Naira Redesign, Fuel Shortage Could Raise Tension Ahead of Election – World Bank

The World Bank's country office in Nigeria's capital, Abuja, has said the hardships facing Nigerians due to fuel shortages and the redesigned naira policy could heighten tensions in the most great economy of Africa before the general elections.

According to an internal document dated February 2, obtained exclusively by PREMIUM TIMES, the bank said the February 10 deadline for the phasing out of old naira notes will cause a shortage of liquidity which could be economically and socially damaging to vulnerable people. in Nigeria.

"Lack of liquidity is aggravating fuel shortages that have lasted for months," the bank said.

“There is a clear risk that cash shortages will cause hardship and frustration that could heighten social tensions, particularly in a feverish political environment in the run-up to the February 25 elections (presidential and parliamentary) and of March 11 (Governor)."

Before the implementation of the new banknote policy, the World Bank said the latest available data shows that only 45% of Nigerian adults had a bank account, 34% said they had paid or received money. money digitally in the past year, and only 9% have made an in-store payment digitally.

Based on this, he said the Nigerian authorities should consider allowing a longer implementation period, well beyond February 10.

According to the bank, it is highly unlikely that Nigeria will be able to scale up digital payments fast enough to fill the ongoing shortages of new banknotes across the country within the timeframe.

Redesign of the Naira, rarity

On October 26, 2022, the Central Bank of Nigeria announced the introduction of redesigned 200, 500 and 1,000 naira notes into the financial system. But ever since the notes were unveiled, Nigerians in different parts of the country have found it difficult to access them from banks and ATMs.

Last week, amid the chaos caused by the scarcity of new tickets, the CBN extended the deadline for removing old tickets from January 31 to February 10.

Despite the extension, many Nigerians working in the informal sector of the economy had to rush for the new notes while others lamented their inability to withdraw their hard-earned money from their bank accounts.

Depository banks have also been accused of hoarding the new notes, while some ATM vendors are exploiting the situation by handing out the new notes to customers at skyrocketing prices.

The World Bank in its paper noted that anecdotal evidence and media reports suggest new banknotes are rare.

"The National Mint's annual capacity would be 2 billion banknotes, so even assuming it only produced the highest denomination 1,000 naira banknotes, it would take a year to produce banknotes. 'worth NGN 2 trillion,' he said.

Therefore, the bank noted that if existing banknotes are indeed demonetized on February 10, there will be a significant shortage of physical currency.

"Around 500 billion naira of new notes could be available, compared to 800 billion naira of old notes outside banks last week and 2.7 trillion naira outside banks before this policy was implemented. work," the bank said. .

Socio-economic co...