With the scarcity of Premium Motor Spirit (PMS), otherwise known as petrol, persisting across the country, coupled with the challenge of the currency swap of old notes of the three highest denominations of the naira, NCHETACHI CHUKWUAJAH reports that for Nigerians, it is double trouble.
In the last few weeks, Nigerians have experienced far-reaching hardship as a result of the twin problem of fuel scarcity and cash crunch.
Recall that in November 2022, long queues surfaced at filling stations across the country due to the unavailability of fuel in some filling stations while those who had the petroleum product sold theirs at N240, which is N85 above the pump price of N165 approved by the Nigerian National Petroleum Company (NNPC) Limited.
The Independent Petroleum Marketers Association of Nigeria (IPMAN) had attributed the price increase to an increase in the depot price, which went from N148 to N200.
According to the National Operations Controller of IPMAN, Mike Osatuyi, “Unlike in the past when our members used to lift the product at N148 per litre, they currently lift it at N200 per litre. It would be impossible for them to sell petrol at the N165 per litre regulated price.
“Our members pass through much difficulty to get the product at this time. The marketers also spend much to take the product to many parts of the nation because of the high cost of diesel, currently selling at about N800 per litre.”
Despite calls from different quarters, including the National Assembly, for NNPCL and oil marketers to resolve the fuel crisis, the price of petrol has continued to increase since November 2022 and is currently being sold for between N240 and N500.
Trade of blames
While the NNPCL has continued to insist that it has enough fuel to last the country for days, IPMAN says the challenge is the vandalism of some depots belonging to the NNPCL and private depot owners who incessantly increase the price of fuel.
“Remember that nearly all the NNPC depots are not working, over 80 per cent of them, because of vandalism; we have at least 21 that I can count. When they bring this product in, they now begin to put it in private depots and pay them triple charges.
“When this product is gotten from the mother vessel, those tank farm owners will go and bring it. They will now put their cost. You don’t expect them not to break even. These are the people who will now sell to us.
“Those who get from NNPC directly, it is N148.19 per litre. These private tank farm owners, by the time they begin to put their own charges, which involve hiring vessels, NIMASA, NPA, and a lot of things associated, from their depots, you can get it for either N185 or N210.
“Their excuse will be they hire vessels to take the product from the mother vessel and some of these things are dollarised so you have no choice,” he said.
On the other hand, the Group Chief Executive Officer, NNPCL, Mallam Mele Kyari, said on January 3 that the distribution challenge, panic buying, and consumers’ behaviours are factors fueling petrol scarcity across the country.
He said there is no fuel scarcity as the country currently has over 28 days of supply, adding that the distribution challenge was due to current realities spreading across the supply chain.
The GCEO, who spoke on NTA Good Morning Nigeria show, said, “As we speak now, we have over 28 days of supply even if we evacuate over 60 million litres of PMS everyday. So we do not have a supply problem. Even if you do not bring a drop of fuel into this country in the next 28 days, we will still have 60 million litres to give out to Nigerians on a daily basis.
“But the challenge is the distribution problem. The distribution challenge comes as a result of the realities that happened; taking products’ mother vessels into the terminals and from the terminals into the trucks and fuel stations.
“Some of these trucks take up to seven days to get to their final destinations and another seven days to return. So, you can see that once you have some minor glitches like issues around road incidence, you just see these trucks getting stuck and they cannot reach their destinations and this becomes an issue. And for consumers, when people see four cars in a station, they naturally rush in.”
One blow after another
As though not being allowed to recover from the fuel scarcity blow, Nigerians were dealt another one as the initial January 31 deadline given by the Central Bank of Nigeria (CBN) for the extinction of the old N200, N500, and N1,000 notes approached.
The CBN announced plans to redesign the three highest naira denominations on October 26, 2022, with the goal of reducing inflation rates, preventing banknote counterfeiting, and managing currency circulation.
On November 23, 2022, President Muhammadu Buhari unveiled the redesigned notes, which were subsequently made available to the public on December 15, 2022.
Days before the initial January 31 deadline, queues were seen at several banks’ automated teller machine (ATM) points and banking halls as Nigerians sought to withdraw the redesigned notes, while others shut their ATMs for cash withdrawal purposes.
Banks’ inability to issue the new notes made the situation worse because, according to reports, many of them continued to issue the old notes through ATMs and over the counter for weeks after the new notes were introduced.
Although the CBN extended the deposit period for the old naira notes by 10 days and issued numerous instructions to banks on how to make the redesigned notes available to Nigerians, the nation is in a panic because it appears that there is not enough circulation of the redesigned notes, a claim that the CBN has consistently denied.
“I can tell you today the CBN on a daily basis gives out the new notes. As we speak, banks are taking money from the CBN.
“I am reliably told that we are actually begging commercial banks to come and take money from the CBN. We have these new naira notes in our vaults, and we are waiting for banks to come and collect them,” the Director of Legal Services Department, CBN, Mr Kofo Salam-Alada, said at a sensitization programme at Computer Village, Ikeja, Lagos, on January 19.
