Video - Taxes hiked for telecoms, large motor vehicles and alcohol in Nigeria

Beginning June 1, Nigerians will have to pay a little more for imported goods, alcoholic beverages, tobacco, single-use plastics, and telecommunication services. And imported vehicles, whether new or used, will be subject to an import adjustment tax of 2 or 4 percent.

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Despite forex trading being viewed as a high-risk venture, hundreds of thousands of Nigerians are diving in every year, as they explore new ways to earn a living. 

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Manufacturing activity rebounds in Nigeria as cash crisis eases

Nigeria’s manufacturing activity pulled off a sharp growth last month, shaking off successive contractions in the two months preceding April.

The growth was recorded as the squeeze resulting from the central bank’s push to wean Africa’s largest economy off dependence on physical cash softened.

The country’s Purchasing Manager Index (PMI) came in at 53.8 for the month on increased production level and improvement in new business, according to newly issued factory activity data.

A reading higher than 50 points to growth, while any below that threshold implies a shrinking in PMI, which assesses the overall direction that business condition in the manufacturing industry is headed.

Hiring was restrained and employment consequently slowed as companies still grappled with uncertainty in some way, following the crisis.

“The easing of the cash shortage challenge in April saw improvement in both output and consumer demand,” Muyiwa Oni, Head of Equity Research West Africa at Stanbic IBTC Bank, said.

Stanbic IBTC Bank works alongside S&P Global and Nigeria’s statistics office every month to provide the data.

“While the easier access to cash caused business activities to expand across key sectors (Agriculture, manufacturing, services and wholesales and retails sectors), firms however maintained caution in increasing staff head count,” Mr Oni further stated.

His optimism for activity in the near term is measured, considering that sentiment remains relatively weak and given the signals that access to cash will be steady, not dramatic.

The document highlighted a steep jump in input costs for manufacturers in April, not altogether unanticipated as Nigeria’s inflation climbed to 22 per cent in the preceding month, closing in on its 18-year peak.

Even though firms passed on the increased cost to customers, that was done sensitively in order to attract them, leading to the slightest rate of selling price increase in three years.

“Business sentiment remained subdued in April, despite a slight pick-up from March. In fact, optimism was among the lowest seen since the survey began in January 2014,” the report said.

By Ronald Adamolekun, Premium Times

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Banknotes Dispensed in Nigeria to Reduce Three-Month Cash Crunch

Nigeria’s central bank increased the supply of banknotes to lenders to end shortages that have hampered individual and business transactions and crippled the cash-based economy since January.

Most lenders including United Bank for Africa Plc, Zenith Bank Plc and FBN Holdings Plc called in staff on Saturday and Sunday to help customers access cash in banks or via automated teller machines.

The disbursement, in compliance with a central bank directive, is being monitored “personally” by Governor Godwin Emefiele, according to spokesman Isa Abdulmumin. Residents should have unfettered access to cash within the weekly withdrawal limits and terms, he said by phone from the nation’s capital, Abuja.

Africa’s most populous nation was hit by a cash shortage late last year after the central bank began replacing old 200-, 500- and 1,000-naira notes with new ones in a bid to mop up excess liquidity, promote electronic-based payments and rein in inflation. Some state governors challenged the program in court and the Supreme Court extended a Feb. 10 deadline set to phase out old notes until year-end.

Although the court ordered the central bank to redistribute old notes amounting to 2.2 trillion naira, or 70% of cash in circulation, to ease shortage, residents still struggled to access banknotes as of last week as few banks and ATMs had supplies. It prompted the Nigerian Labour Congress, the umbrella workers union, to call for protests at central bank offices from March 29.

The improved distribution is expected to balance the supply and demand for cash in the economy and halt further impediments to personal and business transactions. About 90% of transactions in Nigeria’s informal economy are conducted using cash.

