The reaffirmation by the Acting Director of Corporate Communications, Hakama Sidi-Ali, Central Bank of Nigeria, that the Supreme Court of Nigeria’s ruling of December 29, 2023, that old N1,000, N500 and N200 notes remain valid indefinitely and will be used pari passu with the new notes proves that government knows why cash is scare and cannot do anything about it.

But to hide her intentions, Sidi-Ali had coyly said, “The Central Bank of Nigeria has observed the misinformation regarding the validity of the old N1,000, N500 and N200 banknotes currently in circulation.”

Sid-Ali’s unnecessary reiteration of what Nigerians already know justifies her charge to Nigerians “to use alternative payment channels (which include well-funded PoS and unfunded ATMs) as well as report any case of… capping and hoarding by banks or PoS agents to the CBN…”

Currently, banks ration cash in the banking halls and the ATM Galleries. And Nigerians are left in a state of confusion, wondering why the problem that started under the tenure of former CBN Governor Godwin Emefiele persists.

Emefiele was rumoured to have embarked upon a redesign, which turned out to be a re-colouring of some denomination of the naira notes, to hamstring the presidential ambition of Bola Tinubu, who eventually won the oyster despite the odds.

This fits into the narrative attributed to the current CBN that some politicians are already mopping up cash as war chests in preparation for the anticipated vote-buying jamboree of the approaching 2027 general elections.

The CBN is merely chasing shadows with its threat to slam banks that facilitate the illegal flow of mint cash to hawkers (who trade currency at social parties) and unscrupulous agents (and possibly POS operators) with a N150m fine.

Its plan to send “secret agents” into banking halls or bank ATM galleries to detect (or deter) cash hoarding begs the question. All that the CBN needs to do is to make enough cash available for Nigerians to meet their daily cash obligations. The CBN cannot pretend not to know that physical cash is crucial to the survival of the economy.

The President of the Association of Senior Staff of Banks, Insurance and Financial Institutions, Olusoji Oluwole, who obviously knows that the CBN emperor is not wearing any clothes, attributed the shortage of cash to the failure of the CBN to meet the cash needs of commercial banks.

Oluwole, who revealed that Nigerians required a (questionably meagre) N20m daily, looked the CBN in the eye and pointedly declared, “Banks have only two sources of cash: the CBN and retailers. The CBN has not met banks’ demands, and retailers often sell cash for profit, making it harder for banks to access funds.”

While calling on security agencies to crack down on illegal currency trading, advocating for less dependency on cash and acknowledging that a cashless economy is cheaper, safer and more efficient, Oluwole, however, charged the “CBN to have clear statistics, so that they can understand where they are, how they are circulating and where they are circulating to.”

But Oluwole got it wrong or was just being politically correct when he told retailers who sell their daily cash takings to PoS operators, “You cannot sell your currency to people for a profit at discounted rates. It is not done anywhere.”

If the classic definition of economics remains “rational allocation of scarce resources” and the price consumption curve is still “the demand by one customer for a given product or service at different prices”, Oluwole could only blame the CBN, whose negligence creates the willing buyers and willing sellers of naira notes.

To translate two Yoruba proverbs into English for the benefit of Oluwole and other financial sector trade unionists, who may be too timid to speak truth to power, Oluwole should not use a crooked pole to kill a snake or put his words underneath his tongue.

He must call out the CBN and the Federal Government to end this agony by first determining the daily cash needs of Nigerians, determining if the physical cash in circulation is enough and looking for money to print more cash to save Nigerians from this agony.

Apart from being a store of value, in this cash-orientated economy, the naira serves as a means of exchange and lubricant for the economy. There is no doubt that the structural scarcity of the naira, caused by the failure of the CBN to simply make the currency available, is constricting the growth of the economy.

South Africa has edged Nigeria out of the (19 countries that have been strangely named) G-20, for the Group of 20 biggest economies of the world. This cash constraint may further contribute to keeping Nigeria at the nadir of the global economic totem pole.

The CBN must recognise that Nigerians still run into situations of cash-only transactions where any form of online banking—electronic transfers within banking halls or the use of apps—cannot work. Bus conductors, “mamaput” restaurant operators, and artisanal workers, like vulcanisers, tailors, electricians and plumbers, demand cash settlements for their transactions.

That explains the huge success of the PoS. Even the Nigeria Inter-Bank Settlement System reported that PoS transactions in 2022 and 2023 were N8.79tn and N10.73tn, respectively. That is more than 20 per cent of the N52.1tn  gross domestic product of Nigeria.

Though these figures are not exactly the total volume of cash transactions within the Nigerian economy in those two years, you may want to consider that roughly $2.26tn, or about eight per cent, of cash transactions took place within America’s $29.017tn economy in 2023.

This significant percentage of cash transactions within the American economy (which everyone thinks is a cashless society) confirms that cash is still king in some transactions. And it does not look like it will change significantly very soon, especially if you take into consideration that some transactions are deliberately carried out with cash to avoid the tax man or the security agencies.

CBN Governor Yemi Cardoso is not going to be able to act as if he does not quite know what is going wrong with the country’s cash disbursement system. And no longer can he and the government continue to scapegoat former CBN Governor Godwin Emefiele, who is currently facing his life trials.

The argument by some government apologists that the cash squeeze is a result of CBN’s policy to mop up excess cash in circulation to control inflation is laughable. The way to control the current high inflation rate is to control the foreign exchange rate.

The devaluation—or depreciation—of the naira (and the removal of subsidy from petrol and electricity) is the major cause of the current high headline inflation in Nigeria, and it is causing Nigerians to need more cash to buy the same volume of items they bought before the devaluation.

But if the Coordinating Minister of the Economy and other members of the economic management team can finagle an (albeit long-term) way to make the Nigerian economy produce at least strategic consumer goods, like food and petroleum products, the inflation should abate to an extent.

The CBN needs to admit that its plan to run a cashless economy, which started from the days of CBN Governor Sanusi Lamido Sanusi, is now probably a mission impossible.

• X:@lekansote1, lekansote.com