Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors

Cash scarcity has eroded gains of cash economy, financial inclusion – former CBN Deputy Governor Adelabu

"And now, it is about confidence issue, the moment people lose confidence in the banking system, that is the end. You go back to cash."



Cash scarcity has eroded gains of the cash economy, financial inclusion – Adelabu

*Chief Adebayo Adelabu, who is the governorship candidate of the Accord Party in the March 11 election in Oyo State, is a former Deputy Governor of the Central Bank of Nigeria (CBN). He was speaking on Southwest Political Circuit, an interview programme on Fresh 105.9 FM in Ibadan last Saturday, Adelabu analysed the current naira and petrol scarcity, pointing out that the cash chaos has eroded the gains of cashless economy and financial inclusion of the last 15 years.


Q- As a former CBN Deputy Governor, what will you say that the apex bank has done right or wrong in the ongoing cash scarcity arising from introduction of new currencies?

His response 👇🏼

A- Two things are happening now in Nigeria.

The first one is fuel scarcity which affects everyone. We are now buying fuel for more than double the price we used to buy it.

I don’t want to say I don’t believe in what is going on but there is a conspiracy theory going around, it looks more like it, all the signs show that they likely want to disrupt this election.

Nigerians have not experienced fuel scarcity like this in the last seven years, even December periods.

But why this time is what is hard to believe that it is not sabotage, I’m not saying that it is sabotage, but it is hard to believe because it is too coincidental. If they want to prove us wrong, they need to ease the fuel scarcity between now and the time of the election.

The APC administration has made fuel available for Nigerians for the last seven years. Why is it now happening at the twilight of this administration?

Petrol is the easiest to flood this country with because we have not been producing so much locally, we are importing and those import partners have not stopped production. They have been receiving foreign currency in sale of crude oil, the currency is used to pay for importation of petroleum products including subsidy. So why the scarcity?

I believe that for them to prove us wrong, they need to flood the market with petrol and diesel in the next two weeks and the price needs to go back to normal.

Petrol, which is N180 to N185 per litre is being sold for between N300 to N350 freely in the market and nobody is arresting them, and you know the impact of this on the cost of living of our people.

Petrol is so paramount to our life because it affects every aspect of our lives.

Look at inflation now, prices of things have really skyrocketed, it’s because of this energy cost.

If they want to prove to us that this is not a conspiracy, a deliberate and orchestrated plan to disrupt the transition, they need to flood the market with petrol at a normal price.

The other one is the scarcity of cash, it is unfortunate. If I were to be in CBN now as Deputy Governor (Operations), all these would have fallen under my purview because it is the currency management directorate of CBN that handles it which was under me as the CBN deputy governor.

Ordinarily, all CBN policies are guided by the CBN Act, and it has actually envisaged every step of the CBN.

The Act has made provisions for every activity and policy of the CBN. It spells out how it should be run. This is not only in CBN, but also in any government establishment, even in private establishments.

But the moment the implementation of a policy has a political undertone, there is a problem, you are going to be cutting corners.

The idea of introducing new currency started during my stay at the CBN as DG operations, but a lot of things stopped it.

*We were looking at the bigger picture – what is really the advantage of changing our currencies?

We need to look beyond politicians stashing up cash for elections for vote buying.

How much does a politician need to buy votes?

How much is the total cash in circulation?

They won’t need up to five percent, and that should not be the only reason for introducing a new currency.

Why introduce it at this time? They could easily have waited till the elections are over.

You don’t want to target one or two people and you hit millions of other innocent people.

That is why I said introducing a new currency is supposed to run concurrently with the old currency for a minimum of six months.

You will issue new currencies and withdraw old currencies. The only thing is that the day you announce a new currency, CBN will never issue out the old currencies again. Any old currency that enters their vault will stay there.

You know the amount of money in circulation – the M1, M2, M3, (that is technical, I won’t go into full details of that), cash in bank custody, cash in people’s purses and homes.