Citizens withdrew cash from automated teller machines in the business district in Nigeria’s commercial hub of Lagos on Monday without the usual long queues. “After what I went through in the past to withdraw my own money, what I see here today is like magic; it’s a big relief,” said Adebisi Erimipe, who withdrew 10,000 naira ($21.69) in old 500 naira notes within few minutes at Unity Bank Plc’s ATM located on the Island in Lagos.

The central bank will keep weekly withdrawal limits at 500,000 naira for individuals and 5 million naira for companies to discourage residents from holding excess money, Abdulmumin said. A processing fee of 3% for individuals and 5% for companies is charged for those seeking to withdraw cash above the limits. 

By Emele Onu, Bloomberg

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Rates rise in Nigeria due to price and exchange rate pressures

Nigeria's central bank raised its benchmark lending rate by 50 basis points to 18% (NGCBIR=ECI) on Tuesday as monetary authorities continued to tighten policy to rein in inflation which has squeezed consumer purchasing power.

The high cost of living was among major concerns for voters during last month's disputed presidential election that was won by ruling party's Bola Tinubu, who has promised to revive the economy and end widespread insecurity.

The central bank's latest rate hike came after last week's inflation data showed price rises quickened in February despite the recent cashless policy meant to reduce the amount of currency in circulation. Inflation also rose in January.

Central Bank of Nigeria governor Godwin Emefiele said members of the Monetary Policy Committee were unanimous in raising rates, citing price and exchange rate pressures and expectations of the removal of a petrol subsidy that cost $10 billion last year.

"These, in view of members, provided a compelling argument for an upward adjustment of policy rates, albeit less aggressively," Emefiele said.

Razia Khan, head of research, Africa and Middle East at Standard Chartered Bank, said inflation risks remained on the upside but the pace of tightening was more moderate in order to reduce negative real interest rates.

Investors are looking at how quickly the petrol subsidy will be removed as Tinubu prepares to get into office on May 29.

"In terms of reform, there are now firm expectations that we should see fuel subsidy reforms commencing imminently. Less clear is the time frame for any FX policy adjustment," Khan said.

"FX adjustment would likely have to precede any meaningful portfolio inflows, but current global volatility and its impact on the oil price could see fuel subsidy reforms being given prominence near-term, with FX reforms to follow, only later."

Emefiele said Nigeria's banks remained sound and would not be affected by the impact of the collapse of two U.S. lenders and problems at Credit Suisse. 

By Chijioke Ohuocha and Camillus Eboh, Reuters

Critical mistakes made by central bank of Nigeria in cash swap

Nigeria has successfully introduced new banknotes on about 10 occasions since independence in 1960. So why has the latest attempt been so controversial and traumatic? And what measures need to be taken to avoid a future debacle?

Nigeria’s central bank announced the introduction of new banknotes last November, with the changeover to new notes scheduled for mid-December. The rollout of the policy disintegrated into chaos, amid mounting anger among ordinary Nigerians.

The rollout of the currency change was disastrous. The fallout included:

. Severe shortages of the new banknotes.

. Precipitous declines in business transactions (especially in the informal sector).


. Long queues at bank premises and overcrowded banking halls


. Attacks on bank staff and destruction of bank property, including ATMs that failed to dispense cash.

The policy also led to lawsuits by some state governors against the Central Bank of Nigeria and the Federal Government.

I have identified five factors that marred the redesign policy, most of which could have been avoided by the Central Bank of Nigeria.
 

Litany of errors

Cost-benefit: An egregious error committed by the central bank was its violation of the principle of cost-benefit analysis. This is a simple rule in economics that implores policy makers to undertake an initiative only when the benefits exceed the costs. One should ask: What were the benefits of introducing the policy? What were the potential costs at the time of implementation?

The central bank justified the redesign policy as follows: to rein in counterfeiting, promote a cashless economy by limiting the amount of the new banknotes that can be withdrawn, reduce the large quantity of dirty notes circulating in the economy, discourage hoarding, curb crimes like kidnapping and terrorism, and head off illicit financial transactions.

