President Muhammadu Buhari was obviously and appropriately excited when Central Bank Governor Godwin Emefiele presented the redesigned banknotes to members of the Federal Executive Council (FEC) last week.
The President enumerated the advantages of the newly designed denominations N1000, N500 and N200: new security features can make counterfeiting more difficult, the possibility of better monetary policy targets, enriching the collective memory of the country’s heritage, the possibility of controlling the circulation of money, reducing hoarding of large denominations and the cost of currency management.
For me, happy hour was the moment it was mentioned that the redesigned bills were produced and printed locally, a testament to the President’s confidence in promoting local content. The banknotes were manufactured by Nigerian Security Printing and Minting Plc (NSPM). Two points are crucial here. The forum found that only four out of 54 African countries print their currencies in their countries.
Redesigned banknotes due to counterfeiting and increasing security concerns are seen after Nigerian President Mohammed Buhari (R) unveiled new banknotes November 23, 2022 in Abuja, Nigeria. Nigerian Presidency / Anadolu Agency (Photo by Nigerian Presidency / ANADOLU AGENCY / Anadolu Agency via AFP)
Nigeria is one of the four, somewhat proud, an indication that Nigeria still has some redeeming qualities. Second, this comes at a time when many Nigerian doctors, paramedics and lecturers are leaving the country in droves for greener pastures abroad. They call it Japa, the desire to move abroad.
It also showed that best practice banknotes should be redesigned every five to eight years, but ours was redesigned almost 20 years ago. That may be partly why there are too many dirty and torn bills in circulation.
The new ones, which may have been printed in the last 19 years, are controlled by bank executives who sell them to agents who sell them to people who want to show off while spray-painting these notes in style on the faces and bodies of revelers at birthdays, Weddings, chief ceremonies and other meaningless social events.
As they spray and the bills fall on the ground, and other sprayers taking their turn showing our march, those neat bills piled on the ground. The central bank says this obsession is illegal, but it goes on endlessly at various ceremonies each week.
Nigerians will enjoy having the redesigned banknotes, but they won’t stay new for long, so we won’t enjoy them for long. Most of the banknotes now in circulation are very dirty, as if they have been put through a dirt machine. Most of them are also torn, as if they had gone through a defective shredding machine. A few days ago I was in a bank where the teller was dealing with torn and dirty banknotes.
First she had to separate the torn from the dirty. She wore a nose mask, although no one else at the bank wore one. Everyone mistakenly thinks COVID-19 is dead, but it is very much alive. The only difference is that doctors and even private individuals now know how to deal with it. Sorry for the digression.
The girl took a wad of notes and slapped them on her desk, and as the dust started to float towards me I had to fish out my mask and put it on my nose. I didn’t want to swallow the dust. Then she physically sorted the torn ones from the almost torn ones and placed the usable ones in the counting machine.
Often they stuck to the machine and she delicately detached them from the machine with her painted fingernails. I watched in awe as she neatly did a dirty job. This was not an unusual experience. This is common practice at most banks. If you don’t want them, you can go home and starve.
Redesigned banknotes due to counterfeiting and increasing security concerns are seen after Nigerian President Mohammed Buhari (R) unveiled new banknotes November 23, 2022 in Abuja, Nigeria. Nigerian Presidency / Anadolu Agency (Photo by Nigerian Presidency / ANADOLU AGENCY / Anadolu Agency via AFP)
The CBN governor has embarked on a cashless economy. It’s beneficial. It prevents you from being physically robbed. It can keep you from moving around with lots of cash for transactions that can be done simply by entering four numbers. Note, however, that this will not stop many of the financial crimes that continue. Some robbers are now using point-of-sale (POS) machines. Kidnappers also have them for paying ransom. In order for a cashless economy to function smoothly, the infrastructure must be in place.
There are 87 villages in my governorate of Ukanafun, Akwa Ibom State. There isn’t even a bank and there isn’t even an ATM gallery. In order to access a bank or ATM, you need to be out for at least an hour.
