By Yakubu Sani Wudil, PhD
The Central Bank of Nigeria’s announcement that some of the country’s old notes will cease to be legal tender by the end of January 2023 has caused significant concerns among citizens and businesses. While the move towards a cashless economy has its merits, such as increased security and transparency of monetary transactions, it is important to consider the potential negative consequences and ensure that proper measures are put in place to mitigate them.
One of the most pressing concerns is the availability of the new Naira notes. Many citizens have reported difficulties in exchanging their old notes for the new currency, and banks have been dispensing the old notes until only a few days ago. This has led to confusion and frustration among citizens, particularly those in rural areas who may not be as familiar with bank procedures. The government should mandate banks to release the new notes in abundance to prevent any shortage or hoarding of the new currency.
Another major concern is the impact on small businesses. Many small businesses have already shut down because they are no longer able to accept the old Naira note while the new Naira is scarcely inadequate. This has not only resulted in job loss and financial hardship for small business owners but has also created artificial inflation. To mitigate this, the apex bank should consider extending the deadline for the old notes to cease being legal tender to give citizens and businesses more time to adjust and exchange their old notes.
Policymakers need to consider the well-being of the citizens when implementing such a critical change to the country’s monetary system. The decision to cease the old notes as legal tender could disproportionately affect low-income and rural citizens who may not have access to the necessary technology or banking services to conduct electronic transactions.
To address this, the government needs to provide support and education on the benefits of a cashless economy, especially in rural areas. Such sensitizations should involve traditional and religious leaders because they are respected and trusted figures in their communities. They can help to explain the benefits of the system and dispel any misconceptions or fears that people may have about the change. It is also important to note that the success of this transition will depend on the cooperation and participation of the public. Therefore, the government must provide adequate education and support to ensure that everyone can navigate the new system with ease.
No doubt, the cashless economic system constitutes the model of transactions embraced by all technologically advanced nations. With the majority of transactions being conducted electronically, it becomes easier for the government to monitor and detect any illicit activities such as money laundering or tax evasion. Additionally, a cashless economy can also help reduce the risk of kidnapping for ransom, as there would be limited cash in circulation. It would also help to curb political vote buying in the forthcoming general elections.
However, the sudden transition to a cashless regime also has its drawbacks. One of the most notable concerns is the potential decline in the value of the currency. The Naira has been facing significant inflationary pressures in recent years, and the cessation of the old notes could exacerbate this problem. Furthermore, the change in the currency and the scarcity of new notes may halt economic activities, and this will hurt the economy and the well-being of the people.
It is important for the apex bank to consider the challenges that people are facing and to adjust accordingly. The given deadline for the transition to a cashless economy should be reconsidered and more time should be given to allow for proper planning and implementation. The banks should also be mandated to release the new notes in abundance and to ensure that they are readily available to the public. The policymakers should also consider the impact of this change on small businesses so that the economy and livelihoods of the people are not negatively affected. The purpose of government is to develop policies that would improve the well-being of its citizens and not to burden them with unnecessary hardships.
Dr. Yakubu Wudil writes from King Fahd University of Petroleum and Minerals, Saudi Arabia, and can be reached via email@example.com.