It also saw the policy as a way of addressing the huge amount of currency outside the formal financial sector; 85% of banknotes circulate outside the banking system, largely because of hoarding and illicit financial transactions.

And the cost? If indeed the central bank considered the cost, it obviously underestimated it. How would anyone ignore the large-scale disruptions in the economy and loss of productivity that the policy caused, not to speak of the stress and anxiety inflicted on Nigerians?

Communication: Of all the pitfalls that doomed the currency redesign policy, at least as conceived originally, the lack of effective communication about the overarching goals and modus operandi of the exercise was the most devastating.

Nigeria’s central bank threw a basic element of strategic planning and communication to the winds when it failed woefully to communicate and educate the public about expectations, prior to launching the policy. According to strategic planners, a major policy initiative that is not well communicated, from the top of the strategy planning pyramid to the bottom, is bound to fail.

The central bank should have sought the buy-in of major stakeholders, especially the National Economic Council and the National Assembly. The central bank would have had a better chance of avoiding the ferocious push-back it got.

The central bank finally began rolling out a communication plan by late December 2022. But this was too little too late. By then Nigerians had already characterised the policy as decidedly punitive. The narrative that had gained ground was that the change was designed to curtail the ability of politicians to buy votes during the 2023 elections.

This inevitably raised the question of why millions of Nigerians should suffer because of politicians?

The central bank’s mishandling of communication was also manifested in the fact that it failed to issue policy guidelines to commercial banks and the public days after the Supreme Court nullified the bank’s earlier deadline. This has exacerbated the confusion associated with the policy, as merchants and businesses continue to reject the old notes, despite the court’s rulings.

Inappropriate timeframe: The timeframe for implementation was unrealistic and impracticable. By setting a very short timeframe for phasing out the old notes, the Central Bank of Nigeria appeared to have adopted textbook assumptions about how the Nigerian banking system works.

Anyone who has been to a typical commercial bank in Nigeria would know it would have been impossible for the banks to undertake the monumental task of collecting old notes and dispensing the new ones within the one-and-a-half month window originally allowed by the central bank. Overcrowding, chaos, excruciatingly slow service and unnecessary bureaucratic red tape are quite common during normal banking hours. It is not uncommon to observe people with “connection” circumvent queues and obtain preferential access to bank staff. Although Nigerian banks pride themselves as being digitised, a lot of paper-pushing still goes on within the banking system.

The central bank should have considered this fact and allowed for a longer timeframe for implementation.

There was also no persuasive rationale for the rushed implementation of the policy. Neither was the central bank able to explain why the old and new notes could not coexist, a measure the Supreme Court has now mandated the bank to implement.

Conflicting goals and lack of prioritisation: Policy targeting is a major precondition for success. The focus on one unambiguous objective in past redesign policies enabled the central bank to conduct a seamless and less dramatic exercise.

The current redesign policy had too many goals, and it was unclear which one was the target goal.

Identifying target goals enables policy makers to select appropriate instruments for achieving those goals. But when there are too many goals, the danger is that an instrument designed for one goal may undermine another goal.

For instance, the goal of reining in money laundering and illicit financial transactions meant that the Central Bank of Nigeria needed to deliberately restrict access to the new banknotes. But this inflicted unintended hardships on innocent Nigerians who simply wanted to access their hard-earned money.

The central bank should have focused on one major goal. If the goal was to phase out old notes, as the bank is statutorily mandated to do, then the old and new notes could have circulated alongside each other until the old notes were phased out.

A casual announcement that new notes would be circulating from a given date would have been all that was needed. People would not have panicked and rushed to the banks to withdraw money.

Economic headwinds: It is very difficult to implement a major policy initiative that negatively affects people during a period of macroeconomic instability. The central bank policy came at a bad time. Nigeria’s economy is in a shambles, with a 22% inflation rate, 33% unemployment rate – 43% among young Nigerians – and a growth rate of 3%.

