Naira crisis: Nigerians’ pains worsen as currency-in-circulation tumbles to N1.54tn from N3.3tn
As a result of the worsening naira crisis, the total amount of currency-in-circulation in the Nigerian economy has tumbled from N3.3tn to N1.54tn, a Central Bank of Nigeria document has revealed.
This came as a biting shortage of new naira notes amid an acute scarcity of old currency has inflicted untold hardship and pain on millions of Nigerians, leaving several people stranded.
The latest central bank document, according to a report by The Punch, showed that the total amount of currency-in-circulation fell by 53.33 per cent within three months.
Specifically, the currency-in-circulation fell from N3.3tn recorded on October 31, 2022 (a few weeks before the CBN began the implementation of the naira redesign policy) to N1.54tn on January 31, 2023.
The 53.33 decrease in C-in-C followed bank customers’ huge deposits of old N1000, N500 and N200 notes ahead of the CBN’s February 10, 2023 controversial deadline.
Among other things, the CBN Governor, Godwin Emefiele, had said one of the objectives of the naira design policy was to mop up currency outside the bank vaults which he put at N2.7tn. He said with such a huge amount outside the banking system, it would be difficult for monetary policy initiatives to impact the economy.
The latest data is obtained from a report presented by the CBN Deputy Governor, Folashodun Shonubi, at a forum in Abuja last week.
He noted that since 2018, the currency-in-circulation had been increasing at an average annualised rate of 18 per cent before the CBN’s redesign policy.
Meanwhile, Emefiele had announced in October last year that the bank would release re-designed naira notes by December 15, 2022.
According to the CBN governor, this was targeted at controlling currency in circulation, curbing counterfeit currency and ransom payments to kidnappers and terrorists.
He noted, “Indeed, the integrity of a local legal tender, the efficiency of its supply and its efficacy in the conduct of monetary policy are some of the hallmarks of a great central bank.
“In recent times, however, currency management has faced several daunting challenges that have continued to grow in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country.
The CBN had earlier said the old notes would cease to be regarded as legal tenders by January 31, 2023.
However, the deadline was extended to February 10 with a grace period of seven days for old notes to be deposited in banks.
The Supreme Court sitting in Abuja on Wednesday adjourned a hearing in the suit seeking the suspension of the naira redesign policy to February 22, 2023.
Some state governments have filed a suit against the Federal Government seeking a restraining order to stop the full implementation of the naira redesign policy of the CBN.
In a new development, nine states have filed to join the suit initially filed by Kogi, Kaduna and Zamfara states.
The states are Katsina, Lagos, Cross River, Ogun, Ekiti, Ondo and Sokoto states bringing the new total of plaintiffs to ten.
On the other hand, Edo and Bayelsa have filed to be joined as respondents.
The seven-man panel led by Justice John Okoro ordered them to amend their processes to be heard as one.
Meanwhile, pending the hearing of the suit at the Supreme Court on Wednesday, the order suspending the February 10 deadline for the phasing out of old notes subsists amid a conflicting CBN directive to banks and the public.
Meanwhile, President Muhammadu Buhari had said the old N500 and N1,000 banknotes were no longer legal tender in the country.
He, however, directed that the old N200 note should be re-circulated, adding that it would remain legal tender until April 10, 2023.
Buhari appealed to Nigerians to deposit their old N500 and 1000 notes with the CBN.
Already, many states including Lagos, Ogun and Kaduna have declared the old N1,000, N500 and N200 notes will remain legal tender in their jurisdictions, citing the Supreme Court judgment on the matter as their reasons.
Nigeria’s inflation rate rises to 21.91% as cash crunch persists
The consumer price index (CPI), which measures the rate of change in prices of goods and services, rose to 21.91 percent in February 2023, up from 21.82 percent in the previous month.
The inflation rate data is contained the latest CPI report released on Wednesday by the National Bureau of Statistics (NBS).
The February increase comes across as the second consecutive rise in the country’s inflation figure this year, as Nigerians struggle to access cash for their daily needs — a challenge caused by the naira redesign policy of the Central Bank of Nigeria (CBN).
According to the NBS report, “the February 2023 inflation rate showed an increase of 0.09 percent points when compared to that of January 2023 headline inflation rate”.
