A country’s currency should circulate seamlessly and as the world goes cashless, we have Norway and Sweden at near 100 per cent cashlessness. Meanwhile, Somalia had no functional Central Bank a few years back and different currencies were in circulation in Somali’s markets. Nigeria is somewhere in between, with it’s internal regional disparities, meaning a total withdrawal of cash is unwise and cash should remain king for some time. But our monetary authorities think otherwise.
Notwithstanding, it was expected that all will be done within the powers of monetary authorities to make the introduction of new notes as seamless as possible, after all Nigeria has some experience in currency swaps having had three in the past. The first in 1968 during the Nigerian civil war, another after the war in 1973. The third in 1984 under Major General Buhari. Then and as today the currency redesign was perceived as an economic tool.
India had a similar currency disruption in 2016 with aims similar to Nigeria’s. Some of the objectives not purely economic and included going after corrupt money. It was believed there was too much money outside the system, called black money so it needed taken back into the financial system. This caused much rancour in India and almost brought the government down. Indeed some believe this is part of the game plan in Nigeria. Government has since denied it and for now let’s accept.
Then what’s going on? Despite being armed with past Nigerian and the Indian experiences, despite better technologies like cash dispensing machines, money counting machines unlike during 1984 currency change, despite more branches after Soludo’s consolidation this exercise has been plagued with failure and total lack of circulation of the new notes, in other words a scarcity of the new notes despite months of preparation.
What exactly is the reason for this scarcity? On examination we find that there is nothing new about the scarcity of new notes, it has been part of Nigerian banking culture for years and it is business as usual. I inquire, when did anyone receive new notes over the counter or at ATMs? Do we not pay a premium for new old notes? So why the surprise when new new notes also demand higher premium. The only surprise for me is that old old notes now command a premium as well!
Queues at cash dispensing points in Nigeria has been the norm right from inception. Why the surprise now with the longer queues? Our banks have determined that queuing at ATMs is normal. In other countries you don’t find queues at cash dispensing points but Nigerians must queue, it’s our culture. This cash crunch and queuing at ATM is a symptom of a deeper malaise.
While other nations run surpluses in Nigeria the system would rather have scarcity of goods in the market for sustainance of business profits. This has just been extended to cash. It is this overall scarcity mindset that was responsible for the hoarding of Covid palliative in warehouses across the country.
Governments is further complicit in this by putting up obstacles to the freedom of entry into businesses thus maintaining a sustained difficulty of doing business in Nigeria. By stringent registration and licensing requirements government has become an obstacle to new businesses that will ensure increased supply of goods.
There are other examples in the real sector. For years Nigeria remained a net importer of cement despite being blessed with abundant limestone, being blessed with numerous fuels to turn the limestone to cement. Rather than the nation go into surplus the sector contrived to creat scarcity that installed a huge arbitrage for profits for cement plant operators in Nigeria. This was sustained in that sector until disrupted by a Nigerian who didn’t see sense in what the other cement plant operators were doing.
What applied to the limestone cement scenario also applies to other products like fertiliser, petrochemicals and alumina. A nation blessed with raw materials and natural gas to produce these items in surplus is content to import them like we used to import cement in the past. Only in farm produce do we have surplus in times of harvest for just few months the year. We are unable to process or store the surplus. The powdered milk imports into country is because the Dutch dairy industry produces surplus milk which is converted to powder that is shipped round the world.
Other things are lost when your local businesses contrive scarcity, they don’t export. But with surplus in mind you export to take up the surplus. Apart from the above example of surplus dairy products are many others. The fact is while countries with scarcity mentality struggle, those with surplus mentality go out to conquer the world.
It is this same mentality that has resulted in the money crisis we have in the country. After enjoying free monies in time past from hoarding new old bank notes they simply perceive new redesigned bank notes as business as usual and more profits. Let the CBN print zillions of new new bank notes it would not be allowed to circulate, not in Nigeria. That is how we operate, new notes are for the favoured few and those ready to pay a premium for new notes. When they become old the Proletariat will then begin to have it.
This contrived currency scarcity is a wake up call to uproot covert or intentional scarcity of goods and services we experience in the country, be it potable water, electricity, bank credit and many others. A scarcity mindset cannot deliver material prosperity to the citizens of this country we have to uproot that mentality that has taken hold in the business elite of the country.
There is a fundamental economic principle that needs to permeate the whole economy, the freedom of entry into any business or enterprise.Established business are in cahoots with government and have put entry obstacles in place against new businesses competing with them. You can’t get into some sectors unless you procure licenses from government thus putting up obstacles for introducing new technologies that would lead to surpluses and make a local champion become second or third fiddle.
Simply put, Nigerian industries don’t think surplus or capacity for reasons stated above. How do you explain 50 per cent manufacturing capacity utilisation in Nigeria compared to 80 per cent and above for other countries. The essence of this is that government and businesses are keeping another 50 per cent of Nigerian manufacturing capacity idle, as my people would ‘say who do us’
Another scenario is developing in the Nigerian business space, the coming of our own business barons in the mould of the American business barons, I refuse to label them robber’ barons. They built America and likewise Nigerian barons will build Nigeria and are doing so. Unfortunately like in most things we start screaming after the horses have bolted and rushing to shut the gates of empty stables. Where is Nigerian antitrust laws to prevent these business barons later abusing their monopolies thus stifling surpluses. While these barons can make Nigeria a surplus producer in cement, fertiliser and we hope refined petroleum products, in the long run they might fall to their monopolistic instincts hence the need for the American style antitrust laws and it’s thorough enforcement.
