Nigeria was forced Wednesday to delay plans to replace its banknotes with a redesigned currency after chaotic scenes at ATMs as millions of people struggled to get their hands on the new cash.
The country’s old notes were supposed to cease to be legal tender starting February 11 but the country’s Supreme Court suspended that deadline because banks were unable to disburse enough of the new naira.
Nigerians have been spending hours in long lines at cashpoints since late last month after rushing to deposit the old banknotes ahead of an initial deadline of January 31. But they haven’t been able to withdraw enough of the new versions to meet their daily expenses.
That shortage has led to frayed tempers and untold hardship for millions of Nigerians, particularly those who work in the cash-based informal economy and for citizens who live in rural areas.
Nigerians say they are struggling to pay for food and public transportation as vendors reject electronic payments. The pressure on the banking infrastructure has caused many servers to fail, multiple sources told CNN.
In November last year, President Muhammadu Buhari unveiled the redesigned currency with the aim of reining in counterfeiting and the hoarding of large sums outside the banking system.
Central Bank of Nigeria Governor Godwin Emefiele said in January that out of 3.23 trillion Nigerian naira ($6.9 billion) in circulation as of October last year, “only 500 billion naira was within the banking industry” while a whopping 2.7 trillion naira ($5.8 billion) was “held permanently in people’s homes.”
Emefiele added that around 1.9 trillion naira (around $4 billion) have so far been returned to the banking system since the new notes were first introduced in November.
The redesigned bills were intended to replace the older series of the 200-, 500-, and 1,000-naira notes on January 31, but a 10-day extension was announced following widespread outcry about the timing.
The new notes look very similar to those in circulation with a change in color as the only significant difference. The new naira notes are, however, “fortified with security features that make them difficult to counterfeit,” President Buhari said last year.
Abulrahman Abdullahi, who lives in the Nigerian capital Abuja, told CNN he needs cash fast as he is running out of food and unable to restock supplies. Across the country, banks have increasingly become targets of mounting anger over the frustrating search for the new naira notes.
Nigeria’s largely informal economy depends mainly on cash, but the CBN is trying to encourage people to make greater use of electronic banking, a policy considered premature by analysts.
Nigerians are desperately relying on their banks to distribute new bills after the February 10 deadline to exchange the old currency saw many scrambling to deposit their old notes. The banks, however, do not have enough of the new notes to go around, fueling anger from individuals, some of whom have vandalized bank property or stripped to their underwear in rage, according to videos shared on social media.
“I’ve been here for hours,” Abdullahi told CNN, as he struggled to keep his place in a rowdy queue that had formed at a bank ATM in the Nigerian capital Abuja.
“I have to shop for foodstuffs. It has been very difficult for me. The number of times I eat in a day has reduced to two because if I run out of foodstuffs, I may not be able to restock,” he said.
At a neighboring bank, customers were instructed by staff to withdraw no more than 10,000 naira ($22) per person from its ATM. Customers from other banks were directed to withdraw only 1,000 naira (less than $3) from the cash machine.
In one Lagos supermarket, cash from the machine was restricted to just 1,000 naira (less than $2) despite the lengthy wait times.
“What can we do with 1,000 naira!,This government doesn’t care about us,” security guard Joel Johnson told CNN.
The government and the CBN have come under pressure and governors of three Nigerian states are challenging in court the short time frame given to exchange the old notes for new ones, which they warn could lead to “the breakdown of law and order” ahead of the crucial presidential vote later this month.
To compound matters, Nigerians are also facing long lines for fuel across the country, leading to mounting anger and frustration with protests springing up in parts of the country as citizens rail against the hardship caused by the scarce currency and hikes in fuel prices.
One person was reportedly killed in clashes between protesters and police in Nigeria’s third most populous city, Ibadan, according to local media.
Economist Bismarck Rewane told CNN Nigeria’s transition to new currency notes could have been better handled, adding that scarcity of the new bills would hurt the country’s economy.
“It will lead to some disruption and contraction in economic activity,” Rewane says. “GDP numbers for the first quarter of the year will be affected .”
The CBN assures that “queues at ATMs will disappear soon” while directing commercial banks to pay the new notes over the counter, however, “subject to a maximum daily payout limit of N20,000 ($43).”
President Buhari said he was “aware of the cash shortages and hardship being faced by people and businesses, on account of the naira redesign,” but assured Nigerians of “significant improvements between now and the February 10 deadline.”
The current cash squeeze isn’t the only shortage Nigerians are grappling with.
A year-long fuel scarcity has worsened in the past few weeks, leaving many cash-strapped Nigerians unable to purchase gasoline, which has tripled in price in parts of the country.
State oil company NNPC blames the lingering scarcity on distribution problems. Analysts say the fuel shortages could hamper the ruling party’s chances at the February poll.
“It has implications for politics, in terms of the ruling party suffering some disapproval from the electorates because of the hardship they face,” says leading political analyst Sam Amadi.
“People are going to record the government as a failure … and that can impact the fortunes of the ruling party,” Amadi tells CNN.
President Buhari is serving a final second term and the ruling party hopes he will be succeeded by candidate Bola Tinubu, a former governor of the country’s richest state Lagos.
Amadi suggests that the shortage of the new naira could have a positive impact on the coming elections.
“It may actually reduce vote buying if well managed, which is probably (one of) the strategic objectives of the monetary policy around the new naira,” he says.
Vote buying has been a feature of Nigeria’s elections, which have been marred by violence and fraud in recent years.