Deposit Money Banks (DMBs) have commenced payment of old N500 and N1,000 notes to customers across the counter. Analysts predict that releasing the old notes back to circulation will reduce the lingering cash crunch and enhance liquidity. Assistant Business Editor COLLINS NWEZE writes that although the move will raise currency-in-circulation, the impact of the development will depend on banks making the notes readily available to cash-starved Nigerians.
Currency-in-circulation is expected to rise as banks begin to recirculate old N500 and N1,000 notes.
The move follows the Supreme Court judgment that extended the old notes’validity to December 31.
Many customers said the re-circulation of the old naira notes has brought marginal reprieve to the lingering cash crunch.
Already, some banks have started paying the old notes to customers across-the-counter and Automated Teller Machines (ATMs).
The reports said some banks’ branches in Lagos, Abuja, Kwara, Kano, and Port Harcourt were paying customers with the old notes.
Confirming on the development, a Lagos-based bank customer, Johnson Okanlawon, said two commercial banks’ branches in Iyana Ipaja were not only paying the old notes across the counter, but also loading their ATMs with these notes, from where customers were being paid.
“I sent my salesgirl to one of the banks in Iyana Ipaja to deposit old notes into my account. She came bank to inform me that even the banks had resumed payment of the old notes to their customers. We have also seen customers freely buying and selling in the old notes, within that axis,” Okanlawon said.
Another bank customer, Michael Okon, said he had N50,000 old notes, and was planning to take them to the CBN before the new development.
“I am excited at this turn of events. It will save me the pain of taking it to the banks and also help settle my immediate cash needs,” he said.
Despite this move, long queues have continued at the branches of banks across the country.
At many branches visited on Victoria Island, and at Matori and Obanikoro, Lagos, there was no cash payment across the counter, thereby giving room for long queues.
Many of the banks’ branches are still not open for business, and the few that open their branches close early.
“Banks have continued to ration cash to customers, limiting withdrawals to between N10,000 and N20,000 daily. The long queues at few of the ATMs dispensing cash, meant customers have to stay for long hours before they could get cash. I waited for three hours from 8.am to 11 am before I was paid N5,000. I will be back tomorrow because the N5,000 cannot meet my financial needs,” a customer said.
At the Federal Capital Territory (FCT), customers who besieged banks to collect cash were disappointed as the many banks were not paying. Investigations showed that only a few banks were paying every customer N5,000.
Many bank customers are unable to make cash withdrawals across the counter, and also through ATMs.
“I have checked in over 10 banks’ ATMs and none of them was dispensing cash. I expected the cash crunch to ease after the Presidential election, but that is not happening,’’ one bank customer lamented.
Although checks across several banks’ branches in Ibeju-Lekki, Victoria Island, the lingering cash scarcity has not abated.
At the Ibeju-Lekki branch of one of the commercial banks, bank officials told the customers who gathered at the branch that there was no cash.
“We do not have cash to pay anybody. We only attend to customers carrying out intra and interbank transfers, and activation of ATM cards,” a bank worker stated.
Analysts have called for more clarity on how the old N500 and N1000 notes return into circulation.
One of them said: “According to them, the Supreme Court judgment would not be impactful if the old notes were not released by the CBN into the banking system. If the money is not released to the financial sector by the Central Bank of Nigeria, the judgment may not have any effect.”
In a unanimous judgment, a seven-member panel of Justices presided by Justice Inyang Okoro recently held that the directive by President Muhammadu Buhari to the CBN for the redesigning and withdrawal of old notes of N200, N500 and N1,000, without consultation with the states, the Federal Executive Council (FEC) and the National Council of State and other stakeholders, was unconstitutional.
The apex court observed that no reasonable notice was given before the implementation of the policy as stated in the CBN Act.
CBN Governor Godwin Emefiele said currency management was a key function of the CBN, as enshrined in Section 2(b) of the CBN Act 2007. Indeed, the integrity of a legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great central bank.
“Besides, the practice across the globe is that a central bank should normally redesign its currency within five to eight years. From the onset of this currency redesign programme, we made it clear that for over 19 years, the CBN has not been able to undertake this important currency and liquidity management function that has important ramification for the effectiveness of monetary policy.
“Also, we aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this programme and we can see that the Military are making good progress in this important,” Emefiele said.
Earlier, Emefiele said the apex bank was aware of the difficulty being faced by Nigerians in accessing the new currency at this initial stage of its issue and circulation, but wished to plead with them to show some understanding as everything was being done to correct some of the lapses in the implementation of the policy.
Emefiele assured Nigerians that the apex bank was working with the Deposit Money Banks (DMBs) and other stakeholders such as the EFCC, the ICPC and the Nigerian Financial Intelligence Unit (NFIU) to ensure that the ultimate goal, which is to deliver to Nigerians, a new currency that meets global standards, is achieved.
It would be recalled that besides monitoring, the apex bank had commenced a nationwide sensitisation on the redesigned notes to Nigerians to reach Nigerians across multiple channels.
It deployed 30,000 Super Agents in assisting the Cash Swap initiative in the rural areas, and regions underserved by banks to ensure that the weak and vulnerable ones werwe able to sswap/exchange their old notes.
Available data at the CBN showed that in 2015, Currency-in-Circulation was only N1.4 trillion. As of last October, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the banking system and N2.7 trillion held in homes.
“Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN, thereby keeping the volume of currency in circulation under the firm control of the CBN. It should also be noted that the notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth,” Emefiele said.
