CEM INSIGHT, FINANCE | The fall out of the currency redesign policy have continued to bite the economy; affecting both individuals and businesses. Assessment of these impact have continued to occupy economic discuss by concerned experts.
A common denominator in the assessments is that a faulty implementation has turned a beneficial policy to an economic strangler, hampering smooth operation of businesses and individual financial transactions.
Dr Kunle Akiode is a finance and SME expert having worked with small businesses for over a decade. While talking with Continental Economy Magazine last week, He emphasized that small businesses are more adversely affected by the naira scarcity currently plaguing the Nigerian economy
“At the lower level, the small businesses and artisans have really been affected adversely because they could not exchange their goods for value unlike the medium and big businesses that could find their way around it. Some avoidable losses have actually been in cured”; Akiode said.
Specific situations have been reported in different media which casts authenticity on report of the difficulties being encountered by customers and the losses being incurred by small businesses on a daily basis.
“Some days ago, we were viewing some online pictures of decomposed plantain in Mushin. The reason they went bad was because, traders didn’t have physical cash to buy and the dealers don’t have bank accounts to transfer to. Even the few that wanted to take transfer didn’t have internet banking to enable the transfer.
It is obvious that MSMEs in Nigeria are ill equipped to face such a sudden serious disruption that directly affect their daily sales. They operate in an environment with acute infrastructure deficit. Their daily overhead is huge that it weighs so much on profit. A disruption of this kind is expected to push them of the cliff to losses.
It is of paramount importance to dwell on creating supporting environment to enable the small businesses develop resilience to face times such as this.
“That is what we have been doing and that is what I will continue to do; to empower our MSMEs and make them to be able to have some vigor. They may not be able to play in the big league with their medium and large-scale ones, but support at least the minimum level of amenities and facilities. We are talking about helping them get their goods transferred to where it will be sold or transformed; that transformation taking place at a minimum cost as much as possible, we are talking about cheap and constant electricity.
“I’m talking about affordability of raw materials and availability of foreign currencies where you have foreign materials involved in what these artisans are transforming into what they sell.
Lack of education, internet penetration and the knowledge of technology in our ecosystem are also very strong impediments to them.
“This is similar to the COVID-19 pandemic where many organizations went down. So many small and medium businesses were just winding-up and going bankrupt which shouldn’t be in any proper economy”; He said.
As at the time of the conversation with Dr Akiode and up till now, naira still remain scarce and business operation is still being hampered despite supreme court ruling and the CBN directive to commercial banks to reintroduce the old notes into circulation. While it still remains a mystery, Dr Akiode spoke on the initial decision of CBN to declare the old notes non-legal.
“I totally agree with the supreme court ruling that the old and new currencies should run together. In other places where this is done, the old currencies runs parallel with the new for a period of time before the old currency is done away with.
“In transformation from one state to another or from one system to another, there are two methods; we have the ‘big bang’ change process and we have the ‘parallel system’. If you use the Big Bang; where you make a sudden stop to the old and moved to new, that usually come with some catastrophic outcomes but you got to be prepared for it.
“The most popular and the most common one is the parallel system where the old and the new run together concurrently until you find out that the new is doing what is expected of it. Then you gradually discontinue the hold onto the new system which now continue to run smoothly”; Dr Akiode explained.
Just like every other professional that has spoken about the initial perceived direction of the policy, he said that the turn of events has redirected peoples understanding from the initial economic thought to political intent.
“At the inception of this announcement that the currency will be redesigned, some of us welcomed it with the hole of our heart. This is because some other countries, at one point in time, after a number of years did redesign their currency. This is not the first time in Nigeria we are doing it as well. It was with this kind of conscience that we welcomed the redesigning of our currency. It was necessary, it was not something out of the blue.
“But when you take that away from what we are having now, then you will really want to question the original Intent. Applying the Substance Over Form in accounting, it now seems to me that it was not intended for Economic purpose, but actually to arrest a set of perceived intention which has political undertone”; he said.
Dr Akiode expressed sympathy with the CBN Governor and urge him to intensify surveillance on the dispensary of the new notes by the banks.
“I have listened to Emefiele every now and then on different media saying that the new notes have been released to banks and wondering why we are not getting it.
“You would agree with me that while the people are not getting it, there are some individuals that are getting it in excess. Some get the new notes from the bank directly, some people spray the new notes in parties, some high-net-worth individuals have these new notes in abundance. That makes me to sympathize with Emefiele when he said CBN has released enough currency into the circulation.
“CBN should follow up with the banks through its inspectorate unit to make sure that the new notes are loaded into the ATMs and issued across the counter. Regularly. I think that is what they can do using their monitoring apparatus.
“CBN should print more of the new notes and make same available to the banks while following up closely for circulation”; He admonished
Finally, Dr Akiode, however, emphasized the need to upgrade necessary infrastructure that supports the transformation of Nigerian economy from cash driven to digital driven.
“We are in all these because our economy is heavily a cash driven economy. There is much we can gain if we sustain the movement from the cash driven economy to digital driven economy. If our economy was more digital driven, we would have less of this crisis that we are having now.
“Furthermore, transfers done from one account to the other is traceable and can be used as evidence in a court of law. So let the financial inclusion spread more among small holder businesses. Nigerians can adapt when well informed. I was so impressed with some okada guys having their POS; you see people swapping their cards on their POS”; he concluded.