For the vulnerable in our midst, the costs are getting too high to comply with CBN’s ongoing naira currency redesign policy. To establish a context for what follows, most Nigerians appreciate the Central Bank’s commitment to force through this policy. The logic of its necessity is unimpeachable. It is also a fact that CBN completed the redesign, printed naira notes in N200, N500 and N1,000 denominations, and is now circulating the new currency. The bank initially proposed January 31 (two days ago) as deadline for mop-up of the old notes in similar denominations. However, hitches in its implementation forced an extra 10-day delay. There are two such major hitches, one possibly unpredicted but the other definitely man-made.
The man-made hitch became evident when we heard voices of protest against the policy from the rich and powerful. The voices we heard against this monetary policy came from the camps of fiscal policymakers, big-time traders (cattle owners), clever sympathizers of organized crime groups, and legislators possibly speaking up for their political godfathers, those who hitherto used cash to shop for votes. These represent what may be regarded as vested interests officially opposed to the CBN policy. The seemingly unpredicted policy hurdle is the agony of the weak as they attempt to swap their old currency notes with the new. It is to this group – which represents 60 per cent of our population – that we must focus attention, especially since shifting attention to them will likely remove the two hurdles in a go.
The group of poor and vulnerable in Nigeria represents most of our population who live on less than $1 a day. Current projections put their population size at 60 per cent, which means we may be dealing with over 120 million citizens. Has CBN properly captured their interests in the currency redesign policy? If it did, what accounts for the despicable results we are witnessing as our people struggle to swap their old notes with the new in our towns and villages nationwide? Hasn’t the CBN inadvertently imposed an unfair burden on this group, from what we can see? Many are spending a lot – in time and resources – in search of places where they can exchange their old notes. POS operators, especially those at the last mile, claim they do not have the new notes. The urban ATMs are not dispensing much either. And, worst of all, everyone in this group is losing 20 per cent and more of their incomes each time they succeed in their swap. On the streets and in markets, operators using POS devices charge N200 to exchange N1,000.
Here is a personal experience. Last week in Enugu, I queued up to buy fuel sold at N350 per litre. The station did not have a POS device, refused to accept “old” notes from me, and rejected my request to transfer money electronically from my phone. I went in search of a POS operator. The operator asked for N200 commission for every N1,000 she dispensed. I claimed I was a bank official and threatened her with sanctions. She did not budge. I then switched to emotional blackmail and hit gold. She relented and gave me N900 for every N1000 she dispensed. Because I came with a mini-truck that guzzles fuel like fish does water, I withdrew N20,000 and paid N2,000 as commission! On returning to the fuel station, I found everybody waiting for the manager who halted sales to fiddle with the pump heads. When he was done, we found ourselves buying fuel at N370 per litre. My N20,000 could not scratch up to a half of the tank. Two days ago, long after I left Enugu, I am told that it is now N400 per litre in fuel stations where this essential commodity can be found.
Old-timers must be feeling a sense of déjà vu, as we experience the predictable roll-on effects. Transporters, food sellers, and everyone selling goods or services is in on the act. They are mercilessly sucking the remaining naira out of the dry pockets of the poor, thereby justifying the Igbo adage: “Obodo adiro mma b’ulu ndi Nze!” (Loosely translated, it signifies that the titled gentry feeds fat in times of community crisis).
The costs of executing the CBN’s currency redesign policy have become too high not only for the poor but also for everyone. It is often the case that the poor and vulnerable suffer more when policies are launched without thorough dissection of two key factors – a holistic consideration of the risks and a strategic key stakeholder engagement. Based on these two, we have reason to suspect the robustness of CBN’s risk appreciation of what the poor will suffer as a result of the policy.
What is in the bank’s plan for strategic engagement with this key stakeholder group? From the outside looking in, it does not appear that the CBN thinks that the vulnerable among us are a key strategic group. This may be due to the popular assumption that the policy mainly targets the big players – politicians in power, kidnappers and cross-border traders who hoard money for foreign transactions. This class of people – those who store millions of naira in cash at the home office – requires higher denomination currency notes in order to reduce the storage size, hence the target of N200, N500 and N1,000 notes. However, keep in mind that two-thirds of our population live below the poverty line. These are folks that habitually save small quantities of naira notes at home or in their shops. If we apply an average of N5,000 “home savings” in the hands of members of this population, this can easily account for almost the amount that the Central Bank says is yet to be mopped up. In other words, the CBN may be expecting money from the rich that is ironically in the hands of the poor – those who are now struggling to swap their old currency notes with the new – and getting frustrated by it.
There are three hurdles that the vulnerable among us currently face while attempting to swap old currency notes. The first is what has been identified as sudden loss of at least one-fifth of their income at currency swap points. A second is the astronomical increases in the cost of goods and services, leading to further erosion of earned income. The third, a direct consequence of the first, is that banks have apparently decided to continue with business as usual. Commercial banks are allowing their valued customers to cart away new money for further storage. We see the evidence in trending social media video clips where bundles of new currency notes are coolly pasted on celebrants’ foreheads at society gatherings. By the time this breach is completed, most printed newly designed notes will once again disappear into the same hiding places where the old notes were kept. The consequences are predictable.
Vested interests, as the trending videos show, will not give up the habit of bribing voters or continuing with public displays of their naira affluence. Something more drastic and unorthodox may be called for at this time.
One solution that the CBN could apply to ameliorate the current discomfort is a different kind of engagement with the poor and vulnerable. The communication strategy, especially the messaging, appears somewhat fuzzy. Rather than talk over the heads of citizens bearing the brunt of the policy (through jingles to ginger action), why not adopt them as the true key stakeholder group for the enforcement of the policy? These are the stakeholders that see but are not part of the collusion between vested interests and deposit money banks. Among them are security at strong rooms and gates, drivers of cash vans, and service personnel at plush restaurants, hotels and parties. They are those listening to ego talks at salons and running errands for “gangs members” that are frustrating the new policy.
What messages have the authorities developed to specially engage and empower this important stakeholder group? They can own the policy and ultimately play a role in reducing the high costs of CBN’s currency redesign project, which they disproportionately share. Enough said.