In the last few days, many Nigerians have suffered untold hardship as a result of fuel scarcity, difficulty in collecting their permanent voter cards, and limited cash from banks and other financial institutions. This situation has continued to elicit reactions from a cross-sections of Nigerians on how to get over the challenge. No doubt, the launch of the redesigned Naira notes last year brought about high expectations for the smooth transition to the use of the new notes for business transactions across the country. However, responses from the people suggest that expectations may have been dashed, business deals impeded, and loss of time and value experienced.
It has been argued that the Central Bank of Nigeria (CBN) needs to enlighten the public on grey areas about the scarcity of the new Naira notes in addition to strengthening its policy implementation capacity, as this remains the minimum expectation in the face of a currency crisis in which we find ourselves in. The new Naira redesign has continued to trigger varied reactions and feedbacks that tend to suggest that related issues like the phasing of old currency notes, withdrawal limit, and the scarcity of new notes may have started to impact businesses and social livelihood beyond intentions. While banks have endeavoured to meet the currency demands of their customers through Automated Teller Machines, and electronic transfers, the scarcity of the Naira has rendered their efforts ineffective.
Speaking further on the issue, the Director-General, Lagos Chamber of Commerce and Industry, Dr. Chinyere Almona, businesses are suffering the consequences of the CBN currency management policy. Regarding the deadline extension for phasing out old notes, it is believed that this does appear to bring much value if the scarcity of the new Naira notes persists. The body supports the drive toward a cashless economy, redesigning the Naira and phasing out old currency notes, saying it could have been better planned and implemented with no hardship for businesses and individuals. Similarly, the Central Bank of Nigeria (CBN), through its Monetary Policy Committee (MPC), recently among other issues, increased MPR to 17.5% from 16.5%, by retaining the asymmetric corridor of +100/-700 basis points around the MPR, retained the CRR at 32.5%, and retained liquidity ratio at 30.0%.
The decision to further hike interest rates is to curb inflation, which has remained above 21% by drawing close to a general election and with the factors driving food inflation still largely unresolved, we agree with the monetary authorities that the time for easing the rates may not have come at this time. New initiatives include redesigning the Naira notes, launching Nigeria’s first National Domestic Card Scheme to deepen the cashless economy, and the withdrawal limits. While the people hope to see how these initiatives fare, there is bound to be some impact on spending, which may, in turn, affect the way business is done and the adjustments made on the economy. LCCI had maintained that it can predict that there will be some easing of the inflation rate in this first quarter, noting that the easing or acceleration of inflation rates globally and that of monetary rates in some economies, have made it possible to tame their food inflation and its influence on headline inflation. In Nigeria, there is a need to tackle food inflation from the roots looking at issues like targeted support to the agriculture sector, manufacturing and the provision of more export infrastructure for businesses by exporting more and earning more foreign exchange.
The CBN is, therefore, enjoined to look further inward at the peculiar situations driving inflationary pressures within the Nigerian economy for rate hikes are known to weaken growth, and as such, it is expected that the monetary and fiscal authorities intervene with policies and instruments that are growth-boosting. It also calls on the government to commence preventive measures against the expectation of flooding in 2023. Further, the increase in the policy rate would further put pressure on businesses with the resultant effect of rising operating costs that can lead to workers’ layoffs and low productivity. This was a major concern regarding the implementation of more taxes, as provided in the 2022 Finance Bill while urging the government to consider streamlining these issues such that they do not swamp businesses and render them unproductive and uncompetitive.
Beyond the rate hikes, policymakers need to consider more actions to increase and stabilise oil production levels to earn more foreign exchange. Better coordination of fiscal policies can complement the deployment of monetary instruments by the CBN. “We have consistently advocated for a more friendly policy/business environment that will attract foreign and domestic investment and improve productivity, particularly domestic food production. While we commend recent strides in dealing with insecurity, we ask for more deployment of technology and surveillance apparatus, particularly as we approach the general elections in weeks. Weak power supply, scarcity of forex, and expensive logistics due to fuel scarcity are critical issues that must be closely watched and attended to with effective policies and fiscal instruments”, the chamber stated.