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Vol 64 No 4

Published 16th February 2023


The naira republic's banknote crisis hurts (almost) everyone

Campaigners for the ruling party's presidential candidate accuse the central bank of sabotage days ahead of the election

A desperate scarcity of banknotes and fuel are adding a final note of drama to what looks like the most open election ever in Nigeria. Whatever the merits of his eight-year rule, President Muhammadu Buhari had seemed emotionally disengaged from the election and unconcerned about whether his All Progressives Congress (APC) and its presidential candidate Bola Ahmed Tinubu emerge victorious (AC Vol 64 No 3, Economic woes test voter loyalties).

Such has been Buhari's disengagement that some of his critics within the ruling APC are accusing his closest confidants in the presidency of conniving to undermine Tinubu's campaign, especially his legendary prowess in vote-buying. At the heart of their case, is central bank governor Godwin Emefiele's mishandled plan to issue new naira banknotes, and recall some 2.7 trillion naira (US$5.85 billion) from circulation, a month before national elections due on 25 February (Dispatches 1/2/23, Bank governor Emefiele stays at centre of election politics – despite dropping his presidential bid).

So predictable was the chaos triggered by the plan and its unrealistic deadlines, its critics insist it must have been a conspiracy designed to undermine Tinubu – both to hamper the payment of electoral inducements and to paint the image of his party as incompetent and uncaring about the hardship the policy is causing to tens of millions of poor Nigerians (AC Vol 64 No 1, Election noise louder but signals weaker).

The row is playing out in successive legal cases, as in every election in Nigeria, reaching the Supreme Court on 15 February with a call from as many as ten APC governors to allow the continued use of the old naira notes. By adjourning the case for the week, the Supreme Court was understood by the governors to have extended the right to use the old notes to 22 February, three days before voting.

Cash backlash
Undaunted, Emefiele has vigorously defended his decision announced last October to replace the naira notes. In his telling, it was an overdue sanitisation process to undermine criminal cartels and dodgy politicians who have hoarded cash as well as to promote digital transactions.

The governor's evangelising about the advantages of a top-down rapid transition to a 'cashless society' rang hollow in a country of 220 million people where 40% of households do not have a bank account and swathes of territory have no branches at all.

Yet the naira crisis could disrupt all the frontline candidates in the presidential elections: Tinubu as well as Atiku Abubakar of the main opposition Peoples Democratic Party and Peter Obi of the previously insignificant Labour Party. Voters' reported enthusiasm for Obi, a former governor of Anambra state who has finished first in half a dozen opinion polls, has shocked the two established parties (AC Vol 64 No 2, Obi rules at Chatham House).

Many APC officials who spoke with Africa Confidential insist their candidate will triumph due to their party's financial might and organisational reach across the vast nation, as well as the expected difficulties of Obi – a Catholic Igbo from the south-east – in the largely Muslim north.

For Emefiele's critics, these currency shenanigans are the vengeful actions of a megalomaniac still smarting because his eccentric scheme to contest the APC's presidential primaries while continuing to run the central bank was scuttled last May. They say his bizarre conviction that he could join the race to succeed President Buhari without resigning the day job was encouraged by influential individuals in the presidency including Buhari's nephew, Mamman Daura, and assistant-turned-gatekeeper, Sabiu 'Tunde' Yusuf.

Poll fears
An official close to the presidency says Emefiele saw an opportunity in August after Buhari learned that security forces had intercepted containers full of counterfeit naira notes coming from neighbouring Benin. We hear that Buhari, unenthused by any of the three politicians with a chance of replacing him, wants to burnish his legacy, which is ropey in the economic and security domains, by overseeing a credible election.

The central bank governor played to the president's fears of election day becoming a cash-powered bazaar to win backing for a policy that would supposedly force party bigwigs to bring out their obsolete money. Emefiele's preference for contracting overseas firms to print the cash was scuppered by the reliably statist Buhari's insistence that the new naira must be produced in-house by the Nigerian Security Printing and Minting Company (NSPMC). The president appointed his brother-in-law, Ahmed Halilu, to head the state-owned company in September.

With Buhari's approval obtained and conditions fixed, both Emefiele and Halilu were unwilling to inform the head of state that the NSPMC had no chance of being able to churn out notes on a like-for-like basis. One credible estimate reckon it could take Nigeria's mint over six months to replace the old notes. So Emefiele has shifted his emphasis towards endorsing the benefits of a cash-free economy.

