
The scarcity of naira notes and the subsequent erosion of the value of the Nigerian currency have become a recurring decimal in the country’s economy. Despite efforts by the Central Bank of Nigeria (CBN) to address the issue, the scarcity persists, leaving many to wonder if the apex bank is truly helpless in the face of this challenge.
The current naira notes scarcity can be traced back to the CBN’s decision to redesign the higher denomination notes (N200, N500, and N1000) in October 2022. The move, aimed at curbing inflation, reducing the amount of cash in circulation, and promoting digital transactions, was supposed to be completed within a short period. However, the process has been marred by delays, inefficiencies, and a general lack of preparedness by the CBN and commercial banks.
As a result, Nigerians have been faced with severe shortage of naira notes, leading to long queues at Automated Teller Machines (ATMs) and banking halls. Many have been forced to resort to alternative means of transactions, such as mobile banking and Point of Sale (POS) machines, which often attract exorbitant charges. The scarcity has also had a ripple effect on the economy, with many businesses struggling to access cash to meet their daily operational needs.
Furthermore, the scarcity has led to a significant erosion of the value of the naira. The exchange rate has continued to depreciate, with the naira exchanging for over N1500 to a United States dollar in the parallel market. This has made imports more expensive, contributing to higher prices of goods and services. The depreciation of the naira has also reduced the purchasing power of Nigerians, making it difficult for them to afford basic necessities.
In addition, the exorbitant charges by POS operator has further exacerbated the situation with the result that the real value of every N1000 passing through the POS is just about N900 or less.
The CBN’s response to the crisis has been inadequate. The apex bank has continued to assure Nigerians that the scarcity is temporary and that it is working to address the issue, but there is no indication of improvement anywhere causing many to ask if the CBN actually has a grip of the total cash needs of the Nigerian economy?
The CBN’s efforts have been slow and ineffective. The CBN has also been criticized for its failure to provide adequate support to commercial banks, which has further aggravated the scarcity.
In addition, the CBN’s decision to impose cash withdrawal limits on individuals and businesses has been widely criticized. The policy, which aims to promote digital transactions, has been seen as punitive and has further restricted access to cash. Many have argued that the policy is ill-timed and has worsened the situation.
Meanwhile, the federal government has also been criticized for its handling of the crisis. The government’s failure to address the root causes of the scarcity, such as the lack of investment in the banking sector and the inefficiencies in the CBN’s cash distribution system, has been seen as a major oversight.
To address the scarcity and value erosion of the naira, the CBN and the federal government must take urgent and decisive action. First, the CBN must prioritize the distribution of cash to commercial banks and ensure that ATMs and banking halls are adequately stocked. The apex bank must also provide support to commercial banks to enable them to meet the demand for cash.
Second, the CBN must review its cash withdrawal limits policy and consider relaxing the restrictions to allow individuals and businesses to access cash more easily. The apex bank must also work to improve the efficiency of its cash distribution system and invest in technology to reduce the risk of cash shortages in the future.
Third, the federal government must invest in the banking sector to improve its infrastructure and efficiency. The government must also work to address the root causes of the scarcity, such as corruption and inefficiencies in the CBN’s cash distribution system.
Also, the CBN must ensure that rate charged by POS operators are very reasonable as exhirbitant charges may be counter productive and may present a very dangerous consequence which the apex bank may not have considered as a fallout of scarcity of naira notes; that is, currency counterfeiting.
Finally, the CBN and the federal government must work to restore confidence in the naira and the banking system. This can be achieved by implementing policies that promote transparency, accountability, and good governance. The CBN must also work to improve its communication with the public and provide regular updates on its efforts to address the scarcity.
In conclusion, the scarcity of naira notes and the value erosion of the Nigerian currency are complex issues that require urgent attention. So far it does appear that there is no end in sight, leaving the CBN helpless with no clue as to what policies or strategies to implement to stem the southward drift in value or immediately bring the naira notes shortage to an end.
Efforts by BusinessUpdate to reach the spokesperson of the apex bank on how and when an expected end to the problem is likely happen proved abortive as she could not be reached om any of her lines.h
The CBN and the federal government must therefore work together to address the root causes of the scarcity and implement policies that promote transparency, accountability, and good governance. Only then can Nigerians become more confident in the naira and the banking system.