You know the amount, the moment you are able to withdraw up to 60 to 70 percent of the old currencies, you can now cut off from there and declare the old currencies as illegal tender.

But that does not stop you from accepting it from them as they are bringing it, exchange it for the new ones. There wouldn’t have been this problem of artificial scarcity if it had followed those steps.

Question- Are you saying that the deadline set by the CBN to end the use of old currencies is not right?

His response 👇🏼

*I’m saying that CBN’s stand on the deadline is not proper.*

*It should have followed the CBN Act that allows these two currencies to run concurrently for at least six months before finally placing a ban on the old currencies. *

The number two point is the fact that how much are you withdrawing from the system and how much are you releasing?

They said they withdrew N2.1 trillion and they only printed N300 billion. This is generally a cash economy, and it is not as if the cash is in bulk in a few people’s hands, we have over 200 million people.

Even the N2.7 trillion they said was in circulation is about N30,000 in individual’s citizen’s pockets. How is that too much? N30,000 per head.

It may not be that straightforward, but this is the average, and it is two percent of our Gross Domestic Product (GDP) which is not the lowest in the world.

So, the cash to GDP is low. Go to the USA, it is 12 percent because the cash outside the banking system, including those in foreign currencies, because dollar is an international currency.

But let’s go to India, it is seven percent of total cash in hand compared to the GDP. In Nigeria, it is two percent, which means we don’t have too much cash in circulation.

So, we should look at the bigger picture and say why we want the advantage of introducing the new currencies if it is not targeted at a particular set of people and that is being myopic.

*The most painful thing is that we have all laboured, we have served this country and we achieved a lot of milestones in the banking industry, we are losing it now.

Number one is financial inclusion; a lot of people are now using banks, and this is a work almost 10 to 15 years ago.

A lot of investments have gone into this – market women, artisans – they all have bank accounts, and they do transfers. Now, they are losing confidence in the banking system.

Number two is the fact that the gain that we have recorded in the cashless programme of the CBN, they are losing it.

People will now be keeping cash in their homes fearing that this kind of situation can arise.

The moment you experience it once, you will envisage it again. And then security issues too…. people don’t burgle your house again because they know you won’t have cash- it is not video or TV they want to come and pick.

This is why kidnapping is more like an alternative because you will look for cash yourself. Now that they know the system has failed us, we envisage it will happen.

Number three is that electronic banking is witnessing the biggest technical problem in its entire livelihood.

When you have platforms for electronic banking- internet banking, telephone banking and transfers, the only thing is that you expect organic growth in the number of transactions, and you only build slack of about 20/25 per cent.

If you are doing the normal transfer of one million transactions in a month, probably your capacity, you have built it to 1.2 million, so that the following year when you have exhausted it to 1.1 million, you need to build another slack, extra capacity. But look at it now, there is no cash.

Everybody is now doing transfers. A transfer platform with a capacity of 1.2 million, three million people are trying to transfer on it. The surge that they have just witnessed is affecting it.

Have you been able to transfer in the last week?

Too many people are using it now. It is inorganic, it wasn’t envisaged. It is because of this lack of cash, everybody now, for a small amount of N200, wants to do a transfer. For N500, you want to do a transfer.

Whereas people were using transfer for bigger amounts before.

In terms of the number of transactions, those platforms are experiencing the worst capacity burden of their lives.

They are breaking down, from First Bank to Zenith to GTBank to Access – all the banks – because of the number of people trying to transfer at the same time.

It is a major issue and that has actually made us lose all the gains so far in the banking industry.

And now, it is about the confidence issue, the moment people lose confidence in the banking system, that is the end. You go back to cash.

Now, our withdrawal is no longer following the normal pattern. Even if CBN releases money now, people that ordinarily should withdraw N10,000 will tell you please give me N100,000 because we don’t know what will happen next week.

