Why Nigeria Is Experiencing Cash Scarcity Again

In February 2023,  days before the 2023, presidential election,  a vast population of Nigerian citizens was thrown into suffering and chaos, thanks to a decision by the federal government to replace the existing currency with newly designed bills within just four months. Nigerians were asked to turn in the old notes, however, when they tried to withdraw the new notes, from the banks, they were stunned to find that only very few were available.

The old notes were revoked as part of the country’s legal tenders and the new notes were not available to the masses, there were no means for a majority of the population to carry out their daily transactions, ultimately resulting in a cash crisis.  Riots and protests erupted in numerous cities across the nation, as the cash scarcity resulted in enormous queues in numerous financial institutions around the country and disrupted several businesses, with many unable to recover to this day.

To quell the crisis,  the federal government restated the old notes as part of the country’s legal tender until December 31st, 2023. However,  while seems as if the crisis is not over, there have recent reports of cash scarcity in several places across the nation, making many Citizens wonder why Nigeria is experiencing cash scarcity again.

The Genesis

In October 2022, The then Governor of the Central Bank of Nigeria, Godwin Emefiele announced the plan by the Apex Bank to redesign and circulate three bank notes out of the eight existing eight.  The Redesigned 200, 500, and 1000 notes were stated for circulation on December 15, 2022, while the old notes were stated to remain legal tender until January 31st, 2023.

According to Emefiele the reason for the Naira redesign notes was because of the persisting concerns, with the management of currency in circulation, particularly those outside of the banking system.  However,  things began to take a turn for the worse, when the Minister of Finance, budget, and National Planning said her ministry had not consulted on the Naira redesign policy before it was announced to the public.

The Then president of the federation, Muhammudu Buhari stated that the Apex bank has his backing on the Naira redesign policy. By December 15 the Apex Bank had begun to dispense the new notes to customers across the country.  However, the newly minted redesigned notes were not enough to serve the population of 250, Million.

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The Drama

The shortage of the newly redesigned notes led to a series of dramas between the Federal government, State government, the Supreme Court, and several other affected bodies in the crisis.

The whole drama began with CBN extending the deadline for the old Naira note by just 7 days,  despite numerous indicators showing that newly redesigned notes were not enough to serve the country. This led the State governments of Kaduna, Kogi, and  Zamfara to sue the Federal government over the Naira redesign policy.

The crisis got further complicated when then-President Muhammadu Buhari promised to resolve the crisis in seven days and accused commercial banks of hoarding The newly minted notes based on greed. This led to  attacks  by hoodlums on numerous commercial banks

By February 2023, the Federal government stopped  CBN from enforcing the February 10 deadline on the use of the old Naira note.  The then Attorney General of the Federation, Abubakar Salami filed a preliminary objection challenging the court’s jurisdiction to entertain the matter.

Following numerous backforths, between the Central Bank of Nigeria,  The federal government, the State government, and the Supreme Court. It was eventually decided that the old note should remain legal tender until the 31st of December 2023.

While all this were going on, protest and riot broke out in the cities of Ibadan, Benin, and Delta. There are numerous reports of Nigeria’s dying as a result of the hardship that came as a result of the Cash scarcity.

Why is this happening again?

As earlier stated they have a recent report of cash scarcity in several cities across Nigeria, as we get closer to the deadline date. While it is almost impossible to validate these reports, A report by the Central Bank of Nigeria, reveals that the reason for scarcity in the said locations is a result of high and panic withdrawals.

According to the CBN director Isa Abdulmumin,  There are sufficient stocks of currency notes for economic activities in the country.  He also noted that the CBN branches across the country are  working to ensure  seamless circulation of cash in their respective  states of operations

Regarding the 31st December deadline, the Supreme Court recently ordered that the old N200, N500, and N1000 notes should continue to co-exist with the new notes till further notice. The apex court ruled that both old and new notes should continue to remain legal tender until the Federal Government put a process in place for its replacement or redesign after due consultation with relevant stakeholders.

The new Attorney-General of the Federation (AGF), Lateef Fagbemi, explained that should the Supreme Court decline its request to extend the period of circulation of old notes, the country stands the risk of descending into another national, economic and financial crisis as witnessed in the first quarter of the year when the naira redesign policy was being implemented under the former Central Bank of Nigeria (CBN) Governor, Godwin Emefiele.

It asked the court to allow the old notes to be in use with the new notes until after it consults with stakeholders, pointing out that the economy may be in jeopardy once again because some Nigerians have started hoarding the old and new naira notes ahead of the December 31st timeline.