Scarcity of the lower denominations of the Naira has created a lot of problems for the informal sector of the national economy
| By Anayo Ezugwu | Apr. 7, 2014 @ 01:00 GMT
“ENTER with your change, N1000, N500, don’t enter O,” this has become a daily refrain of bus conductors calling for passengers at bus stops in Lagos. What that means is that only passengers with lower denominations of the Naira or those with appropriate fare for a particular route should board the bus. What happens at bus stops in a reaction to the pronounced scarcity of the lower denomination of the Naira across the country. The story is the same in the markets, shopping malls and among road side hawkers. Many Nigerians have fought with bus conductors and shop attendants over their balance, while others were made to forfeit theirs. Realnews investigation has revealed a general scarcity of N5, N10, N20, N50 and N100 in circulation. This general scarcity is threatening the informal sector of the Nigerian economy.
The worst affected by the scarcity are hawkers, petty traders, commercial motor drivers and other informal business owners. Most bus drivers, in their bid to save time and avoid arguments with commuters now demand and collect complete fare for the routes they ply before allowing people to board their vehicles. John Chuku, a commercial bus driver, said he had refused to carry many passengers because they had higher denominations of the Naira to pay their bus fares. Chuku, who declined to disclose the losses he incurred so far, said the shortage of the lower denominations of the Naira had made the transportation business cumbersome.
Hafeez Ibrahim, a bus conductor, said the scarcity of lower denominations of the currency in circulation has been a major issue between bus conductors and commuters. “We have to contend with abuse and curses from passengers who are not able to get their balances after our service. In most cases, we have to forgo our own fare for peace to reign and often we do advise passengers to board with their ‘change’ to avoid any quarrel. Often times we join the balances of passengers and let them sort themselves out.” he said.
Okafor Dike, a commuter, said the scarcity has compelled him to warehouse lower currency denominations before boarding commercial vehicles. According to him, warehousing of lower currency denominations saves him daily from commercial drivers’ embarrassment. Funke Adeyemi, a bar tender in Ikeja, said the issue of giving balance in lower denominations has become a big problem for retailers. “We hardly have balance to give to customers after purchase and this is causing problem for us because most of customers believe that we don’t want to give them balance.”
Victor Enyinnanya, a commuter, said the situation was applicable everywhere even in major shops and eateries in the state. “Retrieving your balance after transaction is not easy nowadays. Even at the banks, it is becoming a major crisis point and I have witnessed a major fracas break out because of as little as N10. It is a big problem and I think government should do something about it before it becomes an economic challenge,” he said.
The shortage of the denominations in circulation has become very noticeable among retailers, bus conductors and petty traders. Many traders and commuters have been forced to abandon their balances after purchase or exchange of services due to the fact that concerned sellers or bus conductors could not raise the necessary balance to complete transaction.
Meanwhile, some residents have attributed the shortage to the inability of banks to upload lower currency denominations in the automated teller machines. They argued that the ATM dispensed only higher currency denominations. Still, others said the development was as a result of the Central Bank of Nigeria, CBN’s cashless policy. Available statistics showed that the volume of raw cash in circulation dropped significantly in January as the cash-less policy of the CBN continued to gain ground. From N1.457 trillion, currency in circulation fell by 10.7 percent value, in contrast to an increase of 4.2 percent value at the end of December 2012.
According to the January Economic report of the CBN, the development reflected 11.2 percent value decline in the amount of currency outside banks. Total deposits at the CBN amounted to N6.787 trillion, indicating a decline of 7.7 percent below the level in last December. The development reflected, largely, the fall in federal government and deposit money banks’ deposits, which more than offset the increase in deposits by others.
Of the total deposits, the percentage shares of the Federal Government, banks and “others” were 63.4, 26.2 and 10.4 per cent, respectively. Also, total foreign net assets of the banking system rose by 2.2 percent at the end of January to N9.302 trillion compared to the increase of 27.5 and 3.9 percent at the end of the preceding month and the corresponding period of 2012, respectively.
The apex bank attributed the development to the 2.6 percent increase in the CBN’s holdings of foreign assets. Other assets (net) of the banking system, on a month-on-month basis, fell by 8.7 percent to negative N8.615 trillion, compared with 5.4 and 2.1 per cent decline at the end of the preceding month and the corresponding period of 2012, respectively. This reflected the fall in unclassified assets of both the CBN and the DMBs
The CBN also promised to inject lower denominations of the currency so as to resolve the shortage in the economy. Tokunbo Martins, director, banking supervision, CBN, said after the bankers’ committee meeting earlier this year that the apex bank was aware of the problems being encountered by the people on account of shortage of the lower naira denominations in the country. According to her, the scarcity of the currency was because of the truncation of the CBN’s currency restructuring exercise. She, however, promised that plans were under way to print lower naira denominations. The director stated that the quality of the notes to be released would be higher than the existing ones.