Similarly, on a year-on-year basis, the headline inflation rate was 6.21 percent points higher compared to the rate recorded in February 2022, which was 15.70 percent,” the bureau said.
“This shows that the headline inflation rate (year-on-year basis) increased in February 2023 when compared to the same month in the preceding year (i.e., February 2022).
“On a month-on-month basis, the percentage change in the all-items index in February 2023 was 1.71 percent , which was 0.16 percent points lower than the rate recorded in January 2023 (1.87 percent).”
This means that in February 2023, on average, the general price level was 0.16 percent lower relative to January 2023.
NBS also explained that the percentage change in the average CPI for the 12 months period ending February 2023 over the average of the CPI for the previous 12 months period was 19.87 percent, showing a 3.15 percent points increase compared to 16.73 percent recorded in February 2022.
FOOD INFLATION SURGES TO 24.35 PERCENT
According to the bureau, food inflation rate in February 2023 was 24.35 percent on a year-on-year basis — representing a 7.24 percent points increase compared to the 17.11 percent recorded in February 2022.
The statistics body said the rise in food inflation was caused by increases in prices of oil and fat, bread and cereals, potatoes, yam and other tubers, fish, fruits, meat, vegetable, and food product.
KWARA, IMO, LAGOS RESIDENTS PAID MORE FOR FOOD IN FEBRUARY
On the a state profile, Kwara, Imo, and Lagos residents paid more for food in the period under review.
“On a month-on-month basis, the food inflation rate in February 2023 was 1.90 percent, indicating a 0.18 percent points decrease compared to the rate recorded in January 2023 (2.08 percent).” the report reads.
“The average annual rate of food inflation for the twelve-months ending February 2023 over the previous twelve-months average was 22.12 percent, which was a 2.44 percent points increase from the average annual rate of change recorded in February 2022 (19.69 percent).
“In February 2023, food inflation on a year-on-year basis was highest in Kwara (29.51 percent), Imo (27.47 percent), and Lagos (27.42 percent ); while Sokoto (18.54 percent ), Jigawa (19.67 percent ), and Yobe (21.89 percent) recorded the slowest rise.
“On a month-on-month basis, however, February 2023 food inflation was highest in Yobe (3.15 percent), Edo (3.03 percent ), and Ogun (2.90 Percent); while Rivers (0.75 percent), Sokoto (0.89 percent), and Nasarawa (0.90 percent) recorded the lowest.”
Delta got N296bn, Edo N37bn — how oil-producing states shared N970.20 billion derivation fund in 2022
The nine oil-producing states in Nigeria shared N970.20 billion from the federation account through the 13 percent derivation formula in 2022.
Data from the National Bureau of Statistics (NBS) showed that Abia, Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Imo, Ondo, and Rivers were states that received the fund.
The 13 percent derivation fund comes from the federation revenue to oil-producing communities through the state governments as enshrined in section 162, sub-section 2 of the Nigerian constitution.
Analysis of the report showed that Delta state received the highest allocation totalling N296.63 billion, representing 31 percent of the total revenue from the derivation account.
Delta is followed closely by Akwa Ibom, having received N222.52 billion, representing 19 percent of the total disbursement during the period.
Other states include Bayelsa (N188.02 billion), Rivers (N169.79 billion), Edo (N37.49 billion), Ondo (N25.95 billion), Imo (N18.61 billion), Abia (N6.95 billion), and Anambra (N4.25 billion).
The 13 percent derivation fund is different from the three percent provided for host communities in the PIA from the oil company’s operating expenses (OPEX).
In a controversial comment last year, Nyesom Wike, governor of Rivers, said President Muhammadu Buhari had approved the payment of funds owed to states in the Niger Delta since 1999.
According to Wike, the money approved by Buhari were funds owed from the 13 percent derivation, which he said have significantly aided his infrastructural strides in the state.
DESPITE DERIVATION FUNDS, DELTA, AKWA IBOM, BAYELSA AMONG MOST INDEBTED STATES
But despite the 13 percent derivation allocations, oil-producing states are still battling with high domestic debt and suffering from massive infrastructure decay.
According to the Debt Management Office (DMO), Delta leads with a total debt of N272.61 billion, followed by Rivers, and Akwa Ibom with N225.51 billion and N219.62 billion, respectively, at the end of Q3 2022.
