Tuesday, February 27, 2024

Avoiding Another Currency Crisis

The ghosts of this year’s currency swap crisis seem to have visited Nigerians again, with the intent to cast a dark shadow over the approaching festive season of Christmas and New Year celebrations. For a year that has been unarguably difficult for many Nigerians, it would be nice to not have another crisis to close out the year. Despite its reassurances conveyed in news reports on November 15, 2023, the Central Bank of Nigeria does not seem to have instilled much confidence in Nigerians who, predictably, have begun hoarding cash again and making the country’s financial system vulnerable to internal shocks and disruptions.

It is no longer news that the naira redesign policy under former CBN Governor, Godwin Emefiele, was terribly mismanaged and beset by inadequate printing and slow distribution of the new notes, as well as logistical challenges in the various geo-political zones. Needless to say, panic, protests, shootings, ATM vandalization, and other despicable acts became fodder for news cycles at the time.

Ordinary Nigerians, already grappling with rising inflation and precarious livelihoods, face the brunt. The month of December has long been regarded as a time for joy and celebration, but this is now dampened by anxiety regarding cash scarcity. How is it still a thing of mystery to the CBN that Nigerians traditionally experience increased demand for cash during festive seasons, especially in December?

If the current scarcity persists, the outlook is dire. Small businesses are struggling to conduct daily transactions. People are transferring aggression and anger to bank tellers over the counter, while others are struggling with angry crowds in disjointed queues at ATMs, which often become empty before noon or close of business in the evening. Nothing defines stress better, especially in a holiday season where rest should be prioritized.

The solutions aren’t new. For the short term, more emphasis should be laid on the active use of digital payment platforms, and the CBN must expedite the distribution of naira notes since banks have said that they can only give out from what has been supplied to their vaults.

The horrors of fuel and/or cash scarcity in December need to be addressed. The Naira scarcity is not just a financial inconvenience; it is a symptom of deeper systemic issues. Breaking free from this cycle requires acknowledging these issues, implementing transparent solutions, and building a more resilient financial system that serves all Nigerians, not just the privileged few. Only then can the festive season truly be a time for rest and joy, unmarred by the anxieties of an unstable currency.

Precious Ohaegbulam is an African Liberty Fellow and a Columnist for the Avalon Daily

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