These economic challenges have been compounded by a 17.5% interest rate, steep declines in the value of the Naira, and widespread poverty.

Nigerians’ tolerance for economic shocks was already at its limit when the redesign policy was launched. The policy and the confusion that accompanied it tipped them over the edge.
 

The challenge of credibility

The central bank needs to reestablish its credibility as the “people’s bank,” to reverse a self-inflicted image of an organisation that’s partisan.

The bank has a fiduciary responsibility of catering to the interests of its main “shareholder,” the Nigerian people. But the perception is that the bank lacks independence. To effectively discharge its statutory duties, the Central Bank of Nigeria should initiate a process of re-asserting its independence and regaining the people’s trust and confidence.

By Stephen Onyeiwu, Professor of Economics & Business, Allegheny College

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Central Bank of Nigeria says old naira notes still legal tender

Nigeria’s central bank will allow old bank notes to continue as legal tender until the end of the year to comply with a court order earlier this month, according to a statement late on Monday, raising hopes this would ease acute cash shortages in the economy.

On March 3, the Supreme Court ordered the Central Bank of Nigeria (CBN) to extend the use of old 1,000 ($2.17), 500, and 200 naira notes until December 31. The initial withdrawal of the notes from circulation became an election issue after causing widespread hardship and anger.

CBN said it was complying with the law and that the old notes would circulate with new ones of equivalent value. Earlier, on Monday evening, a statement from the Nigerian presidency said President Muhammadu Buhari did not urge the CBN not to obey the court order.

“The CBN has no reason not to comply with court orders on the excuse of waiting for directives from the President,” it said.

In a country where most people rely on cash for everything from buying food from markets to taxi fares, the shortages of naira notes have riled citizens, a few of whom have attacked banks and burned cash-dispensing machines.

By Camillus Eboh, Reuters

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16 States in Nigeria sue central bank over withdrawal of old banknotes

16 states in Nigeria asked the Supreme Court to force the central bank to extend by six months the use of old banknotes, whose withdrawal from circulation has caused cash shortages ahead of weekend elections. The shortage of naira notes has angered citizens with some of them attacking banks and burning cash-dispensing machines.

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54% of currency in Nigeria no longer in circulation

Nigeria currently has about 1.39 trillion of its currency in circulation, after cutting off an estimated 1.6 trillion in just a month.

This 54% drop is part of the Central Bank’s governor's initiative to inflate the value of Nigeria’s currency, the Naira. In January, the money in circulation totaled N3.1 trillion.

Subsequently, the currency outside the vaults of banks has also been cut down by 69.3%, jumping from N2.56 trillion to N788.92 within the same month.

In December, the governor of the Central Bank Godwin Emefiele alongside the president of the country, Muhammad Buhari, revealed the new redesigned legal tenders for the N200, N500, and N1000 notes.

This redesign according to the governor was to recover the lost value of the naira. The governor disclosed that the Naira was depreciating because most of the country’s cash was being hoarded outside banking halls.

This, in his assessment, amongst other factors, devalued the naira. As a result, some of the country’s legal tender were redesigned, and the governor gave a short deadline for the return of the old notes.

The first deadline was a little over a month after unveiling the redesigned notes on the 31st of January, which would eventually be extended to the 7th of February.

After massive bouts of civil unrest across the country and a disagreement with the country’s supreme court, which ruled that the deadline be extended, the CBN governor and the president of Nigeria insisted that the deadline would stand, and the redesigned notes would be the country’s official legal tender.

As result, the CBN has managed to reduce the level of hoarded cash outside of banking halls, by a significant margin. This refusal to budge under pressure has also made Nigerians more receptive to the idea of a cashless economy. Now more than ever, Nigerians have keyed into the idea of transacting business via transfers.

In the same period under review, Nigeria’s money supply rose to N53.27 trillion, a 2.2% increase compared to the previous month.

