The Central Bank of Nigeria may be under pressure to extend the deadline for old naira notes to cease being legal tender as bankers and customers push for the extension.
The old notes are expected to be out of circulation by January 31 yet there is scarcity of the new notes as banks keep dispensing old notes to their customers.
Saturday PUNCH gathered that different stakeholders had been mounting pressure on the apex bank to extend the deadline in order to allow the new notes to circulate well and ensure the mop up of the old notes.
It was learnt that prominent among the stakeholders were managing directors of banks and their management teams, but a source close to the chief executive of a Tier-1 lender told one of our correspondents on Friday that the bank managing directors could not make the call for the deadline extension openly as the decision on the redesign of the naira had their approval.
The source stated, “It is tue that the bank MDs are not comfortable with the fact that the new notes are not circulating the way they had anticipated, but they can’t publicly ask for an extension of the deadline as they were part of the decision to redesign the currency and withdraw the old notes from circulation.
“However, because of the failure of the CBN to supply enough new notes and the pressure this is putting on their banks, the managing directors are lobbying the apex bank to consider the extension of the deadline through the backdoor via the auspices of the Bankers’ Committee. It is a sensitive issue.”
A senior CBN official on Friday confided in Saturday PUNCH that the apex bank might yield to the pressure for extension of the deadline.
According to him, a new date may be announced before or during the CBN Monetary Policy Committee meeting coming up on Wednesday, January 25, 2023.
He stated, “It is clear that the CBN has not supplied sufficient new currency notes to the banks. Even many of us in the CBN have not seen the new notes. The absence of the CBN governor has also clouded the issue and that is why no statement has been made regarding the extension of the deadline.
“From the look of things, most certainly, a new deadline may be announced before the end of the month or during the MPC meeting coming up between January 24 and 25.”
A bank manager in the Ikeja area of Lagos, who spoke on condition of anonymity because she was not authorised to talk to the media, stated, “We have been mandated to load all our machines with the redesigned naira notes, but we still don’t have much of the notes in circulation to load in all the machines across the country. What we have agreed is that at least one machine must be loaded in all locations with the new naira notes, because CBN officials have started moving around banks to confirm the level of compliance.
“Two of the CBN officials visited one of our branches today (Thursday) and asked questions if the bank ATMs were dispensing new notes; they also joined the custodians in the ATM room in loading the machines and confirmed that the new notes were being dispensed to customers; they went ahead to ask why some machines were still dispensing old notes and the response given was that the new notes supplied were not enough.
“They requested the evidence of cash supplied from our bullion team and ensured that the same was loaded in the ATMs as we have been mandated not to pay any single note across the counter.”
NUBIFIE seeks extension
Similarly, the National President, Nigeria Union of Banks, Insurance and Financial Institutions Employees, Anthony Abakpa, stressed the need for the CBN to extend the deadline.
He said, “We would have loved for an extension on the deadline that the CBN has issued for those who are underprivileged and those who live in rural areas where there are no banks and they have to travel a distance before they can carry out banking transactions even on the PoS. We will also love it if they can extend it for every individual to be able to deposit their old notes.
“We advise that there should be a little extension like a month so that everybody can deposit the old notes.”
He noted that to a large extent, most of the Automated Teller Machines in Lagos had started dispensing new notes.
However, when one of our correspondents informed him that ATMs in Abuja were dispensing old notes, Abakpa described the situation as abnormal and said NUBIFIE should be notified about such banks so that necessary action could be taken.
Customers lament scarcity
Findings by Saturday PUNCH showed that Deposit Money Banks had not received sufficient new naira notes to satisfy their customers.
Customers at the GTBank, Sauka branch in the Federal Capital Territory expressed dissatisfaction with the continued circulation of the old notes despite directives by the CBN to load the new notes in ATMs.
Our correspondents observed that customers, who as early as 9am on Friday, were in a queue but could only obtain the new notes, while many customers trooped into the banking halls to deposit old notes.
A customer, Mohammed AbdulKadiri, who spoke to Saturday PUNCH, said he was expecting to withdraw the new notes but got dirty old notes when he visited the ATM gallery.
He said, “The current situation is disheartening, it has never been like this. Normally, when you want to produce new notes, on the day of launching, all the banks will have the new notes to give out. By now, I thought we would have more of the new notes in circulation, but unfortunately, I withdrew old notes today.
“Honestly, I still don’t know why they changed the notes. I feel more for traders in the markets because what this means is that by January 31, people will still be spending the old notes.”
When one of our correspondents sought an explanation, an official of the bank branch directed that all enquiries should be directed to the corporate communications team based in Lagos.
