ABUJA – Experts have said that the Central Bank of Nigeria’s silence since March 03 Supreme Court ruling on currency redesign is no longer golden as it is hurting the economy badly.
The apex court ruled that the old N200, N500, and N1000 currency notes remain legal tender till December 31, 2023.
The CBN’s Naira Redesign and Currency Mop-up policies have seen N1.77trn of old currency withdrawn.
The impact of the demonetization policy has been severe, with many MSMEs recording low turnover due to the lack of cash, argue experts on Proshare, an economic intelligence portal.
While the drive for a cashless economy is a good initiative, contracting currency in circulation could be economically harmful.
Analysts argue that the CBN must address the uncertainty associated with the Supreme court judgment if the economy is to avoid spiraling into a near recession.
Analysts argue that the Cashless policy has been in overdrive given that Currency in Circulation in Nigeria as a proportion of the Money Supply is only 5.8% less than what is obtainable in more sophisticated economies.
Currency in Circulation as a ratio of Money Supply in the US is about 11%, in Canada the ratio is 9.4% while in the Eurozone the same ratio is 9.9%, suggesting that Nigeria was not comparatively bad.
Overall, the CBN need not shut MSMEs out of cash to promote a cashless/digital economy. According to the Stanbic IBTC PMI survey, Nigeria’s business activity plummeted from 53 in January to 44.7 in February 2023, essentially because of the cash crunch. The slowdown in business activity would persist in many sectors if the CBN fails to comply with the Supreme court ruling.