Chinedu Okafor, Business Insider Africa

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Anger and chaos outside banks in Nigeria

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President Buhari grants 60-day extension for cashswap

Nigeria's President Muhammadu Buhari on Thursday gave approval to the central bank to extend the deadline to turn in old banknotes by another 60 days after cash shortages stoked anger ahead of presidential and parliamentary elections next week.

Nigeria's central bank decided last year to start circulating newly designed 1,000 ($2.17) 500 and 200 naira notes. The deadline to turn in old notes has already been extended once to Feb. 10, after which they would no longer have been legal tender.

But the new notes have been in short supply, leading to long queues and chaotic scenes at banks across the country. Most of Nigeria's economy is still informal and many people use cash for transactions because they do not have bank accounts.

Buhari said in a television broadcast that old 200 notes would continue to circulate in the economy alongside new 1,000, 500 and 200 notes until April 10.

But the old 1,000 and 500 notes could only be swapped at the central bank and "designated points", he said.

The comments contrasted with last week's Supreme Court interim ruling that said all old notes remain legal tender until it hears a challenge brought by some state governments.

Buhari defended the initiative saying it would lead to greater transparency in financial transactions, curb money laundering and reduce money supply in the economy.

"Notwithstanding the initial setbacks experienced, the evaluation and feedback mechanism set up has revealed that gains have emerged from the policy initiative," said Buhari.

Some politicians have criticised the timing ahead of Feb. 25 elections, as campaigns are funded by mostly hard to trace cash.

Local media reported on Thursday that some angry citizens had vandalised cash dispensing machines at some banks in southern Nigeria as they protested the cash shortages.

By Felix Onuah, Reuters

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Anger and chaos outside banks in Nigeria

People in Nigeria have taken to sleeping outside banks. They want to be among the first in line to get notes from the cash machine once it is loaded up in the morning.

A lack of newly designed naira notes has led to a cash shortage and a growing sense of anxiety among those desperate to get hold of their money in a country where 40% of the population don't have bank accounts.

The Supreme Court has even become involved and has ordered that the deadline to hand in old notes be extended but this has made little difference.

People here have long been used to the periodic bouts of fuel shortages leading to long lines of cars snaking from the petrol stations. But now long lines of frustrated, confused and angry people have become a common sight outside banks as the country builds up to a presidential election at the end of the month.

"I have not eaten today," says Abraham Osundiran, 36, as he stands in one of two queues at a bank in Ikoyi, a district in the country's main commercial hub, Lagos.

He has had to miss work at a construction company for a second day because he does not have the cash to pay the taxi fare. Some Nigerians have embraced digital payments, but many still rely heavily on cash.

"I don't have any cash. I've had to skip breakfast so I could come here, and I don't know what I will eat for the rest of the day."

It is a similar situation for many others.

"It's painful. I can't go to the market, because they want cash. Buses want cash - now I have to trek everywhere," hairdresser Lilian Ineh, 26, tells the BBC from her salon.

"There's no money to buy stock, so I have less products to sell. There are even less customers. Usually on a Saturday I have a minimum of five."

Last Saturday, she only had two.

Nigerians were told last October that the old notes were being replaced with new notes and they were encouraged to deposit any cash savings in the bank.

"They made us put all our money into our accounts, and now we can't access it. It's unbearable," says Osarenoma Kolawole, 40. She works in telesales, but has not been able to access her salary since getting paid last week.

"The last time I went to the shops, I had to buy eggs instead of fish - that really hurt me - not the food, but having to buy what I didn't want to, just because the banks won't let me get my money."

The Central Bank of Nigeria (CBN) said it redesigned the higher denomination notes - 200, 500 and 1,000 naira - to replace the dirty cash in circulation, to tackle inflation, curb counterfeiting and promote a cashless society.

It hoped the redesign would bring some of the money being hoarded by individuals and companies back into the financial system.

The reform has created something like a cashless society - but not in the way the CBN had planned.

People have been finding it difficult to make online payments and transfers. Analysts say the infrastructure to support a digital system is not robust enough.

