Ehe cash reform in Africa’s largest economy, Nigeria, has triggered an unprecedented cash shortage in the West African country. A large part of the approximately 220 million inhabitants depend on cash to pay for food, transport or medicine – but while the old banknotes of the national currency Naira should expire at the end of January according to the will of the government and central bank, new notes are hardly available.
The chaos is fueling desperation and anger ahead of the already polarized February 25 presidential and parliamentary elections. The Supreme Court on Wednesday adjourned a decision on several states’ lawsuits to extend the transition period. According to the court’s order, the certificates continue to be valid until a verdict is reached. However, the central bank objects to this order.
Nigeria’s central bank announced in autumn that it would replace the notes in the highest denominations of 1,000 (about 2 euros), 500 and 200 naira. The declared goal of the reform was to make counterfeiting and money laundering more difficult and to give the central bank more control over the money in circulation – sometimes also to put a stop to voter buying, which is widespread in Nigeria.
Cash shortage protests
But banks have not been able to keep up with the demand for new notes for weeks. For fear of being left with the money, many dealers stopped accepting old banknotes before the exchange period had expired. Anyone who had old cash credited to their account is now often queuing in front of empty ATMs with an empty wallet. There are riots at switches. At least one man was shot dead during protests. According to surveys, more than a third of citizens do not have an account at all and are dependent on cash.
In Nigeria, people with empty wallets are currently queuing in front of empty ATMs.
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Image: dpa
“The result is that many people are starving, it has to be said so clearly. Many people can no longer get food,” said the Nigerian foreign office manager of the Konrad Adenauer Foundation, Marija Peran, the German Press Agency. “People no longer come to work because this is usually done using informal transport that only works with cash – that’s no longer the case.”
Black market trading in banknotes
The central bank insists that it has printed enough banknotes. Greed and corruption are to blame for the shortage – for example, with bank employees who hoard the money to make a profit from the shortage. In fact, illegal money traders can buy the new notes on the black market – for a significant surcharge. Central Bank Governor Godwin Emefiele on Tuesday spoke out against the Supreme Court’s injunction to stay the phasing out of old banknotes pending a verdict.
The cash shortage creates further problems for the elections in Africa’s most populous country – in addition to the catastrophic security situation in large parts of the country, where jihadists, ethnic conflicts over land as well as separatists and criminal gangs threaten to restrict the elections. In addition to enormous hurdles for voters and political explosives, the financial crisis threatens to fuel corruption again. “Part of the central bank’s intention was to take large privately held stashes of cash off the market to prevent vote buying,” Peran said. “The problem is that buying votes is becoming a lot more attractive now, whether it’s with cash or a sack of rice.”