AGUSTO & Co has said that the cash constraint that emanated from the naira redesign policy of the Central Bank of Nigeria will affect the living standard of rural dwellers.
It said this in a report titled ‘Redesign gone wrong? – costly cashless’.
It stated, “The cash constraint is also likely to compel consumers to prioritise spending on necessities, leaving many businesses, particularly MSMEs, with decreased sales and heightened credit risks.
“Worse still, living standards could decline further, particularly for many rural dwellers, as an inability to access cash could limit access to critical services like healthcare, stoking public discontent even further.”
The report added that, “How does the Central Bank retrieve 84.5 per cent of a country’s currency in circulation in just 90 days? This was one of the many questions seemingly begging for answers when Nigeria’s apex bank announced its plan to redesign the three higher value notes of the naira (N200, N500 and N1,000) on 25 October 2022.”
Given the analyst consensus that a 90-day window was simply insufficient to complete the project, it noted that it was difficult to conceive a scenario where the CBN did not anticipate the challenges which had accompanied this transition period.
According to the report, the disruption to transactions, trade (domestic & foreign), productivity and all-around economic activity was likely to be significant enough to trigger a contraction in GDP in Q1, 23 and possibly a loss of livelihoods] for many.
Many cash-dependent businesses were being pushed to the brink, it noted.
“For example, cocoa farmers are currently unable to pay their labourers and transporters, jeopardising production and exports,” it stated.
The report added that, “On the flip side, some of the biggest beneficiaries of the current lapses in electronic transactions have been Fintechs like Opay, Moniepoint, Paga, and Kuda, among others, which are reportedly far less prone to glitches and charge significantly lower transfer fees.
“Whether this is down to lower transaction volumes than traditional banks or the capacity of their digital infrastructure, or both, it remains unclear.”
However, it latest development under the naira redesign policy, the Supreme Court, on Friday ordered that the old naira notes should be allowed to circulate along with the new notes until December 31, 2023.
It had nullified the Federal Government’s naira redesign policy after declaring that it contravened the 1999 Constitution.
Deposit Money Banks were yet to communicate with the Nigerian public if the old N500 and N1,000 would be released into the economy, or the banks would only continue to release the new naira notes based on availability.
When contacted, the acting Director of Corporate Communications Department, CBN, Dr. Isa Abdulmumin, declined to comment.
Source: brandspurng
