speculative activities and other challenges.
Naira Redesign and Cashless Policy
However, the recent engagement between the CBN governor and the diplomatic community exposes the primary intent of the bank’s cashless and naira redesign programmes.
If anything, it showed the benefits of the cashless policy, whose implementation began in 2012; and that the currency redesign programme was initially underestimated.
Emefiele’s interaction with the diplomatic community was particularly critical to shed more light on the policies and disabuse their minds of wrong perceptions following some antagonism by some political class members.
According to the central bank governor, the main objectives of the cashless policy and currency redesign were to make monetary policy decisions more effective, deepen financial inclusion in the country, curb terror financing and banditry, and discourage vote-buying by politicians and money laundering, among others. Politicians were stocking money for election activities, according to the CBN governor.
Specifically, Emefiele pointed out that the CBN intended to make Nigeria operate a cashless economy as obtained in developed countries, where as a result, issues of money laundering are promptly tackled.
In a country where politicians have a penchant for siphoning and laundering public funds in foreign countries, the cashless policy remains a game-changer – no wonder the mounting opposition to the guidelines is enormous.
Unacceptable Level of Cash-carrying
Addressing the diplomatic audience, Emefiele said: “You are all foreign dignitaries representing your countries in Nigeria, and you know, and you would agree that the level at which people carry cash in Nigeria is unacceptable.
“In your countries, you do not carry cash anyhow. You are continuously questioned and profiled if you carry cash and are seen.”
He added: “We want to look at your country, and that is why we are saying that Nigeria, the largest economy in Africa and with the largest population, really must go cashless. And we are delighted at the CBN that with the support of President Muhammadu Buhari, we will achieve this.
“We know that at these initial stages, Nigerians will go through temporary pains, and we call it transient because there would be normal pains that would come with those kinds of shocks; indeed, I must describe this shock as unprecedented.”
Foreign Support is Inevitable for Successes
Knowing fully the damage that misinformation could cause for the country, especially by foreign nationals, Emefiele had made it a duty to explain the cashless and policy redesign initiatives for their buy-in.
He told the gathering, “And that is why I would continue to appeal to everybody – Nigerians and those of you who constitute our diplomatic community to give us all the needed support to achieve this objective. We want our country to look like yours and will continue to seek your support for us to be like you.”
The central bank governor further stressed that the cashless and currency redesign progamme sought to support efforts of the security agencies in combating banditry and ransom-taking in Nigeria, adding, “can see that the military is making good progress in this important task.”
Policies Yielding Fruits
According to Emefiele, the naira redesign policy is expected to curb the inflation in the market as less cash holding reduces currency outside banks and retard money circulation, stressing that the accompanying decline in the money supply would slow the pace of inflation.
Specifically, the CBN governor said, “We have started to see inflation trending downwards following general price stability in almost all market genres, including for goods and financial products.”
According to him, the effective implementation of the policy could scrap four percentage points off the current level of inflation which stood at 21.34 per cent – as it steadily slows the inflation rate to about 18 per cent by mid-2023.
He said: “This is quite achievable, as data from our market sources indicate that the prices of grains and key staples, around Suleja and Lambata markets, for instance, have generally been on a downward trend since the beginning of the policy. The price for soya beans has dropped from N30,000 to N22,000. Maize from N18,000 to N16,000. The price of a bull fell from N400,000 to N330,000 and ram from N75,000 to N50,000.”
The central bank governor also noted that the policy had brought stability to the exchange rate regime.
He explained that before the announcement of the procedure, the huge cash haul outside the banking system had exerted significant pressures on the exchange rate at all windows, but more so at the parallel market as it engendered asset substitution by speculators and rent-seekers.
He said: “While the policy was initially estimated to lead to more speculations due to panic moves as most people try to understand the policy action, it is expected to reduce speculation in the medium- to long-run.
“Today, the limited circulation of the new Naira notes has forced the hands of speculators, and we are beginning to witness some stability. The initial pressure is projected to further moderate as the implementation of the policy takes off, and a wider understanding pervades the system.”
Temporary Discomfort for Nigerians
The CBN boss said the central bank was mindful of some citizens’ challenges and is currently addressing them.
He noted: “There have been reports of occasional failures in e-channel platforms. Our monitoring suggests that despite an expected surge in electronic transactions, these have not risen to unprecedented levels. The payment system is well-equipped to handle even higher transaction volumes.
“While transaction failures are bound to occur occasionally, the public is encouraged to have full confidence in Nigeria’s globally recognised payment system infrastructure. Banks have also been instructed to ensure 24/7 service availability and promptly address any customer refunds arising from such service failures.”
Emefiele further acknowledges the widespread inconveniences due to the policy.
He said: “We have observed pervasive incidences of hoarding and predatory activities of some vendors and unscrupulous Nigerians. Following the redesign policy, hoarding is the principal cause of hardship for the citizens.
“We have noticed that some members of the public are hoarding the new notes, thereby restricting their flow through the economy. Cash kept at home will not circulate but may fuel a perception of scarcity which leads to higher demand for the currency, signalling to those who don’t have an urgent or immediate need to store cash.