Multiple branches have thrown their weight into the dilemma, blurring the line between institutions, and the naira note crisis shows no sign of slowing down. The federal government is composed of the Executive branch (President), the Judicial branch (Supreme Court), and the Legislative branch, each of which is responsible for its own prerogatives. In a proper government, the balance of power is supported by these institutions’ autonomy. Even though the Federal Reserve is not an official branch of government in the United States, it is considered an independent institution whose decisions do not require approval from any other government body. According to the Federal Reserve Bank of San Francisco, it is still subject to oversight by Congress (legislative branch) and must adhere to the government’s overall economic and financial objectives.
The introduction of new naira notes and the political involvement of numerous Nigerian political institutions have precipitated a situation with far-reaching consequences.
The naira crisis began when the Central Bank of Nigeria (CBN) introduced a 48-day period during which both new and old N200, N500, and N1,000 notes were legal tender and could be exchanged. This was accompanied by a limit of N500,000 per week for individuals and N5 million per week for businesses. The cash withdrawal limits did not, however, affect the majority of individuals. Nigeria has a 33% unemployment rate, and the minimum wage is N30,000 per month, or 1.5% of the monthly withdrawal limit.
The CBN was unable to provide enough new Naira notes to replace the old ones.
The CBN’s directive to the Nigerian populace to exchange their notes and deposit their cash wherever possible, coupled with their inability to supply sufficient new notes, led to social unrest and a significant devaluation of the naira on the foreign exchange black market. There were lengthy lines of irate citizens demanding their money. Those who rely on cash on a daily basis were unable to obtain new naira notes, sparking allegations of corruption. There was a suspicion that those with connections and large sums of cash had secured the new naira notes first, leaving none for those in dire need. This suspicion was bolstered by the fact that it was simpler to exchange old currency with currency speculators than with a bank, resulting in poorer exchange rates and lost revenue.
On 3 February, three states – Kaduna, Kogi, and Zamfara – filed a federal lawsuit, citing the hardships the naira shortage had imposed on their citizens and citing their fear of an economic collapse. To facilitate the transition to the new currency, the Supreme Court issued a temporary order extending the legality of old naira notes.
The CBN insisted, however, that old naira notes ceased to be legal tender on February 8. This resulted in numerous governors issuing their own statements and urging the public to continue accepting old currency.
President Buhari defied the court order on February 16 and, via broadcast, reinstated the N200 note while maintaining that the N500 and N1000 notes had ceased to be legal tender.
On 22 February, the suit’s hearings resumed, with the number of plaintiff states increasing to 16: Kaduna, Kogi, Zamfara, Cross River, Sokoto, Lagos, Ogun, Katsina, Ondo, Ekiti, Nasarawa, Niger, Kano, Jigawa, Rivers, and Abia. The states of Edo and Bayelsa joined the federal government in opposing the suit.
On March 3, a seven-member panel of the Supreme Court ordered the CBN to extend the validity of the old N200, N500, and N1000 notes until December 31, 2023. The court held that the directive of President Muhammadu Buhari for the redesign of the new notes and withdrawal of the old notes without due consultation is invalid.
Emmanuel Agim, a member of the panel condemned President Buhari’s disobedience of the court’s February 8 ruling, which had also upheld the validity of the old naira notes. He went further to say that the President’s broadcast on 16 February that only N200 notes would remain legal tender made Nigeria’s democracy look like a mere pretension replaced with autocracy.
The CBN has yet to issue an official statement regarding the legality of old N500 and N1000 notes in light of this ruling. This has resulted in confusion among consumers and banking professionals.
One of the Access Bank employees, speaking on the condition of anonymity, stated that the banks would only listen to the CBN and not the Supreme Court, “Banks in Nigeria are heavily regulated, and we only listen to the CBN. Despite the Supreme Court’s decision, we are still awaiting word from our regulator. Followed by, “We are all aware of the President’s position on the matter. The Presidency issues orders to the CBN. I am certain that any action taken by CBN would be a presidential directive.”
Other bankers have stated that, despite the ruling of the Supreme Court, they do not have physical access to the old naira notes and must await their delivery from the CBN. A banker who requested anonymity was quoted as saying, “We don’t have the old bills, and we’re not accountable to the Supreme Court. Prior to implementing any directive, the CBN must issue a circular.”
Due to this situation, the presidency and the supreme court have issued contradictory directives. However, the last time this occurred, in early February, the directive of the supreme court was largely ignored, if not outright rejected. It appeared that the public chose to comply with the president’s directive. This destabilises the situation following the ruling even further.
Nonetheless, some Nigerian banks, including those named as plaintiffs in the lawsuit, have begun dispensing old naira banknotes via ATMs and the counter. However, the CBN has not issued a formal policy statement.
The tug-of-war between institutions over the legitimacy of the old naira notes undermines their own authority and legitimacy. An executive branch (president) who can openly disobey and contradict a judicial order (supreme court) elevates his position to that of a dictator rather than president. A Nigerian judiciary devoid of authority undermines the authority of all laws. A central bank that only answers to the president, as described by bankers, is no longer an institution but merely another instrument of executive power. Additionally, some banks have begun to side with the Supreme Court and reissue new notes despite not being formally allowed to do so.
By Abdulrahman Oyedeni