"The whole idea was to limit how much cash people have access to, in order to encourage them to make digital payments, so they [CBN] can monitor where money goes," says Paul Alaje, a senior economist at management consultants SPM Professionals.

"But Nigerian banks don't have the capacity or structure to make digital payments work seamlessly."

The CBN has not said whether the shortages are deliberate.

"The government has been trying to move the country into a cashless economy for ages," argues policy analyst and economist Yemi Makinde.

"Its intention is good, but it is just not feasible, the banking systems were not ready and Nigeria is just used to cash."

When announcing the redesign, the CBN said the new notes would begin circulating from 15 December and the old notes would cease to be legal tender at the end of January.

The bank then extended the deadline to last Friday. But the Supreme Court stepped in and suspended this deadline but the queues outside banks remain.

"The only way this judgment would work is to release old notes back into system to meet the shortage [but] doing that will only take us back to square one," says economist Mr Alaje.

Accusations of hoarding

Many have also blamed individual bank branches.

Firstly, they were still giving out the old notes rather than new ones, even up to the week of the initial deadline, thereby keeping them in circulation.

Secondly, agents from the country's anti-fraud body, the Economic and Financial Crimes Commission, raided some bank branches and arrested managers who were accused of hoarding the new notes in vaults rather than putting them in cash machines and giving them to customers.

"The banks are not doing a good job distributing the money. Bank managers have been keeping a lot of the money aside for people with connections and for the rich, misusing the central bank's policy," Dr Makinde says.

As a consequence, the lack of new naira notes has hit those who primarily deal with cash day-to-day, like market sellers and hawkers.

Iya Ruka, 52, sells plantains at a market in Ojodu Berger, Lagos. She has had to adapt by accepting bank transfers - but this has not helped her when she needs money.

"All my customers are saying they don't have cash, they will pay using a bank transfer, but I go to the bank and there's no cash for me to collect. So what do I do?"

Further down the street, Kingsley, who only gave his first name, sells mobile phone accessories.

The 27-year-old told me he has hardly sold anything in the last few days.

"People only pay [by] transfer. If I want to get home, I need to go to a Point of Sale (POS) to get money and they charge a lot now."

POS vendors are individuals standing at street corners who have a card machine and can make transfers for people, but often charge a commission.

They have been accused of fleecing ordinary people by charging extortionate amounts for cash withdrawals.

'Things will get better'

One vendor, who spoke on condition of anonymity, defended the need to charge extra.

"I queued for an entire day at a bank to get new notes and old notes. That's why they must pay, because we queue," says the 25-year-old, who runs a kiosk in Lekki.

She adds that she is not sure how much longer she will be able to keep up the business, as the banks run dry.

"Some customers can get angry and nearly violent - I just avoid looking up at them. They forget I'm suffering as well, like now, I have to trek for an hour home, and I have only been eating garri [cassava flakes]."

CBN Governor Godwin Emefiele has said he has taken steps to get more of the new notes into the system with the aim of easing the situation.

The chaos has become a major election issue with calls for President Muhammadu Buhari to take action to avoid losing votes for the ruling All Progressives Congress.

Despite the crisis, there are a few people, especially those who managed to plan well ahead, who have not felt the crunch just yet.

Ruth Okeke, 35, runs a convenience shop in Omole. She says even though her number of customers has dropped, she is not worried.

"I know things will get better. The bankers are the ones making money from all this panic, but there will be new notes soon, everybody should relax."

By Simi Jolaoso, BBC

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Video - Nigerian banks face a shortage of new naira notes

Video - Supreme court suspends currency swap deadline in Nigeria

Nigeria's supreme court temporarily suspended a February 10 deadline to stop using old currency notes. The deadline issued by the Central Bank has caused a cash crisis in the country. Nigerians have been struggling to access the new currency leading to attacks on banks and demonstrations in some parts of the country.