Another customer, who did not want her name in print, said it was frustrating as a merchant to deposit the old notes and still withdraw the old notes.
She said, “I am tired of this new policy. I no longer keep large amounts of the old notes, but when I make withdrawals, I still get the old notes. It is frustrating. I hope that they will make the new notes surplus next week or at least extend the deadline.”
Saturday PUNCH visited ATM galleries of Access Bank, United Bank for Africa and Wema Bank located at the Federal Secretariat, Abuja.
One of our correspondents observed that the ATMs were still dispensing the old naira notes in N500 and N1,000 denominations.
At the GTB banking hall, cashiers were seen paying customers with the old naira notes.
At the Access Bank ATM gallery, a customer who did not give his name lamented the scarcity of the new notes.
However, he questioned the security personnel, asking why the ATM was still dispensing old notes despite the directive of the CBN for the banks to flood the machines with new notes.
Similarly, the UBA ATM machine at the Federal Secretariat dispensed the old notes.
A customer, who gave his name simply as Godswill, said, “If the government wants to approve the new naira, let it do that once and for all so that everyone can conveniently start getting it from the ATM.”
However, the situation was slightly different in Lagos and some parts of Ogun State on Friday as some ATMs dispensed new notes, while others dispensed old notes and a mixture of both.
Senate proposes deadline
The Senate had urged the CBN to extend the withdrawal date of the old notes to June 30, 2023.
The Senate resolution was sequel to a point of order raised by Senator Mohammed Ndume during plenary.
Raising orders 41 and 51 of Senate Standing Rule, Ndume said the call for extension of the date should be considered as a matter of urgent national importance in order to forestall imminent hardship on Nigerians.
CBN warns customers
However, the apex bank is standing firm on the deadline for now.
When contacted earlier by one of our correspondents, the Director of Corporate Communications, CBN, Mr Osita Nwanisobi, said the release of the new notes to banks was ongoing, adding that the process was still at the initial phase.
The CBN, through its verified Twitter page @Cenbank, urged bank customers to return old notes to the banks before the deadline.
The Twitter post read, “A reminder to the general public that the old series of N200, N500 and N1000 notes cease to be legal tender by January 31, 2023.
“You are once again advised to return them to your bank before the deadline!”
In December, the CBN said it had withdrawn more than N1tn out of the N3.23tn from circulation since the launch of new naira notes in a bid to move cash back into the banking system.
NACCIMA wants N5,000
The Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola Obadimu, advised the Central Bank to extend the deadline if it could not meet up with the standard required to phase out the old notes.
He noted that a new N5,000 note would have served the same objective, adding that phasing out the old notes might affect the economy if it was not seamless.
He said, “The CBN set the deadline, so they just have to meet it. If they cannot, I am sure that they will find a way around it, probably to seek an extension of the deadline.
“However, I think it would have been better if they had issued a N5,000 note due to the rising inflation rather than repainting the old notes. It would have achieved the same objective because all the people who stocked up the old notes would have brought them out in exchange for a new N5,000 note.
“They would have also needed to print less because it is a higher denomination note, so the money they would have needed to spend would have been lower. Another thing is you can’t force people to go cashless, especially when the necessary infrastructure is not readily available. People are sovereign and they have a choice on how they want to run their lives. Going cashless is an option and not going cashless is another option.
“The process of phasing out the old notes may have an impact on the economy if it is not done seamlessly. Remember, there was a time the N100 note was changed but it had no effect because of the way it was done. I think there is no need to panic yet since we still have about 18 more days to the deadline but the CBN must up their game on this matter.”
‘Don’t extend deadline’
A financial analyst and Managing Director, Cowry Asset Management, Johnson Chukwu, said banks were not overwhelmed with the new currency demand if the CBN had given them enough new currencies to disburse, adding that the apex bank had the number of banking customers.
He stated, “I don’t think the banks are overwhelmed with the demand if the CBN has given them enough new currency notes, the limits for withdrawal is only N500,000 per week per individual and N5m per organisation per week.
“So, the CBN has the number of bank customers; The basic thing I would have expected them to have done is to look at the history of the banking customers and see the people who are cash oriented and those who come to withdraw money. Let’s assume you have 12 million bank customers or there about, and you take it that six million will come and withdraw cash and you assume that 50 per cent are individual customers and not corporate; calculate the figures and have an estimate on how cash will be demanded.
“If the CBN has actually released enough new currency notes to the banks, there is no reason why the banks should not be able to meet their customers’ demands. If there is no queue at any bank where people want to withdraw the new notes, it simply means that people are served with the currencies given to the commercial banks by the CBN. If the banks don’t have, they will give them the old currency. So I think clearly it’s all about what’s available.”
