Opinion - CBN Governor Sanusi Lamido Sanusi's Trap By Kingsley Omose
https://nigeriaafrica1.blogspot.com/2012/09/opinion-cbn-governor-sanusi-lamido.html
The announcement by Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria (CBN), that the CBN is to introduce a new N5,000 note and make changes to the security features in all the existing denominations has been attracting many negative comments.
The Nigerian Senate Committee on Banking coming out with a directive to the CBN to halt the policy, while the House of Representatives has summoned Sanusi to come and brief it further on the move.
To begin with, to introduce a cashless policy limiting individual cash withdrawal or lodgement in banks to N150,000, and then initiate changes in features of all currencies in circulation while introducing a new N5,000 note means a deadline will be given within which hoarders of cash outside the banking system have to trade their old currencies for the new ones, which they can only do through banks, and the cashless policy will be waiting for them. Sanusi’s objective, I think, is to bring all the cash outside the banking system to the deposit money banks, thus effectively forcing the informal sector of the Nigerian economy to embrace banking and merging the formal and informal economies.
To be mostly affected will be hoarders and dealers of huge cash outside the banking system who will now be forced to bring their cash to the deposit money banks, and when they are restricted by the cashless policy to depositing only N150,000 a day, we are going to witness a mad dash to the banks by holders of huge cash that will be more chaotic than when Buhari/Idiagbon effected a currency change policy in 1984. The currency restructuring implemented by Buhari/Idiagbon and the short timeframe given for the exchange of the old notes for new ones caused massive disruptions to the economy, as companies and Nigerians rushed to banks to beat the deadline, and we witnessed massive naira flowing into Nigeria from different parts of the world, including briefcases from Saudi Arabia.
Also to be severely affected will be millions of Nigerians in the informal sector – over 60 percent of the Nigerian economy – who do not have bank accounts or have never done any banking transactions before, and whose fate will be sealed unless conscious and deliberate efforts are made by the CBN and deposit money banks to mobilise them to embrace banking so as to avoid being cut off from the new singular Nigerian economy that is soon to emerge.
With the massive inflow of cash into the deposit money banks that the trading of old currencies for new ones will engender, the introduction of a new N5,000 note is to ensure that the banks are not buried under mountain loads of cash and to moderate the cost of handling cash so as not to introduce another demon that will shackle the banks while attempting to solve an existing problem.
It is not difficult to imagine what changes the cashless policy and the new policy on changing all our currencies and introducing a N5,000 note will make, especially when the formal and informal sectors of the economy have been merged, all the cash outside the banking system have been deposited with the banks, Nigerians of 18 years and above now have bank accounts, and the cashless policy is fully implemented across Nigeria. Guess who already has access to view banking transactions and details of bank customers! CBN, EFCC and ICPC, meaning that it will now be easy to track down those with huge bank deposits who cannot explain why they have such huge funds in their accounts (elected politicians and public/civil servants); it will also be easy to track banking transactions of dubious nature and to have records of financial infractions, making it easy to prosecute wrongdoers.
Federal, state and local government tax authorities and agencies will also have access to the banking records and transactions of Nigerians and their businesses, effectively making it easier to access their true net worth for taxing and other purposes that will in turn generate trillions of naira for government at all levels. This explains why the policy on issuing tax identification numbers to all eligible taxpayers is already in place.
My counsel to those who are sitting on mountains of cash in their respective homes or offices is to begin immediately to pay in their money into their various bank accounts so as not to be caught with their pants down when this new policy is implemented, despite the protestations and the best efforts of the National Assembly to halt, limit or slow down this train that has already left the train station. And, to the tens of millions of Nigerians in the informal sector of our economy, they should begin immediately to open accounts with deposit money banks, or better still, register business names and incorporate companies to give recognition and identity to their businesses and make them more compliant for the inevitable changes that are coming.
Ultimately, the gains of these new policies being implemented by the CBN outweigh the pains. Increased accountability and transparency is injected into the Nigerian economy, which signals our desire to be key players on the world stage. However, great effort must be made to carry all stakeholders along, especially Nigerians in the informal sector, to reduce to the barest minimum the pains of transiting to the formal economy.