Trouble started when the government conceived the idea that it wants the country to become a cashless society. Nigeria is a country of over 200 million people, nearly half of which cannot read or write, 140 million Nigerians work and the informal sector and almost exclusively rely on cash transactions only.
The average Nigerian sees less than 6 hours of electricity daily, and hundreds of Nigerians leave the country daily in search of better living conditions abroad. Those leaving are engineers, cyber security professionals – the very people you need if you are serious about transforming your society.
Back in October, the president announced that Nigerians would have three months to take their old currency to the bank and exchange it for new notes, which will be released on December 15. All old banknotes of 1000, 500 and 200 Naira denominations will cease to be legal tender by the end of January.
According to the president, the move was supposed to prevent vote buying in the general elections coming up later this month, reduce inflation, and help combat kidnap for ransom.
The plan was for Nigerians to have 90 days to return their old notes to the bank, out of which 45 days would be used to circulate the newly redesigned notes alongside the old banknotes. But the CBN had other motives, it had deliberately refused to print and circulate enough cash, apparently in an attempt to force Nigerians to use digital forms of payments.
This is where the problem lies, Nigeria is a very large country with over 200 million people and it does not have the infrastructure for digital payments. More than 60% of all transactions in the country are done using the 3 largest denomination banknotes. The consequence of starving such a large population of cash in such a short period is massive queues at the banks and ATMs, also, the digital payment channels begin to buckle under pressure. Most Nigerian banks barely have the infrastructure to keep up with the high volume of transactions they now have to process.
What the president got wrong
The main objective of the Naira redesign policy was to prevent vote buying by unscrupulous politicians and to limit the amount of cash involved in the electoral process. While that is a noble objective, the same result can be achieved by using less drastic measures. Measures like arresting and prosecuting anyone caught trying to influence the election by giving money to voters. Sensitizing the voters on the dangers of accepting money for their votes might also help limit vote buying.
Nigeria needs at least a decade in which the government would put in place the necessary infrastructure and educate the citizens before it can achieve its cashless policy objectives. A country without adequate electricity supply and technical expertise simply cannot be a cashless society.
The politicians the policy was intended to stop already have stockpiles of the new notes. For nearly the first 30 days after the new notes were released, most banks were only circulating the old notes and telling customers that the new notes were not available. The banknotes would later show up at parties and campaign rallies.
The naira redesign policy has already failed. At least 4 state governors are now in open rebellion asking their citizens to disregard the Federal Government and continue circulating the old notes. The whole policy might even be reversed by the Supreme Court in the lawsuit filed by some state governors before it.
This whole problem started because the government wants Nigeria to be a cashless society, the country needs at least a decade of building infrastructure and commitment to achieve that. The president was also wrong in thinking he could starve the politicians of cash in other to limit vote buying, the only thing he has managed to do is starve the economy of millions of poor Nigerians that exclusively rely on cash.