A former General Manager in charge of Large‑Scale Industry at the Bank of Industry, Mr. Joseph Babatunde, discusses with Daniel Ayantoye the impact of naira scarcity on the economy and how government can help businesses grow. He notes that the cashless‑economy policy and the redesign of the naira are commendable and align with global best practices, offering benefits such as reduced inflation, lower risk in cash transactions, and a deterrent to crimes like kidnapping. However, the rollout has caused serious uproar because of an acute shortage of new currency notes in banks, point‑of‑sale terminals and other channels. There was insufficient consultation with stakeholders, and the Central Bank of Nigeria (CBN) appears to have grossly underestimated demand for the new notes, virtually crippling the informal sector where many operators lack mobile‑banking access. Even those with mobile banking face network issues, leading to delays or an inability to transfer funds. Some analysts blame the timing of the policy, while others point to flawed implementation.
The timing issue, according to commentators, stems from the inadequacy of new currency relative to the three‑month window for returning old notes. The new naira was expected in circulation from mid‑December 2022, but it only became available in early January 2023—and not in sufficient quantities. The demand was clearly underestimated, or the printing capacity was insufficient. Babatunde recounts his personal experience of trying to raise just N10,000 for a week without success, while the limited new notes are being sold at exorbitant premiums of up to N200 per N1,000. This scarcity encourages hoarding, as those who obtain the notes are reluctant to spend them for fear of future shortages. He argues that there were less draconian ways to curb corruption and election monetisation than the approach that has crippled the economy and made life unbearable for ordinary citizens.
Babatunde expresses serious concern about the hasty implementation, noting that if he faces such challenges, the majority of low‑income Nigerians will fare even worse. Initial suspicions of bank workers hoarding notes gave way to the realization that the shortage was systemic. Hoarding occurs only when an item is scarce; the limited supply has forced POS operators and banks to ration the new currency. While some commercial banks have allegedly allocated notes to “important” individuals, the root responsibility lies with the CBN, which should monitor how banks disburse their allocations.
Regarding Nigeria’s readiness for the new naira policy, Babatunde asserts that many prerequisites were missing. A large informal sector relies on daily cash income, yet many lack bank accounts or reliable network access, especially in remote areas. Some states have only two banks serving 20 local governments, leaving the rest without banking services. A comprehensive needs analysis should have preceded the policy. Although a cashless economy and currency redesign are desirable, the planning and execution have been poor.
The naira scarcity is also harming manufacturing. Reduced demand for products, combined with cost‑push inflation from high exchange rates and diesel prices, threatens a recession and may force manufacturers to downsize. Inconsistent policies undermine investor confidence, prompting some companies to consider relocating to more stable environments. Babatunde stresses that infrastructure deficits—such as unreliable electricity, poor roads, and inadequate water supply—hamper private investment. While the federal government has made strides in roads, rail and airports, electricity remains a critical bottleneck; Nigeria generates about 6,000 MW for over 200 million people, compared with South Africa’s 50,000 MW for 70 million.
The Manufacturers Association of Nigeria reports a drop in CEOs’ confidence, reflecting high production costs. Exchange‑rate policies have been unfavorable, with multiple CBN windows encouraging round‑tripping and other distortions. Reflecting on his 35 years at the Bank of Industry (formerly the Nigerian Industrial Development Bank), Babatunde emphasizes that financing is only one piece of the manufacturing puzzle. An enabling environment, sound policies, infrastructure, managerial capacity and market demand are equally vital.
When asked why accessing BoI loans is perceived as rigorous, he explains that the bank must lend to a legally recognised entity, requiring registration, quotations or pro‑forma invoices for equipment, audited financial statements, and collateral in line with CBN prudential guidelines. These are standard requirements, not obstacles, provided the borrower is genuine. Regarding loan defaults, the bank targets a non‑performing loan ratio of no more than five percent of total risk assets, acknowledging that some borrowers lack repayment plans or divert funds.
On rising unemployment despite large budget allocations, Babatunde attributes the problem to a mismatch between the growing number of graduates and the limited private‑sector jobs. The government’s role should be to create an enabling environment and invest in infrastructure, while educational curricula need reform to produce skilled workers. He notes that brain drain is often overstated; the proportion of Nigerians emigrating is small, and many expatriates remit funds that benefit the local economy.
Assessing government investment in manufacturing, he says the federal government should provide infrastructure, policy incentives and a stable foreign‑exchange regime. While the Social Investment Programme aims to empower the poorest, its impact is limited by perceptions of mismanagement and the “national cake” mentality. Nonetheless, schemes such as school feeding, N‑Power and Trader and Market Moni have helped many, though challenges remain due to entrenched attitudes.
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