The naira redesign policy failed because of the absence of certain critical measures required to ensure smooth implementation of the policy framework, Ebele Monye, a research analyst in the Carnegie Africa Program, United States has said.
Monye who attempted a prognosis of the problem of the naira redesign policy in a position paper titled, Why Nigeria’s Controversial Naira Redesign Policy Hasn’t Met Its Objectives and published recently in the journal of the Carnegie Endowment for International Peace.
The Washington, DC, based body provides analysis on key topics and regions, including East and South Asia, Africa, Europe, Russia and Eurasia, the Middle East, democracy and governance, nuclear, sustainability and geopolitics, global institutions, technology, and subnational regions, such as California.
In the view of Monye, at the centre of the crisis of the naira redesign policy is the problem of poor implementation of the policy.
“The redesign policy has not achieved the outcomes needed to meet most of its objectives. The policy resulted in a cash shortage and a black market for selling naira notes, causing economic difficulties for Nigerian businesses and individuals who rely heavily on cash. Beyond the direct adverse effects of the policy on Nigerians, macroeconomic changes and leadership shifts have also affected the country’s economic realities.
“Specifically, the new government has removed fuel subsidies, increased electricity tariffs, and unified the country’s exchange rate, which has led to higher inflation rates, lower disposable income for consumers, and decreased business productivity.”
It may be recalled that the apex bank introduced new banknotes on October 26, 2022, for the naira denominations of 200, 500, and 1,000.
The CBN’s governor at the time, Godwin Emefiele, announced the redesign policy, which aims to improve Nigeria’s monetary policy, promote digital alternatives like the eNaira, and enhance the currency’s integrity. Notably, it also aims to reduce cash circulation for illicit activities like kidnapping-for-ransom and vote-buying. The new naira notes have been in circulation since December 15, 2022.
Pressed further, Monye said several underlying factors have led to implementation problems, including the lack of a critical mass of easily accessible alternative financial products, the inadequacy of preexisting infrastructure to support the policy’s speedy rollout, low public trust, and limited public sensitisation coupled with tight deadlines.
The redesign policy also failed to adequately sensitize financial consumers, particularly on the CBN’s directives and deadlines.
Citing a report by the National Orientation Agency (NOA) agents, a campaign to raise awareness about the policy across all 774 local governments in Nigeria, failed because of its poor timing and clarity. According to reports from NOA agents working in various communities, people felt the awareness campaign should have started earlier and that the validity period for old notes should have been longer. Additionally, there was a communication mismatch between what the CBN conveyed and what consumers understood.
Also the digital financial infrastructure was insufficient to handle the increased digital transaction volume caused by the cash shortage, Monye stressed, adding that at the height of the cash crunch, many individuals resorted to making transfers via mobile apps and Unstructured Supplementary Service Data messages such that the existing digital payment system could not handle the surge.
The US-based researcher is however optimistic that improved implementation of the policy is still possible.
Nigeria, she stressed, could draw insights and lessons from other countries that have successfully carried out similar policies in recent years.
Citing the example of India and Sweden, Monye said such cases offer valuable recommendations for Nigeria’s policymakers and partners to consider.
“The experiences of India and Sweden offer valuable insights and ideas for how to ensure a seamless shift to new naira notes and increase the uptake of digital alternatives. While India shares similarities with Nigeria regarding policy objectives and implementation strategies, Sweden’s experience in successfully going cashless provides insights on the steps taken.”
While noting that Nigeria may not yet have the technological advancements of Sweden or the fintech infrastructure of India, but policymakers could learn from these countries’ successes and create multi decade systemic changes that would lead to a cashless society.
These changes, in turn, could make policies like the naira redesign more effective, she stressed.
Expatiating, she said, “Like Sweden, India has leveraged existing infrastructure and financial alternatives to drive financial digitalisation. India Stack, for instance, is a digital identification and payment system that relies on an open application programming interface.This system integrates user information from the country’s national identity programme, Aadhaar, which already has 1.25 billion registered users.
“Additionally, the RBI launched the Unified Payments Interface for mobile phones to enhance digitisation and extend access to the approximately 400 million individuals residing in rural areas by allowing transfers between multiple bank accounts using a single mobile application.”