By Geoff Iyatse, Collins Olayinka, Joseph Chibueze and Anthony Otaru (Abuja)

• Currency In Circulation To GDP Ratio Falls From 1.63% To 0.49% In Two Months

• Scarcity’ll Contract GDP Up To 0.5% In Q2, FG Warned

• No Bank Can Meet 50% Of Customers’ Cash Needs — Managers

• CBN Must Increase Cash Circulation To N2.3tr To Ease Scarcity, Says Emmanuel

• Nigerians No Longer Depositing Cash, Advised To Brace Up For More Hardship

• Toll On Small Businesses Heavy, Says Muda Yusuf

As Nigerians grapple with the multidimensional hardship in daily lives occasioned by the persistent Naira scarcity, financial experts have encouraged them to brace up for more difficult times as the crises might not abate soon.Notwithstanding assurances by the Central Bank of Nigeria (CBN) to ease cash scarcity in the country, data and financial analysts, market intelligence and expert opinions suggest Nigerians would live with limited cash circulation for long or months unless there is a radical departure from the apex bank’s management approach.

The CBN was recently forced down from its high horse by the Nigeria Labour Congress (NLC), which threatened to ground the economy if cash circulation does not improve drastically.

The decision came after weeks of partial implementation of the Supreme Court’s ruling extending the validity of the hitherto phased out old notes to December.

But The Guardian was informed at the weekend that the volume of cash the banks have accessed is a far cry from what the economy required to be fully oiled.

A top banker said no bank would be able to meet 50 per cent of the cash needs of its customers “without running into serious trouble.”

The scarcity, it was also informed, is worsened by zero deposits from customers. The two-way normal cash operations model, where tellers take cash from depositors to give customers, who are withdrawing, has been broken completely, forcing most branches to rely on supply from their regional offices.

In turn, regional or head offices of banks have had to depend solely on CBN in the past two weeks as they have exhausted the residual cash left in their vaults following January/February mop-up.

“The process is not sustainable, and I don’t see anything anybody will do to end the supply crisis until that process changes. If customers withdraw cash only to keep a substantial part of it and nobody returns what has been given out to banks as deposits, how much will CBN print to meet the cash needs of the industry?” another banker asked.

The Guardian had reported that unless drastic actions were taken, banks could face a run when cash operations resume fully.

Bankers, according to fresh findings, are dealing with the fear, through rationing.

For instance, whereas the CBN has directed operators to revert to the old cash withdrawal limit, allowing an individual to withdraw as much as N500, 000 per day, to achieve speedy circulation, banks have introduced their limits – ranging from N10, 000 to N30, 000.

Automated teller machines (ATMs) have also been reconfigured to pay less value for transactions.

In some cases, for example, third-party cards are restrained to N2000 per transaction just as most machines do not pay beyond N20, 000 per day.

Our correspondent was informed that the barriers were created to minimise the risk of excessive cash withdrawal, which could tip the system toward a crisis.

The CBN Governor, Godwin Emefiele, had urged Nigerians to brace up for a more aggressive cashless situation, suggesting that the country might not return to the pre-naira redesign cash level.

If the governor has changed his position, the data does not suggest so. For instance, currency in circulation (CIC) fell from N3.292 trillion at the end of last year to N982 billion at the close of February. That means, the value fell by 70 per cent in two months

In output relations, the CIC to gross domestic product (GPD) ratio is down to 0.49 per cent, from 1.63 per cent it was in December. The current CIC also translates to N4, 546 per capita (per Nigerian).

The official data is inclusive of the number of new notes being hoarded by Nigerians. With the reintroduction of the old notes, the new N200, N500 and N1000 earlier speculated to have been mopped up by politicians and other very important personalities (VIPs) have disappeared. Currently, no ATMs dispense the notes even as they are not available for withdrawal at over-the-counter.

Some sources said the CBN is also at a loss as to the whereabouts of the mints, with some banks said to have been queried in relation to their non-circulation at the height of the crisis.

With the largely informal nature of the economy, low Internet penetration and largely illiterate population, there have been questions on whether the hasty splash of CIC does not amount to cutting the country’s nose to spite its face.

FOUNDER/CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, submitted that the cash crunch has slowed down economic activities and taken a heavy toll on small businesses.

According to him, “one had expected that the situation will improve after the elections, but that has not happened. It has continued to slow down economic activities and it is taking a very heavy toll on small businesses, on those in the rural areas and on the agricultural sector.”

He noted that these are very huge and strategic constituents of the economy because of their contributions to job creation, economic inclusion and their contributions to economic diversification.

He observed that the Nigerian economy has lost an estimated N20 trillion to the prolonged cash scarcity.

According to him, these losses arose from the deceleration of economic activities, the crippling of trading activities, the stifling of the informal economy, contraction in the agricultural sector and the paralysis of the rural economy, including corresponding job losses in hundreds of thousands.

“So, it is a major issue and we thought that the CBN will relax these things now that the elections have come and gone because it appears the main agenda was just to ensure that money is not used for the election,” he said.

Yusuf said whether that is the way to go is a different matter, but that the cost to the economy and the welfare of the people is enormous and it will drag down the gross domestic product (GDP), lead to the contraction of the economy as well as job losses.

