Mojisola Karigidi, Founder and Product Developer, Moepelorse Bio Resources

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Subjects of Interest

  • Food Security
  • Governance
  • Health
  • Sustainable Development

Lessons of the naira redesign for development policymaking 15 Mar 2023

In the last two to three months, Nigerians have suffered avoidable, unintended, and acute economic austerity. This has stemmed from the redesign of the naira. Our policymakers failed to make adequate plan and rejected global best practice on phasing out old legal tenders and replacing them with new ones. As predicted by the World Bank last December, following the unveiling of the newly designed naira notes by the Central Bank of Nigeria (CBN), the timing and short transition period of the naira redesign policy took a heavy toll on economic activities and worsened the welfare of millions of Nigerians.

The CBN in collaboration with the federal government released the new notes into circulation mid-December and mandated that old notes would cease to be legal tender on 31 January 2023. Most Nigerians didn’t get to see or transact with the redesigned notes until the deadline approached. In accordance with the CBN directive, many citizens had deposited their old notes in banks. Getting their hands on the new notes became a nightmare because of their acute scarcity. Most people had their first transaction with the new notes after the deadline was extended to the 10th of February.

Even as the extended deadline appro- ached, people still found it extremely difficult to access their desired amount of cash after struggling to queue for hours in banks – wasting valuable time that should have gone into more productive endeavours. The hardship must have deepened the suffering of over 80 million people who currently live in extreme poverty in the country.

The cash shortages caused direct increments in food prices. Indirect price increases also occurred as people were forced “buy” available naira notes – and odd situation in which the naira was exchanging for the same currency at a price. Millions of households in different parts of the country had to cut down on several essential consumer goods requiring the use of cash, most especially food, thereby exacerbating hunger and undernutrition. Previous reports from the National Bureau of Statistics (NBS) stated that about 90 percent of rural children are experiencing poverty in Nigeria. In November 2022, a United Nations Children’s Fund (UNICEF) report showed that about a hundred children under the age of five die of malnutrition in Nigeria every hour.

The naira scarcity also took a toll on healthcare services as many patients were denied access to care at health facilities because they couldn’t provide cash. Unfortunately, most of the healthcare facilities in Nigeria that are affordable and available for the general public operate cash-only systems. Ironically, many of such are government-owned. Many of them have poor e-payment services, which were worsened by the collapse or poor performance of many bank applications and online money transfer platforms because of high demand for the services. One can only imagine how many lives may have been lost since the beginning of this economic crisis.

In this instance and with many other policies, our policymakers refused to put into consideration some of the likely outcomes of the seemingly good “cash limiting” policy driven by the naira redesign agenda. But such unprogrammed outcomes include the impact on the masses, including farmers, traders in food items, and commuters. In both urban and rural areas, Nigerians largely depend on cash for their day-to-day transactions. According to data released in April 2022 by the Nigeria Inter-Bank Settlement System (NIBSS), only 54 million Nigerians were enrolled on the Biometric Verification Number (BVN). This means that only about 40 percent of the country’s adult population actively operate a bank account. Cash is still the dominant means of payment in Nigeria; majority of our daily payments are made using bank notes.

The crunch in the access to cash has added to the acute stress that citizens were experiencing, which included high inflation rate, scarcity and hike in the price of petrol, and concerns over the general elections. As was predictable, after much frustration over the naira scarcity, the people resorted to protests, destructions of public properties and bank buildings, attack on bank officials, and several other undesirable reactions. Such outcomes must be prevented at all costs when implementing decisions that will affect millions of lives.

Government and policymakers must learn from this ugly scenario. They must stop the practice of hasty, untimely, and poor implementation of policies whose aftermath will largely affect low-income earners that constitute about 63 percent of Nigeria’s population. As much as 133 million Nigerians are multidimensionally poor with food as one of the indicators. Our policies should seek to provide social protection, especially food and nutrition security, for the poor and vulnerable majority.

The country is yet to recover from the unprecedented flooding of last year that damaged several hundreds of hectares of farmland, further impoverishing affected farmers and food producers, and aggravating food insecurity. An assessment of the flood conducted by the National Agricultural Extension and Research Liaison Services (NAERLS) at Ahmadu Bello University, Zaria revealed that an estimated N700 billion in economic value was lost to damages caused by the disaster, including 8.4 million tonnes of 14 crop varieties with output worth N384.4 billion; loss of N100.2 billion in the fish sector; and over N93.04 billion in livestock sector.

Some of the aims of the CBN with respect to the redesign of selected naira notes were to support the efforts of security agencies in combating banditry and ransom collection and to retrieve trillions of naira kept in people’s homes completely hidden from circulation. Nevertheless, the apex bank together with the federal government should have put efforts in place to cushion the harsh effects stringent deadlines for the use of old notes would trigger nationwide. The Supreme Court had to overrule the CBN on the February 10 deadline for old notes to cease to be legal tender. That intervention was, however, ignored as President Muhammadu Buhari who only announced an extension for old N200 notes.

Government cannot continue to make policy decisions that will jeopardize the welfare of the citizens, including vulnerable people. Nigeria already earned the sobriquet of the poverty capital of the world. Therefore, policymakers must seek to expand social protection of the poor and vulnerable and avoid worsening their plights. Social protection refers to policies and programmes that enable individuals and communities to manage risks, prevent severe hardship, poverty, and inequalities and improve access to economic opportunities. Factoring social protection of the masses into the naira redesign plan whose aim was to support credible election, reduce vote-buying among laudable objectives should have sought to protect the dignity of vulnerable population.

As a nation, we should be making and implementing policies to protect individuals and families against shocks such as natural disasters, pandemic, economic slowdowns, and financial stress. Our policymakers must prioritise social peace, avoiding policies – or implementation approach – that would generate social tension and violence. Social protection policies should maintain the human rights of every citizen, including access to good nutrition, health care, quality education, financial stability, and societal security. Consideration for and inclusion of persons with disabilities, senior citizens, workers, children, mothers, migrants, indigenous people, and minority groups should be the backbone of any policy that seeks to improve Nigeria’s economy.

Mojisola Karigidi, PhD, a Financial Nigeria Columnist, is a Nigerian biochemist and the founder and product developer at Moepelorse Bio Resources. She is also a Global Innovation Through Science and Technology (GIST) awardee, and an Aspen New Voices fellow.