Violent protesters on Monday torched several commercial bank branches in Sagamu town of Ogun State, over the scarcity of Naira. According to reports, the list of commercial banks affected by the incident includes Union Bank, First Bank, Keystone Bank, Access Bank, Zenith Bank and GTBank. Monday’s incident is the latest of a spate of protests against the severe cash crunch which has hit the economy since the introduction of the currency swap policy of the Central Bank of Nigeria (CBN). Before the recent incident, there were similar protests in parts of Edo, Oyo and Lagos States all indicative of a rapid descent into a state of anarchy.
In reaction to the development, Analysts in one breath condemn the action of the protesters, arguing that by burning banks, protesters are not helping matters since the disbursement of the new notes would require that banks are open and operational. In another breath, Analysts note that the magnitude of upheaval and mayhem that have attended the Naira redesign policy goes to show that the policy which may have been well conceived was poorly implemented. The President’s national address last Thursday evidently suggests that more than any other espoused objective, the Naira redesign policy was meant to ‘reduce the influence of money in the forthcoming elections.’
Analysts say that this is what made it imperative to force a currency swap in just 45 days when it could have been done more conveniently over a longer period. Ab initio, Analysts had warned against the use of Monetary Policy for scoring political points or for addressing security-related challenges, as a poor implementation would severely amplify the country’s economic problems. The strive and deprivation that Nigerians have seen so close to the election could very well make vote buying easier and cheaper. In general, actions and policies need to be understood within socio-political and socioeconomic contexts, ignoring this reality has created an avoidable social crisis. Yet the situation would have been better had the CBN understood the difference between the money stock and flows and the size of the velocity coefficient of the money supply would have enabled the regulator to determine the volume and value of money needed to meet daily transactions. Overall, the regulator’s decision to change the composition of Money (M1) in pursuit of a cashless economy is brilliant, but such requires better precision and introspection. We recommend that the CBN extends the date for the swap of all currencies, as this is the only way to prevent further chaos. Illustration
