Africa’s biggest economy has lost an estimated N20 trillion naira since the onset of a cash crisis that has crippled economic activities, the Centre for the promotion of private enterprise (CPPE), a non-governmental organisation has said.
According to a statement made available to journalists, 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.
“There are also corresponding job losses in hundreds of thousands. Retail transactions across sectors have become nerve-wracking and distressing as payment system challenges persist,” it said.
It added that the protracted acute cash scarcity has not only crippled economic activities in the country, it is now a major risk to the livelihoods of most Nigerians.
Muda Yusuf, director and chief executive officer at CPPE, said in the statement that millions of citizens have slipped into penury and destitution as a result of the disruptions and tribulations perpetrated by the currency redesign policy, especially the mopping up of over 70 percent of cash in the economy.
“Nigerians have not been this traumatized in recent history.”.
Since the beginning of 2023, households and businesses in Africa’s biggest economy has been whipsawed by a chronic shortage of cash occasioned by the naira redesign policy of the Central Bank of Nigeria (CBN).
The latest Purchasing Managers’ Index (PMI) said business conditions contracted for the first time in over two years (June 2020) as a result of the lingering scarcity of the naira notes.
The monthly PMI by Stanbic IBTC Bank showed that the headline PMI declined to 44.7 in February 2023 from 53.5 in the previous month.
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“This indicates the first contraction in private sector business conditions in over two years. The steep decline is attributed to the cash shortage challenges experienced across the country during the month,” Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank said.
Manufacturers Association of Nigeria (MAN) told BusinessDay that they are already seeing a drastic reduction of more than 25 percent in sales of locally manufactured products.
“What should ordinarily be a welcome monetary policy to improve the CBN management of naira currency has become enmeshed in tardy implementation and needless disruption of businesses and everyday life of the people,” Segun Ajayi-Kadir, director-general of MAN said.
Analysts said that the cash scarcity could affect the country’s Gross Domestic Product (GDP) rate for the first quarter of this year.
In Q4, it expanded to 3.52 percent in Q4 of last year from 2.25 percent in the previous quarter, according the National Bureau of Statistics
“The lingering cash shortages will likely continue to dampen economic activities and could depress economic growth in the Q1,” Oni of Stanbic IBTC Bank said.
The plummeting of productivity has implications for GDP and a domino effect on other economic indices, the Nigerian Economic Summit Group said in a recent report.
“This can mean fewer job opportunities, increasing poverty incidence, thus adversely impacting the collective economic health of the population,” it said.
On March 3, the Supreme Court ordered that the old N200, N500, and N1,000 notes till 31 December should be allowed in circulation till December 31, 2023.
But since the Supreme Court gave its verdict on the case, neither the CBN nor the government has reacted this new development.
This has made it more challenging for Nigerians as traders, motorists and business owners have refused to accept the old naira notes in anticipation of an official approval from the CBN
Yusuf of CPPE said, the banks claimed that the CBN has not officially communicated the Supreme Court ruling to them for any actions; the President has maintained a worrying muteness on the ruling; the market women and men are waiting to hear from the President Buhari or the CBN governor on the legal tender status of old currency notes.
“Curiously, there is an apparent reluctance or unwillingness by the federal government and the CBN to comply with the Supreme Court judgement. This is very disturbing and inexplicable”, he said.
CPPE recommends that the CBN should be directed to immediately inform the Nigerian public that the old currency notes (alongside the new notes) remain legal tender until the December 31, in line with the supreme court judgement.
“The CBN should be directed to officially communicate the outcome of the Supreme Court judgement to the banks and affirm compliance with the judgement,” it said.
It added that the president should publicly empathize with Nigerians on the unwarranted and inexcusable pain and suffering that the currency redesign policy has wreaked on them.
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