Nigeria runs risk of CBN-induced recession – Governors tell Buhari

The 36 State Governors under the aegis of the Nigeria Governors’ Forum (NGF) warned that Nigeria runs the risk of going into economic recession if Federal Government fails to deliberate steps to address the lingering socio-economic crisis triggered by the currency confiscation programme initiated by Central Bank of Nigeria (CBN).

The NGF’s position was contained in the communiqué issued and signed by its Chairman, Governor Aminu Tambuwal of Sokoto State, after the 3rd meeting held on Saturday.

Worried by various challenges faced by Nigerians and the sizeable informal sector in the nation, the Governors argued that the amount of new naira banknotes made available by CBN in exchange for old naira notes so far showed that CBN authorities vastly underestimated the economy’s actual cash needs.

While expressing grief over the impacts of the policy on various sectors of the economy since the implementation of the policy, the Governors unanimously resolved to direct all 36 States’ Attorney Generals to review the suit at the Supreme Court to consolidate the legal reliefs pursued by subnational governments.

Governor Tambuwal, in the communiqué, maintained that “the inability to use the new notes has had far-reaching economic effects, leading to the emergence of the Naira black market, severe food inflation, variable commodities prices based on the method of exchange, and long queues as well as crowds around Automated Teller Machines (ATMs) and banking halls across the country with individuals hoping to get a fraction of their money in new notes to meet their daily livelihood. The country runs the risk of a CBN-induced recession.

“While we acknowledge the submission of the Attorney General of the Federation that the Federal Government will comply with the ruling of the Supreme Court, which calls for the halting of CBN’s plan to end the use of the old currency notes, we are yet to observe changes in the financial system.

“Consequently, we call on the Federal Government and the CBN to respect the Rule of Law and listen to the voice of reason expressed by Nigerians and several other stakeholders, including the Council of State, before the damage to our economy becomes too great to fix by the next administration.

Members rose from the meeting agreeing to direct their Attorneys General to review the suit at the Supreme Court to consolidate the legal reliefs pursued by States.”

According to the communiqué, the Governors, during the meeting, discussed critical issues of national interest and expressed sympathy and support for “Nigerians who are experiencing great difficulties under the current CBN Naira re-design and cash withdrawal restrictions policy.

“We feel your pain and are determined to employ all legitimate channels to ease the situation.

“It has become necessary to make a distinction between the Central Bank of Nigeria (CBN) Naira redesign policy backed by Section 20 (3) of the CBN Act, 2007 and the aspirational policy of going cashless, both of which are mutually exclusive at this time.

“It is our considered view that what the CBN is currently pursuing is a currency confiscation programme, not the currency exchange policy envisaged under S20(3) of the CBN Act, 2007. Currency confiscation in the sense that the liquidity provided to the general public is grossly insufficient due to the restrictions placed on the amount that can be withdrawn regardless of the amount deposited.

“The current approach of the CBN raises concerns about the respect for the civil liberties and rights of Nigerians as it relates to their freedom to use legitimately earned income as they wish.

“The Forum believes that to deploy a cashless policy and deepen digital transactions, the best practice around the world is to create a suite of incentives to attract customers; rather than a draconian approach as we have witnessed in the last three months.

“The argument by the CBN for what it describes as the astronomical increase in the currency in circulation as the basis for this policy is not supported by its data. According to the CBN, the currency in circulation increased from N1.4 trillion in 2015 to N3.23 trillion in October 2022.

“The Bank appears not to have taken into consideration the increase in the size of the country’s nominal GDP over this period, the doubling of consumer prices, rising population, and the impact of the humongous Ways & Means advances to the Federal Government by the Central Bank of Nigeria over this period.

“In the circumstances, it is safe to draw either of two conclusions – the CBN data may be incomplete or in fact, Nigerians may have done exceptionally well in the transition to a cashless economy,” Governor Tambuwal said in the communiqué.

(TNT)