CBN Finally Gives Reasons Behind Cash Scarcity in Banks, ATMs, Suggests Solution
- The CBN governor has identified the reason for cash scarcity in the country
- It associated the scarcity with the flaw in implementing the naira redesign policy
- This follows reports of cash scarcity and bank limits in various parts of the country
Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.
The governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has said that the critical flaw in the implementation of the naira redesign policy is responsible for the prevailing cash scarcity witnessed in Nigeria.
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This is on the back of continuous reports of cash scarcity witnessed across different parts of the country despite the assurance by the apex bank that there is enough cash in the system.
Defects in various policies
According to The Nation report, the CBN governor cited defects in various policies and noted that a comprehensive review initiative is ongoing.
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According to him, the poorly executed naira redesign is the primary culprit.
He noted that the bank is thoroughly examining all policies implemented over time to produce an elegant document outlining the clear rules and procedures necessary for navigating the Nigerian money market.
The apex bank boss said:
“The apprehension surrounding the policy’s end date, well before the third quarter, triggered widespread hoarding. Many feared the old notes would lose legal tender status, prompting them to hold onto their cash.”
A glimmer of hope
Cardoso noted that the Supreme Court's recent ruling upheld the validity of the old notes beyond the initial deadline.
He said this would alleviate apprehensions and incentivize individuals to release their hoarded cash into circulation.
He stated that even before the third quarter, there was a great deal of uncertainty about how this would turn out, whether the old money would be valid as legal tender, and how many people had begun hoarding it.
The Acting Director of Corporate Communications, Hakama Sidi-Ali, also verified that there is, in fact, more money in circulation.
As of December 11, 2023, she claimed, the nation's currency had increased from N1 trillion to almost N3.4 trillion. According to her, this demonstrates that enough cash is available but not circulating due to apprehension among some individuals.
Reacting to this, Charles Abuede, a financial analyst said that the CBN's recent statement on the country's currency situation has generated diverse views.
In his opinion, the current scarcity of banknotes is likely part of the CBN's strategy to absorb excess liquidity, aiming to curb inflation and establish a policy direction consistent with its dovish and pro-growth stance.
According to him, this aligns with President Bola Tinubu's inauguration speech, emphasizing the importance of attractive interest rates to facilitate the repatriation of funds and dividends by multinationals.
He said,
"The Naira redesign policy, implemented last year, faced criticism as it was perceived to have caused undue hardship for many Nigerians. This led to a court order restraining the bank from further enforcing the policy. The past challenges underscore the complexity of implementing currency-related measures and their impact on the well-being of the populace."
"No more 3%": CBN introduces crucial changes to processing charges on large cash deposits
Legit.ng also reported that the CBN has issued a directive to all commercial banks, financial institutions, and non-banking institutions, suspending the processing fees previously placed on large cash deposits.
The apex bank issued the directive under a new guide issued on Monday, December 11, 2023, under the "Guide to Charges by Banks, Other Financial Institutions, and Non-Financial Institutions."
The new directive affects cash deposits of N500,000 by individuals and N3 million for corporate accounts.
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Source: Legit.ng
