Naira redesign, cash withdrawal limit… most debated economic policies of 2022

2022 was a year of economic uncertainty for Nigeria with its prospects for growth dampened by the Russia-Ukraine war, lower-than-expected oil production, and a worsening debt crisis emboldened by huge petrol subsidy payments chopping off the country’s revenue.

In it’s usual reactionary move, the federal government implemented various policies mulled to rescue the country from a complete economic collapse. But its actions provoked mixed reactions from experts and Nigerians at large — both online and offline.

In this review of the government’s policy efforts, TheCable highlights some of the most talked-about economic policies of the year.

RT200 FX PROGRAMME 

In February, the Central Bank of Nigeria (CBN) introduced the ‘race to $200 billion in FX repatriation (RT200 FX) programme’. It was the government’s ‘show of seriousness’ in tackling its dwindling foreign exchange (FX) reserves, and adopting other means of revenue generation aside from oil.

The programme was designed with the aim of ensuring that Nigeria rakes in $200 billion in FX repatriation, exclusively from non-oil exports in the next three to five years.

The initiative comprises five key anchors namely: value-adding exports facility, non-oil commodities expansion facility, non-oil FX rebate scheme, a dedicated non-oil export terminal, and biannual non-oil export summit.

At the end of first quarter (Q1) of 2022, under the non-oil FX rebate scheme, the CBN commenced payment of N65 for every $1 repatriated and sold to third parties through the official FX window while it paid N35 for every $1 repatriated and sold into the official FX window for own use on eligible transactions.

Only exporters of finished and semi-finished goods wholly or partly processed or manufactured in Nigeria are eligible for the rebate.

Recently, the CBN announced that non-oil exporters repatriated $4.9 billion into the country in the first nine months of the year — a figure equivalent to 2.5 percent of its $200 billion target.

As of November, 2022, the apex bank said it has paid N81 billion rebate to exporters.

LIMIT ON DOLLAR SPENDING

Amid the forex crunch in the country, banks announced a reduction in dollar spending limit on naira-denominated debit cards.

In March, Nigerian banks including Zenith Bank, UBA, Guaranty Trust Bank, Sterling Bank and Union Bank reduced the limit on naira cards from $100 to $20 monthly while some banks (First Bank, Standard Chartered Bank) suspended the usage of naira cards for international transactions.

A couple of months later, Nigerians were thrown into panic when a number of African fintechs (Barter by Flutterwave, Eversend, Busha, GetEquity, Klasha and Payday) also shut down their virtual dollar card services.

Recently, Godwin Emefiele, governor of Central Bank of Nigeria (CBN), admitted that there was significant FX shortage in the country, and asked banks to come up with solutions to boosting inflows.

SUGAR TAX

As Nigerians were recovering from the dollar spending limit on cards, on June 1, the federal government began the implementation of a sugar tax of N10 per litre on all non-alcoholic, carbonated, and sweetened beverages in the country.

The policy, embedded in the finance act of 2021, was designed to discourage excessive consumption of sugar in beverages and raise revenue for health-related and other critical expenditures.

While the new sugar tax was welcomed by stakeholders in the health sector who hoped that it would be utilised for public health purposes and improving the national health system, the manufacturing industry vehemently opposed it and called for a reversal of the policy.

However, despite the initial pushback by the manufacturing companies, they have since passed on the extra cost to consumers by increasing the prices of their products and also commenced remittances to the federal government.

To put it more succinctly, the policy, coupled with inflation, has translated to an increase in prices of carbonated drinks on the streets. A 50cl pet bottle of Fanta and Pepsi which used to cost N150 is now sold for N200.

NAIRA REDESIGN

Meanwhile, in terms of monetary policies, on October 26, Emefiele announced plans to redesign, produce, release and circulate a new series of three banknotes out of the existing eight banknotes.

The redesigned N200, N500 and N1000 notes were due for circulation on December 15, 2022.

The bank said the current series of the aforementioned naira notes will remain legal tender until January 31, 2023.

Emefiele further explained that the move was targeted at controlling currency in circulation, curbing counterfeiting, and reducing the amount of cash available to the public to pay ransoms to kidnappers.

Subsequently, the newly redesigned naira notes were officially unveiled by President Muhammadu Buhari on November 23.

The new notes were criticised by many Nigerians who described the change as a “repainting –not redesigning”.

CASH WITHDRAWAL POLICY

More so, in its bid to drive a cashless economy, the CBN, on December 6, directed deposit money banks and other financial institutions to ensure that weekly over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000, respectively.

The policy, which is expected to take effect nationwide from January 9, 2023, will reduce withdrawals at automated teller machines (ATMs) and point of sale (PoS) terminals to N20,000 daily.

Also, only denominations of N200 and below will be loaded into the ATMs.

In “compelling circumstances”, individuals and organisations will be allowed to make cash withdrawals above the specified limits.

Interestingly, such withdrawals cannot be more than once a month and will also attract a processing fee of 5 percent for individuals and 10 percent for corporates.

The bank also listed some documents required for higher cash withdrawals which are expected to be uploaded on a CBN portal created specifically for that purpose.

In documents include: a valid means of identification of the payee (national ID, international passport, driver’s licence), bank verification number of the payee (BVN), notarised customer declaration of the purpose for the cash withdrawal, senior management approval for the withdrawal by the managing director of the drawee, where applicable; approval in writing by the managing director/CEO of the bank authorising the withdrawal.

The policy generated criticisms from several quarters. PoS operators said it would rob them of their means of livelihood while politicians said it was targeted at them ahead of the 2023 general election.

In response to the public outburst, the CBN said it may “tweak” the policy.

As such, on December 21, the apex bank announced an upward review of the cash withdrawal limits, allowing individuals to access a maximum of N500,000 per week while corporate organisations can withdraw up to N5 million weekly across all channels including PoS terminals and ATMs.