Whatever the governor's true intentions, the result has been mayhem for a population struggling with rocketing prices and spiralling unemployment (AC Vol 63 No 25, It takes more than new banknotes…). In cities and towns, people have handed in their old notes but have collected only a fraction of the amount deposited in new bills or none at all. In the countryside, Nigerians have struggled to find anywhere to take their soon-to-be illegal tender.

Commerce has been hammered as traders avoid the cash that is being phased out, making activities such as taking the bus or buying bread a Herculean task. The digital payment infrastructure has creaked under the extra pressure and in some cases failed altogether. Tensions have boiled over as customers protest outside bank branches and staff barricade themselves indoors.

Hate figure
As the chaos worsens, Emefiele has become a hate figure for the APC campaign amid worries that Tinubu, and other party hopefuls will be blamed when voters go to the polls. Those ruling party governors – including Kaduna's Nasir el Rufai, Kogi's Yahaya Bello, Zamfara's Bello Matawalle and Niger's Sani Bello – who filed petitions over the naira replacement at the Supreme Court in early February have lambasted Emefiele as part of their campaign rhetoric.

'Economic activities are grinding to a halt' under the 'haphazard, cack-handed' initiative that has left the states 'on the verge of anarchy,' the attorney generals of Kaduna, Kogi and Zamfara said in a joint application filed to the top court on 3 February. Law-abiding citizens had been denied access to cash, they said, reproaching the Buhari-led federal government for 'embarking on the policy with an unreasonable and unworkable timeframe.'

El Rufai gave several coruscating television interviews that stopped just short of condemning the president while presenting him in an unflatteringly credulous light. In one, he accused unnamed individuals of 'using the primary innocence of President Buhari' to 'sell a dummy to him'. The Kaduna governor continued: 'We are convinced that there are some elements in the Villa that want APC to lose the elections... I know who I am referring and those in the Villa know who I am referring to.'

El Rufai claimed the people behind the plot are northerners who did not want Tinubu to emerge as the APC nominee, fuelling speculation that he was referring to Daura and Yusuf who egged on the presidential ambitions of first Emefiele and later Senate President Ahmad Lawan.

An intelligence source told Africa Confidential that he believes that the central bank governor is funding the campaign of the PDP's Atiku. He partly bases his suspicion on Emefiele's friendship with the PDP's vice-presidential candidate, Ifeanyi Okowa. Both Emefiele and Okowa hail from Delta State. Praise for Emefiele from PDP politicians such as former Senator Ben Murray-Bruce, who tweeted that 'vote-buying will be almost eliminated', haven't helped the governor's standing in the APC.

Tinubu's camp has also aimed its fury at the Federal Attorney General, Abubakar Malami, after he asked the Supreme Court to dismiss the governors' case for lack of jurisdiction immediately after the justices granted an injunction allowing the old notes to remain legal tender beyond the central bank's deadline of 10 February for their retirement. 'Malami is a public enemy like Emefiele,' was the response of Bayo Onanuga, the Tinubu campaign spokesman and veteran publisher.

It is not just APC governors and parliamentarians that worry about fallout from the botched policy. On 11 February, the Nigeria Governors' Forum, representing all 36 state executives, denounced the central bank's 'currency confiscation programme.' Regardless of the Supreme Court's eventual decision, pressure is growing on Buhari to allow much more time to enact the policy and ameliorate the subsequent suffering. On 8 February, the IMF urged the central bank to 'consider extending the deadline' due to the 'hardships caused by disruptions to trade and payments due to the shortage of new bank notes available to the public.'

Two days later, the National Council of State, on which the current and former heads of state sit, met at the presidential villa to discuss the cash crunch. Many attendees argued for prolonging the currency phase-out process. Tinubu and his running mate Kashim Shettima, the former governor of Borno state, released their own statement on 12 February, recommending that both sets of notes be allowed to circulate for another year.

If Buhari does relent and extend the deadline by a month or more, it may mean elections are even more swayed by vote buying – as the richer parties and candidates spend old and new banknotes on a population that has been starved of its own money for the past month. Should that happen, 'cash will end up being more valuable than oxygen' and 'no one will be able to touch us,' an APC official told Africa Confidential.

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