Nigeria delays plans to replace its banknotes after chaotic scenes at ATMs

Abuja, Nigeria

Nigeria was forced on Wednesday to delay plans to replace its banknotes with a redesigned currency after scenes of chaos at ATMs left millions struggling to access the new cash.

The country’s old notes were due to expire as legal tender on February 11, but the country’s Supreme Court suspended the deadline because banks were unable to distribute enough of the new naira.

Nigerians have been People have been spending hours in long queues at cash points since late last month after rushing to deposit old banknotes before the initial deadline of January 31.

The cuts have caused deep anger and untold hardship for millions of Nigerians, especially those working in the cash-based informal economy and citizens living in rural areas.

Nigerians say they are struggling to pay for food and public transport as shopkeepers reject electronic payments. Several sources said many servers have failed due to the strain on the banking infrastructure.

In November last year, President Muhammadu Buhari unveiled the newly designed currency aimed at curbing counterfeiting and hoarding of large sums outside the banking system.

Central Bank of Nigeria Governor Godwin Emefiele said in January that of the 3.23 trillion Nigerian naira ($6.9 billion) in circulation as of October last year, “only 500 billion naira was within the banking industry” while a total of 2.7 trillion naira ( $5.8 billion) was “permanently placed in people’s homes.”

Emefil added that about 1.9 trillion naira (about $4 billion) has returned to the banking system since the new notes were first introduced. in November.

The redesigned bills were meant to replace the old series of 200-, 500- and 1,000-naira notes on January 31, but a 10-day extension was announced after widespread outcry over the timing.

The new notes look very similar to the notes in circulation with the only major difference being the color change. President Buhari said last year that the new naira notes, however, “are equipped with security features that make them difficult to counterfeit.”

Aburahman Abdullahi, who lives in Nigeria’s capital, Abuja, said he was in urgent need of cash because he was running out of food and unable to restore supplies. Across the country, banks have become increasingly angry over the desperate search for new naira notes.

Nigeria’s largely informal economy depends primarily on cash, but CBN Trying to encourage people to use electronic banking more is premature, according to policy analysts.

Nigerians are desperately relying on their banks to issue new bills after the February 10 deadline. Many people were seen rushing to deposit their old notes after replacing the old currency. However, banks do not have enough. For the new notes to go around, there has been anger from individuals, of which there are some Demolish, Destroy Bank property or Stripped of their underwear Furious according to videos shared on social media.

“I’ve been here for hours,” Abdullahi said as he struggled to keep his place in a row. A bank ATM in Abuja, the capital of Nigeria.

“I have to go grocery shopping. It’s been very difficult for me. The number of times I eat a day is down to two because if I run out of food, I May not be able to restock.

At a neighboring bank, customers were instructed by staff not to withdraw more than 10,000 naira ($22) per person from their ATMs. Customers of other banks were instructed to withdraw only 1,000 Naira (less than $3) from the cash machine.

At a supermarket in Lagos, cash from a machine was limited to just 1,000 naira (less than $2) despite long waits.

“What can we do with 1,000 Naira!, this government doesn’t care about us,” said security guard Joel Johnson.

The government and the CBN have come under pressure and the governors of three Nigerian states are challenging in court the short time frame given to replace the old notes with the new notes, which they have warned against. That there may be “disturbance of law and order” before that. Key presidential vote later this month.

To complicate matters, Nigerians are facing long queues for fuel across the country, with the city’s currency dwindling amid growing anger and frustration as a result of protests in some parts of the country. They are protesting against the hardships caused by shortage and increase in fuel prices.

According to local media, one person was reportedly killed in clashes between protesters and police in Ibadan, Nigeria’s third most populous city.

Economist Bismarck Rivane said the transition to new currency notes in Nigeria could have been better managed, adding that the lack of new bills would hurt the country’s economy.

“This will lead to some disruption and contraction in economic activity,” Rivane said. “The GDP numbers for the first quarter of the year will be affected.”

The CBN assures that “queues at ATMs will end soon” while directing commercial banks to pay for the new notes over the counter, however, “with a maximum daily payment limit of N20,000 ($43). Subject to.”

President Buhari said he was “aware of the cash crunch and difficulties faced by people and businesses due to the new design of the naira,” but Assured Nigeria’s “significant improvement between now and the February 10 deadline”.

The current cash crunch is not the only shortage Nigerians are dealing with.

A year-long fuel shortage has worsened in the past few weeks, leaving many cash-strapped Nigerians unable to buy petrol. The price of which has tripled in different parts of the country.

State-owned oil company NNPC blamed the prolonged shortage Distribution problems. Analysts say the fuel shortage could affect the ruling party’s chances in the February elections.

Drivers queue to buy fuel at and before a filling station causing a traffic jam on the Ibadan Expressway in Lagos, on January 30, 2023, in Lagos.

“This has implications for politics, in the sense that the ruling party is facing some disapproval from voters because of the difficulties,” says Sam Amadi, a leading political analyst.

“People are going to record the government as a failure … and that could affect the fortunes of the ruling party,” Amadi explains.

President Buhari is serving a second term and the ruling party hopes to succeed Bola Tinubu, the former governor of Lagos, the country’s richest state.

Amadi suggests that the devaluation of the new naira could have a positive impact on the upcoming elections.

“This can actually reduce vote buying if managed well, which is one of the strategic objectives of monetary policy around the new naira,” he says.

Votes have been bought and sold. A feature of The Nigerian elections, which have been affected. By violence and fraud in recent years.

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