By Bassey Ubong
Would it have been possible to reduce or eliminate the pain of the 2023 currency redesign policy in Nigeria with the benefit of related experience? American philosopher, Professor George Santayana left words on marble, when he said: “Those who forget the lessons of history are bound to repeat it.”
Align this with the old cliché, no one in the present age needs to reinvent the wheel. One can say the sad consequences of the Naira redesign policy were avoidable if the key staff of the Central Bank of Nigeria (CBN) had reviewed the case of India and guided the Federal Government as appropriate.
On November 8, 2016, Prime Minister Narendra Modi of India made a televised broadcast to the people of India to announce the immediate withdrawal of two denominations of the Indian rupee. Following the night of the announcement,
the 500 and 1,000 denominations of the currency ceased to be legal tender from that day.
As expected, crises erupted in a country where no less than 190 million people had no bank accounts, and by extension were strangers to digital financial transactions.
Daily living and business transactions relied on cash at most levels. Why did the government embark on such unprecedented action with little preparedness?
The government indicated its intentions to include the need to trap ‘black money’ held by money laundering syndicates, counterfeit rings, insurgents, kidnappers, and corrupt persons in the public and private sectors.
Long-term goals included a cashless economy and an increase in tax collections. The British Broadcasting Corporation (BBC) believed the drive for more tax revenues stood at the forefront.
The fallouts were many and painful to citizens and the national economy was made worse by what the Financial Express of September 21, 2017, described as “Shifting the goalposts” as the game went on.
The CBN has experienced this problem of movement of goalposts as it scrambles to cope with the unintended consequences of a policy that went wrong by day one.
Within a short period, India witnessed strikes, litigations, protests, many human pains, and loss of lives.
These have played out in Nigeria, and with the Supreme Court declaration, citizens continue to watch for further developments.
Given the documented outcomes, how did the Indian ‘demonetization’ project fare? The Guardian of August 30, 2018, indicated the return of about 99.3% of the withdrawn currency into the banking system.
Of the 15.41 trillion rupees before November 8, 2016, 15.3 trillion rupees found their way back to the vaults of banks. Several corrupt and criminal persons kept their ill-gotten wealth in gold, real estate, and foreign bank accounts.
Those who held cash followed the several changes introduced by the Reserve Bank of India (RBI) and used poor people, relations, and employees to meet deposit limits.
In a fairly funny move, the RBI introduced a new 2,000-rupee denomination, which somehow worked in favour of large cash holdings and the cashless policy.
In Nigeria, we have heard of kidnappers who give out free old notes, and we are aware of state governments that rushed to pay salary arrears with the old notes.
Reviews of the Indian exercise indicate a marginal increase in tax revenues to the government after the demonetization of 2016. Persons who dodge tax know how to circumvent whatever policy government arranges. Nigerians know little about private tax, which means the currency change had no such policy in mind.
The RBI had to print the lower denomination notes to meet regular use. This placed considerable strain on government resources to the point the RBI paid fewer dividends to the government a year after.
We are aware of the admission of the CBN Governor on the capacity of Nigeria’s Mint to print the redesigned notes as reason rotten 200, 100, and 50 denominations went into the system to ease the cash crisis.
The Indian government envisaged increased economic growth but harvested a fall in economic growth. CBN targeted a fall in the inflation rate, but such will become evident if the python-style squeeze continues to enable the bank to have greater control of money supply.
But, the most dramatic aspect of the Indian experience related to the expectation of cashless transactions to boost the economy and create jobs. The Guardian reported a loss of at least 1.5 million jobs in the first year. Several small and micro businesses tanked and went under.
The dream of cashless transactions received an immediate, but short-lived boost because ATMs, wallets, and payment agencies blossomed. But in the long-term cash use went up several folds as soon the negative effects of the policy forced the government to make more cash available.
What should hold further fascination should be the national elections in 2017. The ruling party of Prime Minister Modi formed a solid coalition and stayed back in office despite the pain of demonetization.
What happened in Nigeria after the February 25 election? In mature democracies, the pain, frustration, and loss of lives and businesses would have been reflected in the Presidential and National Assembly elections.
But the party which managed the currency change took the majority in the National Assembly and the Presidential candidate won (?) the election. Nigeria, like India, continues to display the characteristics of a world of wonder!
One can see the possibility of Nigerian politicians who acted based on the Indian experience. They know the people and they knew the people would go for the known devils and reject the unknown angels with or without cash inducement.
Politicians have won, while CBN Governor, Godwin Emefiele has been left to hold the short end of the stick. Whatever successes the CBN recorded in past years have vanished like mist before the lowest flame.
The Nigerian experiment continues to evolve, but some lessons can be drawn this early all the more so CBN appears reluctant to return cash into the system and the digital infrastructure remains in its infancy.
First, the Indian case should have attracted Nigeria’s Central Bank, because of similarities in structures. A society where the rural population predominates implies a low literacy rate, low access to financial technology, and high dependence on cash transactions.
The major differences between the two exercises lay in the implementation period and what was withdrawn.
In India, it took place overnight, while in Nigeria series of announcements preceded the implementation and three months of preparations.
In Nigeria 1,000, 500, and 200 Naira denominations received new artwork, while in India the 1,000 and 500 denominations were withdrawn, while the new 2,000 denominations entered the field of play.
But the outcomes have been similar to this point. The pains to ordinary citizens have been remarkable in the two cases. Days at ATMs imply lost man-hours, along with health hazards.
Lives have been lost, and illnesses, along with malnutrition, reigned. We have no information on India, but in Nigeria, youths had access to millions of new notes and sprayed them on each other at a wedding party.
The APC presidential candidate threw bundles of new notes to supporters the day he ended his campaign at Lagos. Small pockets one will say but how did the new notes get into a few hands ready to play with them when the majority of Nigerians starved?
Second, the Indian government sought to checkmate the bad guys. The government scored little or no success in the main because the targets had other approaches to storing wealth.
In Nigeria, we heard the government planned to stop vote-buying, but in one Ibo state, politicians gave women something more useful and with a longer life span than cash and rice – gas cylinders! It appears those designed to lose the election got their way, but with lower cash expenditure.
And the unspent cash in the old currency will get back into the system if the Supreme Court judgment stands after all. The Kaduna State Governor, Nasir el-Rufai, had announced before cameras the intention of the APC presidential candidate to do what the Supreme Court in all probability planned to announce.
Third, the growth of the Indian economy fell by a small percentage point, although the cashless policy aimed at accelerating economic growth. The dividends payable to the government by the Indian Mint dropped because of the high cost of printing of tons of low-denomination notes.
This has happened in Nigeria, which forced the CBN Governor to admit lack of capacity to print notes, while rotten N200 notes have been put back in the system without explanation.
The issue of the brother of President Buhari’s wife being the boss of the Mint has nothing to do with capacity and cost. And how are we sure N2,000.00 notes will miss this pot of confusion in Nigeria?
Dr Ubong, an educational administrator, writer and literary critic, lives in Uyo