He said the damage is far higher than whatever benefit people might want to ascribe to it, noting that the CBN cannot arbitrarily cut the amount of cash in the economy. “It has to be based on clear economic principles and empirical study. You have to relate the amount of cash to the size of your economy as well as the total money supply. Those two variables are very important. That is the way to manage an economy.”

David Adonri, an economist and stockbroker, told The Guardian that the drastic cut in available cash could tip the economy to crisis and trigger a bank run. Adonri earlier insisted that the CBN must return CIC to its or above pre-naira design level to starve off a run on the banks.

Asked for his perspective on the likely solution to the protracted crisis, Adonri said: “It’s like CBN does not have any solution to the monetary problem it created with the connivance of the Federal Government. So far, cash scarcity has intensified with undiminished intensity. Whether CBN has destroyed the cash it confiscated or is unable to print new currency notes, the Bank must be held liable for the near collapse of the economy that the policy has caused.

“I still suspect a clandestine motive behind the formulation of the policy. Those behind the perpetuation of this policy have a target objective, which they are yet to realise… I think that the forces behind the continuation of this policy are beyond the power of CBN. Hence, the problem has become intractable.”

Also speaking, Dr. Tope Fasua, a former presidential candidate and economist, doubted that the CBN has sufficient cash to return circulation to the previous level but expressed the belief that the crisis has reduced considerably.

“The CBN can only continue to print more based on their schedules and some extra until we get to a level of better comfort. It is also important to note that due to the serious hiccups, people are still wary of spending the cash they manage to find. People are still hoarding. With a little patience, people will spend and money in circulation will stabilise,” he said.

With moderate improvement in the efficiency of electronic payment channels, Fasua said the crisis must have passed its peak, and that the country could only expect consistent improvement as days turn to weeks.

CHIEF Executive Officer, Dairy Hills Limited, Kelvin Emmanuel, stressed that it is very important for the CBN to raise the circulation of new naira notes from N400 billion to a minimum of N2.3trillion, which is 85 per cent of the N2.7 trillion taken out of circulation in the failed naira re-design campaign.

He argued that the shortage of bank notes at ATM points, over the counter of banks, and POS vending points are an indication that the apex bank might be unable to return all the old notes totaling N2.7 trillion collected from deposit money banks, because some of the notes might have been destroyed already.

Indeed, there is the post-traumatic effect of hoarding, drawing from the example of what happened after the demonetisation exercise in India with the rupee.

Emmanuel added: “The Demonetisation exercise has led to the destruction of micro-businesses and has wiped out entire quarter earnings of major corporates of fast-moving consumer goods. I expect that in the second Quarter, its impact will reflect in the GDP numbers, with contraction of up to 0.5 per cent.”

Emmanuel urged the CBN to impress it on the Printing and Minting Corporation to ramp up capacity to, over the next six months, raise the number of new notes in circulation by N200 billion per month, while phasing out the old notes systematically in corresponding volumes through the deposit money banks, saying this is necessary because, by October of 2023, the CBN has to start a three-month notice of calling back the old notes in line with the end of the year deadline.

“I am also expecting that the Confirmation of the new Universal Service Provision Board at the Senate (tasked with increasing the Internet Penetration Access and mobile telephony signal to Rural Areas) will be a joint effort by stakeholders to raise the number of BTS in rural areas, which is critical to incentivising the private sector’s quest to provide financial inclusion for the people outside the banking system,” he explained.

On his part, the Lead Director of Centre for Social Justice (CSJ), Mr. Eze Onyekpere, also said the informal sector of the economy has been the worst hit by the cash scarcity.

He said: “The informal sector is a very huge contributor to our national GDP and they are very badly affected by the cash crunch. Most of the businesses in the informal sector are cash-based. But patronage has dropped significantly because people do not have cash to buy things. The situation has also slowed down production and consumption of goods and services; the effect has been negative for the economy. I believe that by the time the GDP figures for this period is computed, the figured will be down. Government seriously needs to pump money into the system.”

Co-founder, PeaceFront for Development Initiative, Maife Owolabi Lincoln, described the Naira redesign policy as a failed experiment.

“The scarcity of cash and the hardship Nigerians are experiencing now is a product of a miscalculated policy implementation and any significant changes to address the situation will require careful planning in consideration of the country’s economic and political climate,” he said.

In agreeing with Emmanuel, Maife urged the CBN to increase the amount of cash in circulation to ease the scarcity.

Maife insisted that the government should also embark on the aggressive promotion of cashless transactions by incentivising businesses to offer electronic payment options, educating citizens on how to use electronic payments, and improving the infrastructure for digital payments.

He maintained that encouraging the use of electronic payment systems could reduce reliance on cash and ease the scarcity Nigerians are currently facing.

In his analysis, Professor Akpan Hogan Ekpo observed that the N1 trillion new notes initially printed by the apex bank was too small to meet the people’s cash demands.

He charged thee Federal Government to put in place more ICT infrastructure to provide the much needed services to customers. “Our current infrastructure are very poor and that is why they cannot sustain the traffic of cash transfers that would ensure the success of the cashless policy.”