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Supreme Court suspends banknote deadline in Nigeria

Nigeria's Supreme Court has temporarily suspended Friday's deadline to stop using old banknotes, which had caused a cash crisis in the country.

Many banks have not had enough of the new naira notes, leading to desperate and chaotic scenes as people tried to get their hands on them.

Videos were shared of people stripping in banks in protest and fights at ATMs.

The chaos led to concern that it could affect this month's elections, as many Nigerians do not have bank accounts.

The head of the election commission said some election service providers will need to be paid in cash, and that could prove to be difficult.

The Central Bank said the currency redesign would help it tackle inflation, which is currently running at about 21%.

The bank said 80% of the notes currently in circulation were being held outside financial institutions. It hoped the redesign would bring some of that money being hoarded by individuals and companies back into the financial system, and so stop prices from rising so quickly.

The case, which was brought by the northern states of Kaduna, Kogi and Zamfara, has been adjourned to 15 February.

By Cecilia Macaulay, BBC

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Nigeria should consider extending banknote swap deadline according to IMF

The International Monetary Fund said on Wednesday that Nigeria should consider extending a deadline to swap old banknotes because of the disruption to trade and payments being caused by a shortage of new notes.

Nigerians have to turn in 1,000, 500 and 200 naira notes by Friday, when they cease to be legal tender.

The Central Bank of Nigeria (CBN) has started releasing newly designed notes, but many Nigerians say they are not yet available in banks, sparking acute cash shortages and chaotic scenes at banks.

Ari Aisen, IMF resident representative in Nigeria, said in a statement: "In spite of measures introduced by the CBN to mitigate the challenges in the banknote swap process, the IMF encourages the CBN to consider extending the deadline, should problems persist in the next few days."

The CBN has said recalling the banknotes is part of plans to reduce the use of cash and curb double-digit inflation. About 1.3 trillion naira ($2.8 billion) in old notes has been deposited into the bank since the announcement in October, according to the bank.

Some politicians have queried the CBN's timing for the swap, ahead of elections this month, where campaigns are funded mostly by cash.

Some ruling party officials have publicly accused the CBN of a plot to turn voters against its presidential candidate in the Feb. 25 election, in which President Muhammadu Buhari is not running as he will have already served two terms.

Opposition presidential candidate Atiku Abubakar has said extending the deadline would help by "reducing the financial consequences for citizens".

Three states on Monday asked the country's highest court to stop the federal government and central bank from ending the use of old naira notes this week, saying this was causing hardship ahead of the election.

By Camillus Eboh, Reuters

Related stories: States challenge central bank cash swap deadline in Nigeria

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States challenge central bank cash swap deadline in Nigeria

Three states in Nigeria have asked the country's highest court to stop the federal government and central bank from ending the use of old naira currency notes this week, saying this was causing hardships, ahead of an election later this month.

The Central Bank of Nigeria (CBN) gave a 10-day extension until Friday for citizens to turn in 1,000 ($2.17), 500 and 200 naira notes, after which they will cease to be legal tender.

The plan has sparked acute cash shortages and chaotic scenes at banks. Most transactions in Nigeria are still in cash.

Some ruling party officials have publicly accused the CBN of a plot to turn voters against its presidential candidate in the Feb. 25 election, in which President Muhammadu Buhari is not running because he is serving his final second term.

Kaduna, Kogi and Zamfara state governments in northern Nigeria filed a suit in the Supreme Court on Monday saying the cash swap had caused restiveness among Nigerians and that this would "degenerate into the breakdown of law and order."

The three states are seeking an order "restraining the federal government through the CBN (and) the commercial banks from suspending on the 10th of February 2023 the time frame within which the now older versions of the 200, 500 and 1000 denominations of the Naira may no longer be legal tender."

The court could make an interim ruling this week.

By Camillus Eboh, Reuters

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Nigeria disagrees with credit downgrade

Nigeria's finance minister said on Thursday she disagreed with what she called a "surprise" downgrade of the country's credit rating by Moody's, insisting the government was already addressing the agency's concerns.