There is no amount they bring out now that will solve the problem completely. I saw a withdrawal slip by a particular bank customer where they wrote how much do you want to withdraw? He said, ‘everything in my account, I no dey do again.’ That’s the kind of impact it is having, and it is unfortunate.

*We should separate politics from statutory institutions.*

When I wanted to contest, I could easily have held on as Deputy Governor, maybe I just take a few months leave of absence and come and contest for governorship, and if I don’t win, I go back; it would be approved for me because of my impact in CBN.

I didn’t want it. If this is what I want, let me face it. I left CBN before the primary election, nothing says I must leave. I could easily give them an application for a leave of absence and the president would have approved it for me for another three or six months. If I fail, I can go back, but why? You must know what you want as a human being if you don’t want to be controversial and don’t want to leave a legacy that is negative.

If you want to do politics, do politics.

if you want to do CBN governorship, do CBN governorship. When you mix the two, it is a problem.

Even if some of these policies are not deliberate, it looks like they are orchestrated because your head is not above the waters.

So, if I was the one, that is what I would have done.

The person that took over from me, as the Managing Director of Nigeria Inter-Bank Settlement System (NIBBS), of which I was his chairman; when I was leaving, we recommended that he should take over as Deputy Governor of Operations. I don’t envy him now because all these things are actually under him and probably the forces bigger or higher than him are not allowing him to do what is right.

*You cannot replace N1.7 trillion withdrawal or N2.1 trillion withdrawal with N300 billion.

Printing money is not an overnight activity, it has a cycle, whether you are printing locally or you are printing abroad. We have limited capacity here.

The Nigerian Security, Printing and Minting company, of which I was a director when I was in CBN, the one in Lagos and the one in Abuja, has limited capacity. The papers, the ink, the staffing etc…

*Question – What’s their capacity?

Well, I won’t go into details about their capacity. I know they have limited capacity. Not that you want one trillion today and in the next two days you will have it.

Even if you import from overseas which we used to do before we said no, why waste this foreign currency on importation of currency we were including the capacity of the local printers, it has a cycle period- importation time.

You do all the necessary papers for importation, they will do their own printing, you do freight, transportation.

Nothing less than one month before you could actually import money and our money is bulky.

How much can you really transport into the country in a particular week?

When it gets into the country, how do you distribute it to the various banks?

We have 36 states. It is a big problem; we just must be understanding. I want to appeal to Nigerians and let them remain calm. The situation will still come back to normal soon. All hands are on deck now.

*Question – What do you advocate as we speak now?

Sincerely, CBN should allow both the old notes and new ones to run concurrently, and it should look beyond the election.

The election is a transient activity, it will come and go. You cannot destroy our entire lives.

Whatever you want to do, you have months to do it. I will expect the CBN to allow this thing to run.

Let me tell you, it will affect the election. Oyo State is a very large state. It occupies 28,400 square kilometres, we have some remote villages where you need to send agents, you need to send canvassers, you need to transport the INEC staff, and there is no fuel, which would disrupt the process.

What about the distribution of electoral materials, how will they do it? It will affect the election process.

Number two is that you need to recruit agents for the 6,390 polling units across the 351 wards that we have in Oyo State.

You will recruit agents and canvassers at the polling unit, even if it is just 10 canvassers per party. We are talking about over 60,000 people. They won’t do it for free, you have to pay them. These are legitimate electoral expenses; you must pay for their services. It is also an avenue for people to bolt with your money.

One person will not sit down and be doing a transfer to 60,000 people. You have to have people you will transfer to that will transfer to them.

Someone to who you transfer N2 million to go and share, in his life, he has never received N500,000 in his account… you will see him after the election, you can’t kill him.

So, they need to do something about this. The transfer platforms must be effective, they must push out more cash and people must be ready to make this thing work.

Everybody should contribute for us to making the system work. But the way it is going, it is looking blurry!

Share this:

Back to top

Sign up for the latest news, updates, and analyses by email