In the last few days, Nigeria has experienced a spasm of national discontent occasioned by the Central Bank of Nigeria’s pronouncement that the old Naira notes will be taken out of circulation and replaced by a new Naira especially for its N200, N500 and N1,000 denominations. This has caused a severe shortage of the Niara in circulation as the CBN has not been able to scale up its cash management policy to ensure that the new naira notes get to the downtrodden who are mostly financially excluded due to a lack of bank accounts in a cash-based economy like the West African giant.
This ambitious and risky strategic direction signaled the CBN exercising its statutory imperative as the currency regulator and bank of issue of the country’s legal tender, the Naira. This much criticized policy was initially welcomed by the populace, believing that indeed this would help stifle the influence of money bags in the polity especially as general elections are fast approaching in the coming weeks. This erroneous thought however, has become a bitter pill and worse still has shown the defects in the implementation of the Central Bank’s much-publicized e-Payment drive which was launched in the last 2 decades.
Taking into consideration the amount of work that had been done by the CBN through its Payments System Vision 2020 initiative, which ultimately coalesced into the Payments System Oversight department and other institutional changes within the organizational structure of this knowledge based institution, this naira redesign policy was a test to the resilience of its payment system to withstand any shocks and mitigate any unforeseen logistical risks in the cash management policy for naira redistribution across the country. Alas, the current situation in the country with riots creating flashpoints in the polity has shown that indeed there were lapses in this strategy which have created what could be termed a potentially systemic breakdown of the country’s payment and financial systems.
The role of the Payments system in any country is supposed to ease the settlement of financial transactions between Person-to-Person and Business-to-Business entities which form the backbone of the economy and ensures that the economy moves apace and the velocity of money and transfer of value in the commercial space is not stifled. The many working groups created by the Central Bank in terms of the mantra for international recognition and national utilization of the payment systems were formulated with a focus to ensure that there were various and diverse methods available for electronic payment for the populace and most importantly to reduce the reliance on cash as a legal tender in the country. This decades-old approach was initially domiciled under the purview of the Banking and Payments System Department and thereafter the Payments System Oversight Department which unfortunately has not lived up to expectations as evident in that debacle of the last few days.
In a situation where the CBN wanted to change the naira notes and thereby control the currency in circulation as a mitigation to the risk of monetization of the upcoming elections, it would have been expected that the CBN would have ab-initio ensured that it bolstered its transaction networks and settlement systems-for Direct debits, card payments, inter-bank transfers, Cheque Processing and different electronic payment channels. What is most important, is its Mobile Payments Regulatory Framework which was created to engender an increase in the formalization of the person-to-person payment networks for smaller value transactions. This would have ensured that the majority of the proletariat would have been protected from the cash shortages as a truly functional electronic payment system would have been a logical alternative to the cash reliant networks that pervaded the payments system with the implementation of the POS Operator model now prevalent in Nigeria.
The Mobile payments system or lack thereof I dare say is the main reason why we have such tension in the polity today as the main agitators are those down-trodden amongst the populace who are merely seeking to make payments for their daily needs such as food, clothing, shelter and transportation. What we find is that whilst the CBN should have been focused on creating epayment chanels and living to its true intentions of having a cashless economy, its policy implemetation failure stems from the fact that it inadvertently created more cash centers called Point Of Sale operators instead of true electronic payments system. This tact was celebrated as a success in the Banking halls and the Banking Committee however those professionals in the Banking sector who crafted these policies and understood the real intentions that were put in place realized that the hoopla was premature albeit a step in the right direction. The recent events have proven what these eggheads had stated in many a memo to the Czars of the Nigerian payment systems and the Central Bank in particular that long queues at POS centers or ATM machines is a clear signal that the ePayment strategy of the CBN has failed in its mandate.
The recent upheavals in the country has shown that the Central Bank of Nigeria has failed in its core function of stabilizing the monetary system in the country but instead has fashioned itself as an institution that the subversive political class can use at will to create turmoil in the land whilst it stands aloof to the wishes and groans of a population already yoked with untold hardships. We have seen many Nigerians undergoing nervous breakdowns in the banking halls, a situation which has never before been seen in Nigeria as the angst is no longer directed at the political class but now at the Banking executives. This is a pressure point that all well-meaning Nigerians must work immediately to stem as it speaks of doom as the elections draw nearer.
Considering all that has transpired in the last few weeks across the lenghth and breadth of the country, it has become even more pertinent and mandatory that the CBN reviews its policy on the Naira redesign and its ePayment implementation by reigniting the verve with which it once drove the Payments system initiatives and work towards creating a new drive to redirect its focus away from creating more cash centers but more towards real electronic payment channels that do not require reliance on cash at hand by an already cash strapped population.
May the nation survive this nearly treasonable act of economic sabotage triggered by the CBN under Governor Godwin Emefiele in its failing of one of its core and fundamental functions as an institution saddled with the responsibility of financial stability and the ultimate custodian of the country’s cash reserves.