Moody's downgraded the West African oil producer last week to Caa1 from B3, saying the government's fiscal and debt position was expected to keep deteriorating, an announcement that sent Nigeria's dollar-bond and currency forwards tumbling.

"Moody's downgrade came as a surprise to us because we had presented all the work that we have been doing to stablise the economy," the minister, Zainab Ahmed, told reporters in Abuja.

"But these are external rating agencies that don't have the full understanding of what is happening in our domestic environment."

She said she expected S&P's rating, due on Friday, would be more positive.

"S&P's assessment is not the same as Moody's. They have come out with a much better assessment," she said.

Nigeria has faced oil production shortages due to crude theft in recent years, though production has started to recover.

It has also suffered chronic dollar shortages coupled with high debt service which has eaten into government revenues.

Moody's cited these factors as reasons for its downgrade.

By Felix Onuah, Reuters

Video - Nigerian banks face a shortage of new naira notes

Frustration is growing among millions of Nigerians who have queued at automated teller machines to collect new naira notes. The Central Bank of Nigeria extended the deadline to swap the old naira notes by an extra ten days, to February 10. But no one is confident that banks will have enough of the new notes by then.

CGTN 

Related story: Video - New currency in Nigeria to affect small businesses according to World Bank

Cash Withdrawals from Government Accounts to be banned in Nigeria

 

 

Cash shortage in Nigeria due to redesigned currency push

Nigeria's push to replace its paper money with newly designed currency notes has created a shortage of cash, leaving people unable to buy what they need and forcing businesses to close across the West African nation, experts and business groups said.

The Central Bank of Nigeria says the redesigned denominations of 200 naira (43 U.S. cents), 500 naira ($1.08) and 1,000 naira ($2.17) notes and new limits on large cash withdrawals would help curb money laundering and make digital payments the norm in Africa's biggest economy.

But the process to replace the old currency notes is "rushed," and commercial banks don't have enough new cash to give to customers, pushing demand higher than supply, said Ayokunle Olubunmi with Nigeria's main ratings agency, Agusto and Co.

The central bank "doesn't want us to be spending cash; they want us to be doing transactions electronically, but you can't legislate a change in behavior," Olubunmi said. "You have to make people see reasons and ensure those channels are reliable."

The government is pushing for a cashless economy that is more inclusive and says the changes will drive economic growth. Critics are skeptical, pointing to decades of chronic corruption in which government officials are known to loot public funds and create more hardship for the many struggling with poverty.

As of October, more than 80 percent of the 3.2 trillion naira ($7.2 billion) in circulation in Nigeria was in private hands, but 75 percent of that has now been deposited with financial institutions, the central bank governor, Godwin Emefiele, said over the weekend.

He extended the deadline for Nigerians to deposit their old banknotes by 10 days, to Feb. 10.

Even as more Nigerians deposit old currency in banks, the Associated Press found some financial institutions were still issuing the outdated notes to customers as of Monday. Bank customers told the AP they are allowed to withdraw very little cash and face high bank charges for each transaction.

Digital payments run by banks are often unreliable in Nigeria, leaving businesses struggling as growing numbers of customers have been unable to find the cash to pay for goods and services. The situation has created a parallel market for people to illegally sell the new banknotes, the Nigeria secret police said Monday.

The cash supply crisis has disrupted such sales across the country, forcing a good number of businesses to shut down, said Muda Yusuf, head of the Nigeria Center for Promotion of Private Enterprise.

"The two critical sectors of the economy -- trade and commerce as well as agriculture -- have been very badly affected because they do a lot of transactions in cash, especially in rural areas," Yusuf said. "This policy has brought their economic activities to a halt."

Authorities should allow more time for the old notes to be gradually replaced by the new ones, he said.

"To make matters worse, the supply is extremely limited. Economic activities have been practically crippled as some people have locked their shops," Yusuf added.

AP

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