Understanding the logic of cheaper cash handling practices

The new notes were dispensed over-the-counter alongside the old ones in most commercial banks amid complaints of supply shortages in new notes in several locations.

There were reports of hesitance among some segments of the Nigerian business community in accepting the new notes as a means of exchange especially on the first of its flag off. But, while the reported incidence of rejection of the new notes were not widespread, it still raises questions about the public enlightenment mechanism of the apex bank in driving communication around the redesigned naira.

With logic as the science of formal principles of reasoning, it does  appear that so far, many Nigerians especially at the grassroots are yet to buy into the apex bank’s rationale for implementing the policy initiative.

This is more so because over the last few weeks, effort at understanding the real intentions behind the Central Bank of Nigeria’s cashless policy as expressed in the redesigning of the national currency and the curbs on withdrawals for corporate and individual account holders have continued to generate a whole lot of arguments among various political and economic stakeholders.

The symbolism of such debates remains the fact that most of the dramatis personae have agendas that appear markedly at variance with  the national objectives of allowing fewer wads of the naira in the hands of individuals to achieve certain broad macro economic objectives, seeing doing otherwise and allowing more money outside the banking vaults had always negatively impacted the nation’s monetary policy objectives.

Since informing Nigerians of the absurdity of leaving an estimated N2.7 trillion of N3. 3trillion of total money in circulation outside the banking system, several economists have seen everything wrong in such practice hence their support for the CBN’s redesign of the naira including the setting up of withdrawal limits for individual and corporate customers, amidst the multiplicity of market- facing alternative channels that often come cheaper and with more efficiency.

As explained in its policy statement, the dangers of carrying or transacting with huge amounts of cash in a highly insecure environment like ours are too grave to be contemplated.

A thorough analysis of traffic, household robberies and burglaries in cities and rural communities in recent times show that most of such nefarious activities are more prevalent in locations where victims carry large sums of cash in preference to use of alternative channels.

This was recently attested to by the Chairman of the Senate Committee on Banking Insurance and Other Financial Institutions, Senator Uba Sani, while presenting his committee’s report to the Red Chamber, who argued that the planned Cash  Withdrawal Limits were well conceived by the CBN to transform the nation’s economy and falls within its mandate as provided for in section 2(d) and 47 of its extant Act.

According to him, implementation of the Cashless policy in six states alone resulted in reduction in the cost of currency management by 15.20 percent from N36 97 billion to N31.35 billion between 2013 and 2014.

Senator Sani, however noted that the trend of cost reduction reversed in 2014 following the suspension of cash deposit charges in the six states, as currency handing cost suddenly rose by 17.20 percent between 2014 and 2015.

According to the lawmaker, cost of currency management has been on the increase since then, hitting N47.25billion in 10 months to October 2022.

-diplomatic diary