Currency swap escalates living condition, slows down business activities as debts accumulate
The impact of the currency swap has left a toll on the socio-economic activities in Nigeria, especially in the informal sector, where cash is the primary and most preferred mode of transaction.
In an interview with the Nigerian Tribune, some Nigerians and business owners described the policy as “inconvenient” given the timing and the difficulties they face in accessing the redesigned notes.
“It has been tough accessing cash. It is even worse with some banks where you have to be in a queue and later not get cash. I visited a bank this morning to withdraw, and if you are not banking with them, you can only withdraw N1,000. So, if you want to withdraw N10,000, you have to withdraw it 10 times.
“Yesterday, I had to move around in the evening to see if I could get cash but I couldn’t and that is why I am here this morning; that means, the whole day is gone already. I have been queuing for over an hour. If you want to get anything done now and you don’t have cash on you, you are in trouble,” said Mr Oluwaseyifunmi Ajayi.
Mrs Ifemide Ifemade said, “I was here yesterday; they said they could only pay us N2,000. I didn’t collect it. I came today, and they are paying only N1,000, and they said tomorrow, it will be N500. It is so frustrating.”
The situation is not different for business owners. Favour Johnson and Adisa Olanrewanju, who deal in clothes at the Mokola area of Ibadan, Oyo State, shared their experience with the Nigerian Tribune.
“It is really affecting our business because if people have cash, they will be more willing to buy, but since there is no cash, our business is not moving as it used to,” Johnson said.
“We find it difficult to make sales now. Those who want to buy from us don’t have cash to buy. We also don’t have enough cash to buy another one. If it continues like this, it is going to be terrible,” Olanrewaju added.
Another man’s meat…
While Nigerians lament the impact of the currency swap, Point of Sales (POS) operators seem to be having a field day as they have increased charges for cash withdrawal from an initial N100 for N5,000 to N1000 for every N10,000.
The operators blame the hike in charges on the difficulties they also face in accessing the redesigned notes from banks.
Speaking to Nigerian Tribune, Mr Ohuakanwa Damian, a resident of Ikorodu, said he went to a POS terminal to withdraw N4,000 and was charged N400.
“I would rather do today’s purchases on credit than pay such an amount,” he said.
Economists divergent on CBN’s policy
Economists have opined with divergent views on the currency swap policy of the CBN. While some fault its applicability in the face of current economic realities, others believe the policy holds much potential for the economy.
The Lagos Chamber of Commerce and Industry (LCCI), on January 1, said the not-too-smooth transition from the old notes to the new ones, for business transactions, has begun to take its toll on businesses in the country.
The Chamber, in a statement issued by its Director-General, Dr Chinyere Almona, argued that the expectations surrounding the introduction of the new naira notes last December were gradually being dashed, as evident in the harrowing experiences individuals and businesses had been made to pass through in the past few weeks.
“We regret to note that expectations have been dashed, business deals impeded, and loss of time and value experienced by many.
“The new naira redesign has triggered varied reactions and feedback that suggest that related issues like the phasing of old currency notes, the withdrawal limit, and the scarcity of new notes may have started to impact businesses and social livelihood beyond intentions,” the Chamber said.
The Centre for the Promotion of Private Enterprises (CPPE), on its part, said that the argument that currency swap would enhance monetary policy effectiveness and curb inflation has no strong basis in economic theory.
CPPE, in a statement on January 29 by its Chief Executive Officer, Dr Muda Yusuf, said the currency swap drive of the Central Bank of Nigeria (CBN) is “committing huge resources to fixing what is not broken.”
Dr Yusuf said, “Money supply is a more critical variable in the inflation equation. Total money supply in the Nigerian economy as of December 2022 was N52 trillion; total currency was N2.6 trillion.
“Thus, cash as a percentage of the money supply was only five percent. The implication is that 95 percent of the money is still within the banking system.
“It is therefore a gross misrepresentation to give the impression that 85 percent of money is outside the banking system. Currency is only five percent of money in the economy and should therefore not warrant the scale of energy and resources being dissipated around it.
“The focus of monetary authorities should be on regulating money supply, not mopping up currency notes.
“Currency notes are meant to be largely outside the banks, not in the banks. Cash is a medium of exchange to be used by citizens, not stored in banks.”
Professor Uche Uwaleke, a financial economist and professor of capital market at the Nasarawa State University, Keffi, in an interview with the News Agency of Nigeria (NAN), on the other hand said, “The measure… will go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in.
“If it leads to large deposits in banks, it means the banks will have more money to lend, which may reduce interest rates.
“Perhaps more importantly, with increased currency in circulation now in the vaults of banks, I expect to see improvements in monetary policy transmission.”
Dr Tope Fasua, another economist, in an interview with NAN, said the policy should be done more regularly to rein in “illegal monies” in people’s possession.
“When central banks do this, they try to pull in money people are hiding—illegal money, corruption money, kidnapping money.
“I will even suggest that the CBN do this more often, maybe every 10 years. You will see a scenario where the banks are awash with liquidity. There are many people sitting on billions in naira and even in dollars,” he said.
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