Chukwu added that the volume of transactions done with cash had significantly dropped, adding that cash was no longer a significant standard of payment in the country.
“So, in as much as there may be some discomfort and challenges at the very rural areas, I don’t think it will cause any major hiccups in business transactions, because I don’t know anyone that is buying anything for N2m that will carry cash around unlike what we used to have in the past. Most Nigerians have moved to other means of payments that are more efficient. The shortage (of new notes) will not affect economic activities,” he said.
Unlike others, he noted that the deadline should not be extended.
He said, “No, I don’t think that the CBN should extend the deadline because, if you look at some of the motivations for that timeline, an extension will defeat some of those primary objectives. This is a new currency design and it will reduce the volume of cash that people can withdraw, so I don’t see the possibility of an extension.”
Speaking on how the apex bank should tackle the inadequate supply to commercial banks, he said, “I think it’s a design, not an accident; it’s clearly a design by the CBN to ensure that the volume of cash in circulation is checked.”
Senior lawyers differ
Meanwhile, some senior lawyers have expressed divergent views on the possible extension of the deadline for the old notes to cease from being legal tender.
While Babatunde Ogala, SAN, noted that the CBN might have to extend the deadline, Kemi Pinheiro, SAN, urged Nigerians to embrace the cashless culture as too much cash in circulation could be used for vote-buying.
Ogala said, “Today (Friday), it is becoming inevitable with the scarcity of the new currency that there may be a need for an extension of time for the old notes to cease to be legal tender, but in a situation where the banks’ Automated Teller Machines are still dispensing the old notes, how can you now achieve the mop up?
“The banks are only taking in the old notes and circulating them back to the public. What this tells us is that we are not ready yet. The CBN probably needs some more time to achieve this task, because I don’t see that happening within the time frame. It is obvious that we still do not have the new notes. We understand that we want to go as cashless as possible, but there is no country where we do not have at least some cash in circulation.”
On his part, Pinheiro said while the move by the CBN to implement the cashless policy was a welcome development, the process had been subverted by illegality and lawlessness.
He also said the January 31 deadline should be sufficient time.
“I think Nigerians will adopt the cashless arrangement. There has been legislation in place for more than 10 years for this cashless policy and it is not being implemented. Insisting on implementing it now – you know we’re not just told about it; we were told three months ago – 90 days should be sufficient time.
“People took bundles of naira with wrappers of banks that have ceased to exist to the bank; they were keeping money at home. No modern society operates that way. You want to buy a car and you carry N3m in cash to the place; where is the money coming from? If we adopt the cashless policy, it will allow the flow of legal funds, and that is why people are kicking against it. People want to buy votes, but this process will make it difficult for them.
“The CBN is not as foolish as many think, so I think that at the end of the day, it is a policy that is long overdue.
“As for the availability (of new notes), I think the government is trying to mop up funds so that they don’t spend it recklessly. How do you go to a party and say give me your account and let me transfer money; the money is simply not there for you to spray.”
“What is unfortunate is that we thrive in illegality. You go to a bank and they tell you we do not have new notes, meanwhile some people are hawking it. Despite legislation against such practices, lawlessness is the middle name of our society.
A Professor of Economics at the University of Uyo, Edet Akpakpan, said, “I can’t understand why they insist that it has to close on a certain date. We need to find out why because, as things stand, there will be problems. Since I got some new notes about two weeks ago, I have not been able to see any till now.
“I think it will be dangerous for the CBN to insist on withdrawing the old notes on a particular date. They should extend it. And if they are not extending it, what efforts are they making to make it available? The idea of changing the notes is good, but they should implement it properly so that citizens are not hurt in the process.”
On his part, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said it was increasingly becoming clear that the deadline set by the CBN was not realistic and the National Assembly had advised the apex bank on its postponement till around June.
“The House of Representatives spoke in a similar manner that this thing requires a lot more consultation to ensure that necessary flexibility is introduced to the implementation. That it doesn’t disrupt economic activities, especially among the rural dwellers, the informal sector and the larger economy generally.
“So, with what we have seen, obviously, there are capacity problems on the side of the CBN to implement this. It is evident that they don’t have enough, because if the banks in Lagos up till now are still dispensing old naira notes, that means there is a production capacity problem because the Nigeria Minting and Printing Company is in Lagos, so the challenges of logistics are out of it.
“So, if Lagos is still experiencing this, what will happen to other states around the country and all the local government areas? Many of them are in remote locations that don’t have banks and ATMs. And there is a lot of cash in those locations because many of these rural people are the ones who are really in agribusiness and trading in commodities like yam, tomatoes and potatoes.”