Growing scarcity of lower denominations of the naira is hurting living and commerce alike
A strange report of sudden shortfall in unfit-for-circulation currency notes meant to be destroyed began filtering out of the Mint Inspectorate, MI, at the Nigerian Security Printing and Minting, NSPM, recently. Designated as a currency security unit supervised by the Central Bank of Nigeria, CBN, but situated in the NSPM, MI maintains the quality and security of naira notes and coins in the country. According to the report, the MI had begun noticing a sharp shortfall of this category of notes in lower denominations of N200, N100 and N50 respectively. The report aptly demonstrated the acuteness of the shortage of currencies in lower denominations across the country.
Going by the currency management policy of the apex bank, money deposit banks across the country collate currencies, sort them out into fit and unfit notes and return to the CBN if unfit or re-circulated if still in good condition. But the indication from MI on the paucity of currency in lower denomination to the management of the CBN indicates that banks may not be remitting the old currency like before. Before long, the reasons became apparent. The lower denominations of the naira are believed to be trapped in transaction cycles in the trade and commerce sector on account of the acute shortage being experienced. But how is this possible?
“There is a big demand for these denominations by traders to do their businesses. Don’t forget, most commercial banks have services specially targeted at bringing in more commercially inclined traders as a result of the cashless policy,” said a bank’s branch manager who agreed to speak off record on the matter. He may well have made a good observation on this score.
In the last two years, the apex bank has introduced a rash of policies with a view to firming up the naira and the economy. The CBN introduced its cashless policy in key cities like Abuja, the Federal Capital Territory, FCT, Lagos, Port Harcourt, Onitsha and some other urban and commercial nerve centres in the country. The plan is to ensure less transaction with physical cash. While the use of automated teller machine, ATM, is emphasised, traders and businesses in the informal sector would be encouraged to use more of the point of sales, PoS. It is expected that the measure will greatly curb armed robbery normally associated with physical movement of money, money laundering, and other forms of financial malfeasance would be greatly reduced. The policy is also expected to give fillip to economic planning, especially as it relates to money in circulation.
The CBN is also looking to effect changes in the currencies. It envisaged in the new currency regime that the use of polymer to make naira notes would be phased out. But for the people directly affected by the policy, it is all sad tales as they are unable to see any benefit to their businesses from the plan by the government. According to them, more of their businesses are put in jeopardy by the lack of physical cash to do their daily transactions. In fact, the few available lower denominations of the naira are often tattered, while notes in the polymer category are often torn, only to be patched.
Rabiu Mohammed, a recharge card dealer in Wuse, Abuja, would not agree less on just how serious the situation is for them. When the magazine spoke to him, he had just lost a business transaction worth N10,000 because he could not get a N200 note to give to his customer as balance of payment made to him. “My business has suffered greatly because of this shortage of lower denominations of the naira,” he told the Magazine. Mohammed operates around a business hub known as AMAC Plaza in the FCT. Two commercial banks service the area and often, they come handy for traders in the area who need lower denominations to do business. But Mohammed says that banks now encourage them to bring the lower denominations.
For recharge card retailers like Mohammed, it is double tragedy because, already, banks have started to key into recharge card sales with the use of the ATM. Most people, to avoid the change palaver, resort to their ATM terminals to recharge their phones with airtime, leaving the old retailers out of business.
Ijeoma Erege is into sales and supply of confectionaries and drinks also in the area. For her, four out of five transactions she makes in a day end almost in stalemate as to how to balance her customers. “I have had to wave off marginal amounts to keep my customers,” she said, adding that this has greatly affected her bottom line in the last three months.
The transport sector suffers more from the shortage of lower denominations of the naira. While traders could search around for lower denominations for their transactions, it is not so with a taxi driver like Aliyu Umar. He picks four passengers for a short distance in his Chevrolet and charges each N50. “A passenger was going to a place where she had to pay 50 naira and she brought out N1,000. Where am I supposed to get the balance from?” asked Umar.
But CBN, though admitted that there was, indeed, scarcity of lower denominations of the naira in the past, insisted that the situation has been normalised. According to Ugochuku Okorafor, spokesman for the CBN, the apex bank’s researchers made a different finding altogether. “I am really surprised that people are saying that there is scarcity of lower denominations. You know that we have done our survey and our research shows that no such thing is happening,” Okorafor told the magazine last week.
He, however, admitted that the apex bank was in the race to get more people to hook to the cashless form of transaction. But as desirable as the policy is, the CBN may be ignoring basic truths on the banking population in the country, which may well determine how successful the policy is at the end of the day. For instance, cashless transactions would thrive with more people having bank accounts upon which a PoS can be used by traders. But the facts on ground suggest that banking services penetration in the country is still very poor. For instance, the CBN estimates that of the 39.2 million adults in the country, an estimated 46.3 per cent of them have no access to financial services. Women, who form the bulk of informal traders in the country, are said to account for more than 50 per cent of these under-banked Nigerians.
According to Henry Odioma, an economist and consultant based in Abuja, it effectively means that a large section of the informal business sector is being shut out economically. “If the cashless policy initiative is responsible for these shortages in lower currency denomination, then federal government may sentence a large percentage of Nigerians to economic strangulation,” Odioma said.