Any decision that brings back the old banknotes in Nigeria is a bad one. Nigeria’s central bank should print just enough new banknotes and strengthen the country’s e-payment infrastructure. Well-meaning Nigerians should support the demonetization policy.
“Whether we acknowledge it or not, money is a conduit of power,” writes Georgetown university professor Stefan Eich in his 2022 book “The currency of politics: The political theory of money from Aristotle to Keynes.” Nigerians know as much now. They must wonder at the newfound enthusiasm of subnational state governors for the masses over the palpable shortage of new banknotes, which came into effect in early February. State governors met Muhammadu Buhari, Nigeria’s president, to voice their concerns about the scarcity of the new currency in early February.
Dissatisfied with Mr. Buhari’s seeming ambivalence, a couple of them went to the supreme court, which in its wisdom ordered for a pause till mid-February, when it will consider the case. I shall not delve into the matters of law, albeit many senior lawyers have not been able to hide their bewilderment at the court’s ruling, which effectively extends the period for which the old banknotes will be legal tender by an extra five days.
Mr. Buhari has been clear about his intent. Even though the central bank’s motivation for the demonetization policy is a desire for a cashless economy, the intent of Mr Buhari, who as president, is the approving authority by law, is primarily to prevent vote-buying in the upcoming 2023 general elections from late-February to about mid-March. And unlike the popular perception, the policy was likely first signalled by Mr Buhari, who as military head of state did the same thing to rein in corrupt politicians and government officials.
Many notable Nigerians have been offering their views about the new currency, especially in light of the shortage of the new banknotes. Banks do not seem to have been particularly enthused about the naira re-design, as they did not demonstrate a sense of urgency, nor did they prevent highly-placed politicans from acquiring disproportionate sums of the new banknotes. In fact, one state governor was able to have N500m of the new banknotes shipped to him.
It is highly unlikely that this was unique to only one governor of the 36 subnational state executives Nigeria has. We know at least one state governor had that much cash sent to him because Nasir El-Rufai, the governor of Kaduna state, revealed it during his media advocacy marathon for the old banknotes to be allowed to remain legal tender for a bit longer. That is an understatement actually. If Mr El-Rufai has his way, he would prefer the old banknotes remain legal tender for another four years. Incidentally, the man whose views are probably the most objective and insightful in this regard are those of Mr El-Rufai’s close friend, Sanusi Lamido Sanusi, the former governor of Nigeria’s central bank.
Mr. Sanusi was recently asked about the demonetization exercise of Godwin Emefiele, his successor and incumbent governor of the central bank, during one of his regular Islamic sermons (Mr Sanusi is a Sufi order leader in Nigeria). Mr Sanusi affirms his support for the policy, having initiated the policy himself in 2012, amid similar uproar too at the time. In other words, the CBN’s demonetization efforts are a decade old this year.
Mr Sanusi advises Nigerians to be wary of politicians who are conveniently siding with the people this time around, especially elected public officials in government, who embezzle public coffers to bribe the police, secret service, election officials, judicial officers and thugs during elections, buying thugs weapons and hard drugs to cause violence and disrupt the peaceful conduct of polls. Mr Sanusi was characteristically frank.
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His message was directed specifically at the northern public, as he spoke in Hausa. He admonishes northerners not to be hasty to condemn the government and the central bank for the scarcity of new banknotes and the aggressive drive towards electronic transactions. What suffering are the northern poor complaining about compared to the hardships of the past eight years, Mr Sanusi wonders.
In fact, politicians in government have become those who are able to steal public funds during their tenures for buying votes during elections, with victory almost guaranteed consequently. With the naira re-design, politicians with stashes of the old banknotes have found themselves with useless money. And because the new banknotes have been under-produced, they have not been able to replenish their stash with as much money as they had in old banknotes.
I say as much myself in a recent feature in the Financial Times. According to the Nigerian Financial Intelligence Unit (NFIU), which has barred cash withdrawals from government accounts from March 2023, over N1trn were withdrawn from federal, state and local government accounts in 2015-2022. Pray tell, what were these cash withdrawals for? Civil servants are paid electronically via banks, as well as government contractors.
What is it that governments want to do with that much in currency that they cannot do electronically? And because of a section of the budgets of governments is set aside for classified security expenditure, there is little to no accountability for some of these funds once they are withdrawn from the coffers of government. You do not need to be a genius to know where the cash ends up.
Despite the temporary hardship of getting access to the new banknotes, Mr. Sanusi tells the Nigerian poor to be happy about the new currency instead. The demonetization policy will ultimately be to the benefit of the masses, as they will be able to choose who they really want as their leaders in elections without the pressure of monetary inducements to do otherwise hitherto. I agree.
