Monday, February 20, 2023

The Nigerian Elections and the Cashless Economy

 The poverty rate in India is about 16%, and that of Nigeria is about 46.4% - 2022 Global Multidimensional Poverty Index

The latest estimates are that Nigeria has 71 million people in extreme poverty (living on less than $1.90 per day) compared with India's 44 million.

In just five years between 2015 and 2020, the number of fully employed people dropped by 44% - from 55 million to 31 million people.

The Central Bank of Nigeria (CBN) said it redesigned the higher denomination notes - 200, 500 and 1,000 naira - to replace the cash in circulation, to tackle inflation, curb counterfeiting and promote a cashless society. When announcing the redesign, the CBN said the new notes would begin circulating from 15 December and the old notes would cease to be legal tender at the end of January. The bank then extended the deadline.

It hoped the redesign would bring some of the money being hoarded by individuals and companies back into the financial system.

The reform has created something like a cashless society - but not in the way the CBN had planned.

"The whole idea was to limit how much cash people have access to, in order to encourage them to make digital payments, so they [CBN] can monitor where money goes," says Paul Alaje, a senior economist at management consultants SPM Professionals. "But Nigerian banks don't have the capacity or structure to make digital payments work seamlessly."

"The government has been trying to move the country into a cashless economy for ages," argues policy analyst and economist Dr Yemi Makinde. "Its intention is good, but it is just not feasible, the banking systems were not ready and Nigeria is just used to cash." He continues, "The banks are not doing a good job distributing the money. Bank managers have been keeping a lot of the money aside for people with connections and for the rich, misusing the central bank's policy," Dr Makinde says.

Nigeria's naira shortage: Anger and chaos outside banks - BBC News

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