Why Naira scarcity may linger
The Central Bank of Nigeria (CBN) has hinted that it will take about two weeks for the cash drought across the country to ease.
A staff member of the apex bank who craved anonymity said the current situation will take one or two weeks to normalise”.
Asked if this will not trigger a protest from the Nigeria Labour Congress (NLC), the official explained that “the CBN is not out to confront labour but the process and requirements for releasing cash back into the system is not that simple”.
He also said the CBN will not go back on its cashless policy, as a result, “the CBN will regulate the volume of cash in circulation in relation to the amount of cash the banks have in their vaults”.
The CBN, he said, does not want a repeat of what happened before the Naira redesign policy was introduced with over N3.3 trillion outside the control or knowledge of the banking system.
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By regulating how much is held outside the bank vaults, the CBN, he said, “will record greater success in implementing its monetary policy decisions”.
One of the reasons for initiating the Naira redesign was to tackle inflation which is a cardinal objective of the CBN.
The CBN official pointed to the CBN governor’s response to the growing inflation and the hike in interest rate to 18 per cent after the last Monetary Policy Committee (MPC) meeting.
CBN Governor Godwin Emefiele had stated that the CBN will do “whatever needs to be done to rein in inflation, that will continue to be the strategy, “but we will do it more moderately going forward”.
According to Emefiele, “we are conscious of the fact that when you over tighten it will begin to have contagion effects and negative impact on banking system and financial soundness and financial system stability in an economy.
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“That is what we want to do. We want to reduce inflation and not do it in the way it will upset the economy,” he added.
Yesterday, the banks in Abuja opened to customers but continued to ration the amount of cash (old notes) they paid over the counter and through Automated Teller Machines (ATMs).
Meanwhile, a staff member of a commercial bank on Sunday said that “the CBN has significantly increased the amount of cash it allocates to bank branches since the cash crunch began”.
The reason for rationing cash paid to customers, the banker said is because, “while the CBN has really tried to increase the quantity of cash in supply, it is still not enough to meet the demands like we used to have before the Naira swap programme”.