Nigeria sees cash shortage amid push for redesigned currency

Jan 31, 2023, 3:14 AM | Updated: 6:51 am
FILE - A money changer counts Nigerian naira currency at a bureau de change, in Lagos Nigeria, Oct....

FILE - A money changer counts Nigerian naira currency at a bureau de change, in Lagos Nigeria, Oct. 20, 2015. Nigeria's push to replace the local currency notes with newly designed ones is creating an economic crisis, experts warned Monday, Jan. 30, 2023 with the limited cash in circulation hurting many people and businesses across the West African nation. (AP Photo/Sunday Alamba, File)

(AP Photo/Sunday Alamba, File)

ABUJA, Nigeria (AP) — Nigeria’s push to replace its paper money with newly designed currency notes has created a shortage of cash, leaving people unable to buy what they need and forcing businesses to close across the West African nation, experts and business groups said.

The Central Bank of Nigeria says the redesigned denominations of 200 (43 U.S. cents), 500 ($1.08) and 1,000 naira ($2.17) notes and new limits on large cash withdrawals would help curb money laundering and make digital payments the norm in Africa’s biggest economy.

But the process to replace the old currency notes is “rushed,” and commercial banks don’t have enough new cash to give to customers, pushing demand higher than supply, said Ayokunle Olubunmi with Nigeria’s main ratings agency, Agusto and Co.

The central bank “doesn’t want us to be spending cash; they want us to be doing transactions electronically, but you can’t legislate a change in behavior,” Olubunmi said. “You have to make people see reasons and ensure those channels are reliable.”

The government is pushing for a cashless economy that is more inclusive and says the changes will drive economic growth. Critics are skeptical, pointing to decades of chronic corruption in which government officials are known to loot public funds and create more hardship for the many struggling with poverty.

As of October, more than 80% of the 3.2 trillion naira ($7.2 billion) in circulation in Nigeria was in private hands, but 75% of that has now been deposited with financial institutions, the central bank governor, Godwin Emefiele, said over the weekend.

He extended the deadline for Nigerians to deposit their old banknotes by 10 days, to Feb. 10.

Even as more Nigerians deposit old currency in banks, The Associated Press found some financial institutions were still issuing the outdated notes to customers as of Monday. Bank customers told the AP that they are allowed to withdraw very little cash and face high bank charges for each transaction.

Digital payments run by banks are often unreliable in Nigeria, leaving businesses struggling as growing numbers of customers have been unable to find the cash to pay for goods and services. The situation has created a parallel market for people to illegally sell the new banknotes, the Nigeria secret police said Monday.

“Someone might want to transfer funds to you, but it can’t be processed and they don’t have cash because of this issue,” said Chima Ekwueme, who sells car parts in Nigeria’s capital, Abuja. “Sometimes, I ask them to drop my goods and go and find money anywhere.”

The cash supply crisis has disrupted such sales across the country, forcing a good number of businesses to shut down, said Muda Yusuf, head of the Nigeria Center for Promotion of Private Enterprise.

“The two critical sectors of the economy — trade and commerce as well as agriculture — have been very badly affected because they do a lot of transactions in cash, especially in rural areas,” Yusuf said. “This policy has brought their economic activities to a halt.”

Authorities should allow more time for the old notes to be gradually replaced by the new ones, he said.

“To make matters worse, the supply is extremely limited. Economic activities have been practically crippled as some people have locked their shops,” Yusuf added.

Nigerian authorities said the redesigned banknotes and new withdrawal limits would help curb the use of money to influence the Feb. 25 presidential election, though experts argue the currency changes are being done at the expense of most Nigerians. They’re already facing inflation of 21.3%, a 37% increase in the rate in a year.

“All these together are causing significant hardship in both rural and urban areas, (and) the hardship for people is merely collateral damage to the political class,” said Tunde Ajileye, a partner at Lagos-based SBM Intelligence firm.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Haitian migrant Gerson Solay, 28, carries his daughter, Bianca, as he and his family cross into Can...
Associated Press

US, Canada to end loophole that allows asylum-seekers to move between countries

President Joe Biden and Canadian Prime Minister Justin Trudeau on Friday announced a plan to close a loophole to an immigration agreement.
2 days ago
Expert skateboarder Di'Orr Greenwood, an artist born and raised in the Navajo Nation in Arizona and...
Associated Press

Indigenous skateboard art featured on new stamps unveiled at Phoenix skate park

The Postal Service unveiled the “Art of the Skateboard" stamps at a Phoenix skate park, featuring designs from Indigenous artists.
2 days ago
(Facebook Photo/City of San Luis, Arizona)...
Associated Press

San Luis authorities receive complaints about 911 calls going across border

Authorities in San Luis say they are receiving more complaints about 911 calls mistakenly going across the border.
8 days ago
(Pexels Photo)...
Associated Press

Daylight saving time begins in most of US this weekend

No time change is observed in Hawaii, most of Arizona, Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam and the Northern Marianas.
16 days ago
Mexican army soldiers prepare a search mission for four U.S. citizens kidnapped by gunmen in Matamo...
Associated Press

How the 4 abducted Americans in Mexico were located

The anonymous tip that led Mexican authorities to a remote shack where four abducted Americans were held described armed men and blindfolds.
16 days ago
Tom Brundy points to a newly built irrigation canal on one of the fields at his farm Tuesday, Feb. ...
Associated Press

Southwest farmers reluctant to idle farmland to save water

There is a growing sense that fallowing will have to be part of the solution to the increasingly desperate drought in the West.
23 days ago

Sponsored Articles

(Photo: OCD & Anxiety Treatment Center)...

Here’s what you need to know about OCD and where to find help

It's fair to say that most people know what obsessive-compulsive spectrum disorders generally are, but there's a lot more information than meets the eye about a mental health diagnosis that affects about one in every 100 adults in the United States.
(Photo by Michael Matthey/picture alliance via Getty Images)...
Cox Communications

Valley Boys & Girls Club uses esports to help kids make healthy choices

KTAR’s Community Spotlight focuses on the Boys & Girls Club of the Valley and the work to incorporate esports into children's lives.
(Pexels Photo)...

Sports gambling can be fun for adults, but it’s a dangerous game for children

While adults may find that sports gambling is a way to enhance the experience with more than just fandom on the line, it can be a dangerous proposition if children get involved in the activity.
Nigeria sees cash shortage amid push for redesigned currency