Imo has a domestic debt of N207.52 billion, followed by Bayelsa, Edo, Abia, Ondo, and Anambra with N151.16 billion, N110.99 billion, N104.57 billion, N78.82 billion, and 75.69 billion, respectively.
Speaking last year, Ikemesit Effiong, head of research at SBM Intelligence, had said that oil-producing states ignored workable revenue initiatives because of crude oil income.
Effiong explained that because oil-producing states command a healthy portion of the national income, they are not motivated to “build the durable revenue generation and infrastructural structures that would ordinarily guarantee sustainable economic development, simply because crude oil income is available for them to spend”.
“There is also the situation where a lot of the players in the oil and gas sector which operate in these communities offer to stand in the gap in meeting some of these infrastructural needs, but host communities stand as a roadblock by demanding even more income rent from them,” he said.
“This leaves state governments with the lion’s share of responsibilities in meeting the infrastructure needs that major oil and gas players would have taken care of, further driving up subnational commitments.
“In the end, crude income is easy money, and easy earnings are also easy to spend, so these states are too relaxed to look for creative ways to build robust revenue generation structures.”
Nigerians await Supreme Court’s judgment in Naira redesign suit today
The Supreme Court will today deliver judgement in the naira swap policy of the Central Bank of Nigeria (CBN).
The court had on February 22 fixed today for judgment in a suit by 17 states challenging the policy which has for months caused naira scarcity and untold hardship to Nigerians and their business.
This was after constituting a seven-member panel to entertain the suit and directing the plaintiffs ( the 17 states) to consolidate their briefs.
The plaintiffs are Kaduna, Kogi, Zamfara, Katsina, Lagos, Cross River, Ogun, Ekiti, Ondo, Sokoto, Rivers, Kano, Niger, Jigawa, Nasarawa, Plateau and Abia states.
The defendants are the Federal Government, Edo and Bayelsa states.
In their separate cases that were consolidated, the plaintiffs argued that the policy was unconstitutional and should be voided.
Lawyer to Zamfara State Government, Abiodun Owonikoko, had before then prayed to the apex court to set aside President Muhammadu Buhari’s February 16 directive that only N200 old note should be in use.
Owonikoko, a Senior Advocate of Nigeria(SAN), added that the naira redesign policy was at variance with the provision of Section 17(2)(c) of the Constitution, which says the governmental actions shall be humane.
But Kanu Agabi (SAN), Tijani Gazali (SAN), Kenneth Mozia (SAN) and Audu Anuga (SAN), who represented the plaintiffs, urged the court to dismiss the suit for want of jurisdiction and for being incompetent.
Agabi,, who argued that necessary parties were not before the court, faulted the exclusion of the governor of the CBN, Godwin Emefiele as a party in the suit.
He noted that references were made to the CBN 32 times in the plaintiffs’ originating summons and supporting affidavit, while seven reliefs were sought against the apex bank, which was not made a party in the suit.
Agabi, who said his client filed a motion on notice seeking the dismissal of Form 48 issued on the Attorney-General of the Federation (AGF) and Emefiele, added that an affidavit to show cause why Form 48 should be set aside had also been filed.
He argued that Buhari did not flout the order of the court in his February 16 nationwide broadcast, insisting that it was a necessary intervention.
Meanwhile, there appears to be no respite for Nigerians who have turned to Point of Sale (PoS) operators as their main sources of cash.
In Abuja, the POS operators yesterday charged N300 for every N1,000; N1,500 for N5,000; N1,800 for N6,000; N2,100 for N7,000; N3,000 for N10,000, N6,000 for N20,000 and N40,000 for N100,000.
An agent, who gave her name simply as Edith, justified the charges and blamed the development on the CBN.
Lamenting that cash from the banks “is not always available,” she challenged the apex bank to release cash to banks.
Edith revealed that she deposited N1.2 million with a filling station to get N1 million cash three weeks ago.
Explaining that N1.2 million for N1 million is the going charge demanded by filling stations, desperate PoS operators do not hesitate to pay more.
She flayed the CBN for threatening to prosecute PoS agents, arguing that, “anybody who needs cash, pays for it.
“CBN does not know how much we pay to get cash. If the cash was available from CBN we won’t be in this crisis. PoS operators are not to blame, the CBN should be blamed.”
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