Monday, 13 February 2023

The Sanctity Of Central Bank of Nigeria independence Must Not Be Eroded.

The recent supreme court judgment in Nigeria mandating the Central Bank of Nigeria (CBN) to postpone the timeline for the ban on old naira notes has sparked debates and discussions about the immediate impact of the decision on the Nigerian economy and the policy itself.

Nigeria’s Supreme Court temporarily halted any plans to ban the use of the old naira notes across the country. The ruling was issued on Wednesday, February 8th by a seven-member panel led by Justice John Okoro, based on an exparte application brought by three northern states of Kaduna, Kogi, and Zamfara.

The ban on old naira notes was aimed at promoting a cashless policy and reducing the amount of physical currency in circulation. But. the supreme court’s decision has now put a halt to the ban, and its impact is being felt across the economy.

Creates Confusion – Firstly, the decision has created confusion in the banking sector and among the public. The initial deadline for the ban was February 10, but with the supreme court’s ruling, the CBN has been restrained from implementing the ban, leaving many banks and individuals uncertain about the status of the old notes.

Banks are now unsure of whether they should continue accepting old naira notes, or whether they should prepare for a new deadline.This confusion could lead to a reduction in economic activity as people are reluctant to transact due to the uncertainty surrounding the old notes.New notes distribution: Moreover, the postponement of the ban could also impact the inflow of new naira notes into the economy. 

While the CBN has been working (rather poorly) to distribute the new naira notes to banks, with the postponement, the inflow of new notes into the economy could slow.

This could result in an acute shortage of new naira notes, particularly in rural areas where access to banks is limited and people are still skeptical about keeping the older notes beyond the Supreme court order.

An increased shortage of new notes will make it even more difficult for people to transact, and this could have a ripple effect on the economy as businesses struggle to operate without adequate cash in circulation.

Financial Inclusion: Furthermore, the decision has impacted the efforts of the CBN to promote financial inclusion.One of the key reasons for promoting a cashless policy was to encourage more people to open bank accounts and transact digitally.

This would increase the number of people with access to financial services and help to boost the economy.However, the postponement of the ban could create further setbacks to these efforts, as people will still hold onto their old notes, making it less likely that they will open bank accounts and transact digitally.

Monetary Policy could be impacted: Another impact of the supreme court’s decision is the delay in achieving the goals of the CBN’s monetary policy.The CBN has been working hard to reduce the amount of physical currency in circulation and promote a cashless policy for monetary policy reasons, particularly targeting inflation reduction.

The postponement of the ban will slow down the achievement of these goals, and this could have a long-term impact on the economy.December inflation rate rose to 21.34% the first drop in over two years.

Increased Counterfeiting: Additionally, the postponement of the ban could lead to a rise in counterfeiting.

The old naira notes are more susceptible to counterfeiting, and with the postponement of the ban, it is likely that there will be an increase in the circulation of counterfeit notes.This could have a negative impact on the economy as people are less likely to transact with old notes if they suspect that they may be counterfeit.

CBN’s independence: Finally, the supreme court’s decision has cast doubt on the independence of the CBN, even though most critics will suggest it never had been independent.However, the CBN is an independent body by an act of the National Assembly, and its policies are meant to be free from political interference.

The supreme court’s decision to postpone the ban, based on an ex-parte injunction, could be seen as political interference and could undermine the credibility of the CBN and the policies it implements.

In conclusion, the introduction of new naira notes and the subsequent ban on old naira notes has had a significant impact on the Nigerian economy and the CBN’s policy.

While the Supreme court decision helps to douse the controversy surrounding the ban it could exacerbate things if politics is allowed to get in the way.

Olufemi Aduwo 

Permanent Representative of Centre For Convention on Democratic lntegrity (CCDI) to ECOSOC /United Nations and Returnee of World bank /IMF boards governors meeting

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