Nigeria cash policies breed false claims ahead of poll

When Nigeria’s central bank announced a redesign of its national currency in October, few expected the move would spark a cash crisis, protests and an avalanche of false claims online.

The shortage of naira banknotes is piling more misery on Nigerians already battling biting fuel scarcity and rising inflation.

“It has been extremely difficult to get cash to buy food,” said Adebisi Ogunbiyi, a trader in Badagry, a border town in southwestern Lagos state.

The Central Bank of Nigeria (CBN) said the policy was aimed at mopping up the bulk of banknotes in circulation in the hands of hoarders and “criminals”, and place them securely in bank vaults.

“We cannot continue to allow a situation where over 85 percent of cash that is in circulation is outside the banks,” CBN governor Godwin Emefiele said in December.

But when the bank introduced a cap on cash withdrawals, the move sparked angry protests, forcing officials to increase the limits and push back the deadline for phasing out the old currency to February 10.

Recession risk

The influential Nigerian governors’ forum warned that the shoddy implementation of the naira swap may cause “a CBN-induced recession”.

The CBN has defended its policies, arguing that inflation was already “trending downwards and exchange rates relatively stable” as a result.

“We aim to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this programme,” Emefiele said.

But experts said tackling security challenges was not part of the CBN’s responsibilities.

“I don’t think the reasons given by the CBN warrant the speedy implementation of the naira redesign policy,” said Iniobong Usen, a senior policy analyst with Lagos-based civic tech organisation BudgIT.

The chaotic rollout has sparked protests across Nigeria, with people attacking ATM machines and bank buildings.

Clashes broke out in major cities in February, including in Lagos, Nigeria’s commercial hub and Tinubu’s stronghold.

Conspiracy theories abound

The crisis has heaped pressure on President Muhammadu Buhari and his ruling All Progressive Congress (APC).

The former army commander will step down in May after eight years in office. During his reign, Nigeria experienced two economic recessions, rising unemployment rates and inflation quickening to a 17-year high.

Analysts warned the crisis may impact the chances of the APC’s presidential candidate, Bola Tinubu, who is one of the top contenders in the February 25 election.

“It can lead to a lot of protest votes against the ruling party as experienced in the 2015 general elections” when the then-incumbent president Goodluck Jonathan lost to Buhari amid voter disenchantment, said BudgIT’s Usen.

The tensions have fuelled disinformation about the APC, including false claims debunked by AFP Fact Check about officials seizing truckloads of old naira notes from Tinubu’s home.

‘We will win’

Conspiracy theories have also infiltrated the political discourse.

The powerful governor of Kaduna state, Nasir El Rufai, told local media in early February that “certain elements” in Buhari’s inner circle did not want the APC to win the polls, alluding to the cash crisis as part of a plot to turn voters against the party.

He and other APC governors have told people in their states to continue spending the old notes, defying Buhari’s directive.

The appointment of Buhari’s brother-in-law as head of the company responsible for printing the banknotes fed conspiracies that the cash crisis may have been designed to stop Tinubu from winning the presidential contest.

President Muhammadu Buhari (R) joined his ruling party’s presidential candidate Bola Tinubu at a rally in Lagos on February 21, 2023 ( AFP / Michele SPATARI)

The latter’s supporters have criticised Buhari for his sparse attendance at rallies, fuelling unverified claims that the president opposed his party ally’s candidacy.

Tinubu has in the past alleged that “saboteurs” within Buhari’s inner circle colluded to orchestrate the fuel and cash crises.

“Even if you change the ink on naira notes, what you want will not happen,” Tinubu told supporters in January. “We will win.”

However, Buhari joined Tinubu on stage this week at his final rally in Lagos.

Meanwhile, Buhari’s spokesman Ajuri Ngelale accused the CBN of misleading the president on the availability of new naira notes for political motives. Emefiele, the CBN governor, was rumoured to have eyed the APC’s presidential ticket eventually won by Tinubu last June.

Dire situations in rural areas

Alongside the naira redesign, the government has been moving towards a cashless economy with the launch of the eNaira digital currency last year.

But the policy has harshly impacted Nigerians who work in the informal economy where hard currency is king.

People queue outside a bank in Lagos on February 22, 2023 ( AFP / Patrick MEINHARDT)

At least 36 percent of adults were unbanked as of May 2022, according to Enhancing Financial Innovation and Access (EFInA), a financial inclusion advocacy organisation.

The situation is especially dire in rural areas where 62 percent of adults “are not within proximity of financial service providers,” EFinA said in a May 2022 report released.

“It is counterproductive to seek to implement a cashless economy abruptly at the same time the new naira notes are being rolled out in limited quantities within a very limited timeframe,” said Taiwo Oyedele, a fiscal policy partner at PricewaterhouseCoopers’ Nigeria office.