• Sunday, June 16, 2024
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BusinessDay

New naira scarcity threatens ‘urgent 2k’

Naira shortage puts $220bn informal economy on life support

 

A lot of Nigerians, particularly the unemployed, dependants and the less privileged, who rely on handouts, known in local parlance as ‘urgent 2k’, may be in for a hard time with the scarcity of new naira notes.

Nigerians are facing a double whammy as new naira notes remain scarce, even as the deadline for the expiration of the old ones draws nearer.

The situation has forced many to opt for electronic channels to carry out transactions in a bid to reduce the volume of old notes with them.

Following the redesign of N200, N500 and N1,000 notes, the Central Bank of Nigeria (CBN) commenced the distribution of the new notes on December 15, saying the old ones would cease to be legal tender on January 31, 2023.

But more than one month after the redesigned banknotes entered circulation, they are still hard to get from banks. Many Automated Teller Machines and Point of Service agents are still dispensing only the old naira notes.

The old notes in circulation have reduced while the new ones are scarce, constraining the ability of many Nigerians to give out cash.

Blessing Martins, a mother of two who begs for alms, has seen a drop in the number of benefactors. “Give me food, any food, I’ll eat!” she wailed.

It was a buzzing day in Lekki, a city in Nigeria’s commercial capital, Lagos, with the sun shining brightly. Martins seemed reserved while telling her stories to this reporter, yet she had conceived too much pains, she said, and couldn’t bear it any longer.

“Before, I used to get cash gifts from people but lately all I keep hearing is ‘I’m sorry, I wish I can help but I currently don’t have cash’,” she said.

With the reduction in cash in circulation coupled with the cost of living crisis, many Nigerians like Martins who depend on cash gifts are hardest hit.

“I believe I will think twice before giving out cash now because I also need it for myself, especially because the new naira may be scarce,” Remi Afilaka, a graphic designer based in Lagos, said.

Read also: Nigerians switch to electronic payment as cash becomes scarce

Last month, the World Bank warned that the naira redesign may have a negative effect on economic activity, especially poor Nigerians due to its timing and short transition period.

“While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have been redesigned for two decades, the timing of and short transition period for this demonetization may have negative impacts on economic activity, in particular for the poorest households,” World Bank said in a report titled ‘Nigeria Development Update’.

The CBN had last month unveiled new N200, N500 and N1,000 notes as part of measures to tackle significant hoarding of the local currency, worsening shortage of clean banknotes, and the increasing ease and risk of counterfeiting.