For the 87 villages there is only one police station with a Hilux vehicle and about 50 police officers. This is probably the situation in most local governments in rural areas. The Ibrahim Babangida government brought the idea of rural banking and the People’s Bank from Southeast Asia. They thrived there because there was adequate infrastructure and their economy is more developed than the Nigerian economy.
The International Monetary Fund (IMF) says Nigeria’s banks closed 234 branches and 649 ATMs (ATMs) in 2020, causing the country’s Financial Access Score (FAS) to fall to 4.44 a year from 4.78 a year 2019 led. The fund announced this in its Financial Access Survey 2021 Trends and Developments.
The fund uses two indicators: the number of commercial bank branches per 100,000 adults and the number of ATMs per 100,000 adults. According to the report, Nigeria recorded declines in these two critical indicators and 12 other indicators among the 64 indicators measured by the FAS.
This was caused by the drop in the number of commercial bank branches in Nigeria from 5,392 in 2019 to 5,158 in 2020. Likewise, the number of ATMs per 100,000 adults allowed the country’s financial access score to drop from 17.19 in 2019 to 16.14 in 2020. The actual number of ATMs fell from 19,459 in 2019 to 17.19 in 2020.
The report also showed a drop in the number of registered mobile money outlets in the country from 145,800 in 2019 to 129,154 in 2020. The drop in these three areas reflects the overall decline in the economy and people’s access to these financial instruments a cashless economy can emerge. Presenting the redesigned banknotes, Mr Emefiele said the world had moved from a predominantly cashless to a cashless economy.
That is true, especially in developed countries, but in order to make this paradigm shift efficient, the necessary infrastructure must be in place. The two examples that the governor mentioned where people cannot easily withdraw $10,000 or £10,000 are the United States and the United Kingdom.
Why this works in these two countries, because their economies are very developed and the infrastructure is in place for a cashless economy to run smoothly. In Nigeria, anyone who has used their ATM card in a mall will tell you what they go through most of the time. You may get a “rejection” only to find out a little later that the money has been paid.
You then have to go to your bank, fill out a form and request that your money be transferred back into your account. The other alternative is for the store owner or cashier to walk around the room looking for places where the service is better. The last alternative is for you and the cashier to turn into prayer warriors and ask God or Allah to approve the transaction. I’ve had to do that a few times. Sometimes prayer is answered; sometimes it isn’t. This is how these transactions work in Nigeria. I doubt if this is the case in the UK or the US.
It is also important to remember that our informal economy employs more people than the formal economy. Our informal economy is also mostly small and medium-sized. Our informal economy is also largely based in rural areas, and most of the facilities you need for a cashless economy are not in place. That’s why people in these areas keep their money under their pillows. They don’t take them to the banks because there are no banks nearby. The People’s Bank and mini-banks that operated in rural areas have since collapsed, leaving rural folk as helpless as they were before the banks’ temporary establishment in their communities.
The other factor to consider is that most of our small farmers, traders and artisans are largely illiterate. A certain level of education is required to operate successfully in a cashless economy. Both the United States and the United Kingdom have over 95% literacy rates. The same applies to most other European and Asian countries.
Nigeria is still a largely illiterate society, especially among those living in rural areas. This means that a smoothly functioning cashless economy in Nigeria is still a few years away due to some of the factors already mentioned. For the most part, most city dwellers are already happy to show their plastic in front of the checkout, because that shows not only the easy handling when everything goes well, but also their composure.
Furthermore, it must be said that the idea of a cashless economy is not a project that only belongs to the central bank. Governments at the various levels need to be involved so that they can help provide the infrastructure that can make their realization possible in the foreseeable future.
The central bank must emphasize this at every forum where it meets with federal, state and local officials. If they don’t all go for it, the CBN will only be fighting windmills, although the idea is a good one.
Comments are closed.