Obaseki, CBN’s naira redesign scheme and matters arising

Like several times in the last 18 months since the Nigerian economy seemed to descend on a free fall, the Governor of Edo State, Mr. Godwin Obaseki, has again sounded the alarm.

The issue this time around is the sudden decision of the Central Bank of Nigeria (CBN) to redesign the Naira.

As is expected, several incentivised jesters are falling over themselves to condemn the governor’s guts and his patriotic resolve to set political correctness aside and call out the action as capable of causing substantial damage to Nigeria’s already limping economy.

As we listen to the views expressed by these opposers of Obaseki’s cautionary response, it is necessary to look at an earlier instance when Governor Obaseki warned about the Federal Government’s incoherent and disastrous handling of the monetary policy.

In April 2021, Governor Obaseki alerted Nigerians to the fact that the CBN had printed about N60bn and shared it to states in the wake of a shortfall in revenue. He also said that the poor handling of the economy was going to set the Naira on a tailspin, noting that $1 would exchange for N1000 if order was not restored.

The CBN and the Federal Ministry of Finance dismissed the claims and sent attack dogs to defend the ruinous policy.

The CBN was later to admit that it indeed printed money to shore up revenue, but failed to acknowledge the governor’s warning. Alas, as at today, $1 now changes for around N900, which is a fulfilment of the governor’s prediction about 18 months after.

Now, the Edo State Governor has again warned that the recent plan of the CBN to redesign the nation’s currency does not have basis in Economics and that it is politically motivated. The usual suspects have started the same rigmarole again, by playing the ostrich and jettisoning the warnings.

Obaseki insists that the move has no basis in economics because until the root causes of the problems that have kept the cash in question out of the financial system are addressed, the problem will not go away simply because the CBN has redesigned the Naira.

To properly place this in perspective, we have to look critically at the claims made by the CBN and analyze how the postulations could affect the economy.

The CBN claims that 70 percent of the cash in circulation is outside the banking system. The question is why did the apex bank print this much cash over which it has now lost control.

The total money supply in the system is around N49 trillion and cash makes up about N3trillion of this figure, less than 10 percent of the total sum.

Let us take it for granted that it is the CBN’s poor management of monetary policy that is the cause of excessive cash in circulation leading to unprecedented inflationary pressures and other related challenges, is the redesign of the Naira the most effective tool to resolve this problem?

There are many other tools open to the CBN to mop up excessive cash in circulation. And besides, even if the currency is redesigned and the infrastructure issues as well as poor monetary policy management persist, we are going to face the same challenges in the near future.

This move is reminiscent of the theatrics that followed the CBN’s attack on AbokiFX last year, when the bank declared that it was because the website operator was publishing black market rates that was responsible for the declining value of the naira.

Another pertinent question that begs for an answer in the unfolding melee is: who does this policy serve?

It is clear that the policy will not benefit the common man nor will it serve to curb the rising inflation in the country but rather worsen it. As such, the governor’s argument that the move serves only a political purpose is valid.

But if it does serve a political purpose, pray tell, which politician does it serve?

It is on record that the CBN Governor, Mr. Godwin Emefiele, is a politician, who openly contested to clinch the presidential ticket of the APC in the 2023 general election.

Will the policy not serve him and his political party in the 2023 general election?

The CBN’s policy is as cosmetic as it can get. Monetary and fiscal policy pundits are unanimous on the fact that Nigeria must ramp up production, stimulate opportunities to drive economic diversification and enhance fiscal discipline to resuscitate the nation’s ailing economy.

Without these, the redesign of the Naira will end as another failed CBN project.

Osagie is the Special Adviser on Media Projects to the Edo State Governor