• Thu. Mar 30th, 2023

    Naira Redesign Implementation Failure & Its Consequences


    Mar 15, 2023

    By Kingsley Moghalu

    The terrible suffering and economic loss Nigerians and Nigeria have experienced as a result of the faulty implementation of the Central Bank of Nigeria’s Naira redesign policy, and the entry of the judiciary into central banking functions, all show clearly how our institutions— and Nigeria — fail when institutions that are meant to be operationally independent become politicized.

    Currency functions are a core part of any central bank’s mandate. To that extent, I had no problem with the policy. Except for two vital issues. First, the 90-day deadline, which I warned was too short to be effectively executed. Second, the timing – so close to the elections. 

    But, as later became clear, there was a haphazard and incoherent communication of the purposes of the policy. In one breath, it was said to reduce the money supply and help tame inflation (after the Bank had created and lent N23 trillion to the federal government (!), illegally because that was way beyond approved limits under the CBN Act of 2007). Next, it was promoted as a national security measure to halt kidnapping, Naira hoarding, and sundry crimes. 

    Then, next, it became about “free and fair elections “ to stop vote-buying. This last reason became the most important — and controversial — reason as the tempo of the 2023 presidential contest rose to boiling point. 

    Expectedly, politicians who felt the policy was targeted at them complained loudly and wanted the deadline extended, while those who believed it helped their own political agendas hailed the tight and impractical deadline and did not want it moved. Nigerians were trapped between the devil and the deep blue sea of a desire to curb the menace of vote-buying and the effective confiscation of their own money by the implementation failure of the policy. 

    While increasing digital payments, another purported goal of the policy was a good one, that thinking failed to consider the reality that the payment infrastructure was still not robust in many rural areas of our country, that cash remains king, and, as I said on an interview with journalist Ladi Akeredolu-Ale on Channels Television, we were carrying on as if it had now become a crime to use cash in Nigeria. 

    Most important, as I raised the question in that same interview, what exactly is the mandate of the CBN? Had it now become to end vote buying in elections? Surely, we have anti-corruption institutions vested with such mandates, and to use the CBN for that primary purpose was to politicize the institution. But many Nigerians, as usual, did not think deeply about the implications of this line of thinking and action because of their political passions against presumably corrupt politicians. 

    Today, whatever may have been the benefits of the Naira redesign policy have been canceled out by the economic and social waste and gridlock it has created. We are still suffering from it after the “almighty” presidential election has come and gone. 

    There are several lessons here. One such lesson is the importance of effective risk management which was evidently absent in the conception and execution of the policy. I had highlighted this in a previous intervention. But there is the fundamental lesson of whether our institutions in Nigeria have been hijacked and subverted from serving the Nigerian people and our economy to serving personal and political agendas, including a dishonest use of a “war against corruption” as an attractive shiny object. 

    One day, we will count the losses, to the Nigerian economy, the legitimacy and effectiveness of a once-prestigious institution, and to the legitimacy of the Nigerian state itself, of the partisan politicization and de-professionalization of the leadership of the CBN. 

    Our apex bank, along with the judiciary, is one of the key institutional prisms through which foreign countries and investors abroad and at home assess the functioning or otherwise of the Nigerian state. Turning it into a political football was, and is a big mistake, and a strong indicator of state failure.

    Moghalu is a former deputy Governor of the CBN in charge of Financial Systems Stability

    Leave a Reply

    Your email address will not be published. Required fields are marked *