MONEY IS AS MONEY DOES

The Central Bank of Nigeria has threatened not to extend the deadline for exchnage of old notes.

As a matter of accepted practice, when a governmental authority sets a deadline that affects a sufficiently wide number of citizens, the deadline gets extended once, or maybe twice.

A quick case in point is in the telecommunications sector. Remember the deadline for the registration of all sim cards was shifted a billion times from 2010 to 2013. Then there was a deadline to link citizens’ National Identification Numbers to their sim cards which was shifted a gazillion times from 2020 to 2022.

It is not necessarily based on law, I guess it is just what you do when you are responsible for a large group of persons who tend not to pay mind to the government until a directive is issued two to three times. Especially when the consequences of the punishment to comply with the directives are far-reaching and hard to remedy.

In a surprising turn of events, away from accepted practice, the Central Bank of Nigeria (CBN) has insisted that it is not going to extend the January 31st deadline it has set, insisting that the old 200, 500 and 1000 naira notes will lose their status as legal tender.

I really do not have a lot of thoughts as the deadline is still a couple of days away, but I have been thinking about what would happen if the deadline is not shifted.

Unlike every other deadline, such as the registration of sim cards, the punishment, in this case, cannot be remedied. When people who failed to register their sim cards had their phone lines blocked, they could remedy it by subsequently going to register their sim cards.

In this case, it is different. The notes, by law, shall no longer be legal tender. Is there any possibility that this could be remedied? Can another Executive Order be made declaring the notes to be legal tender again after it has ceased to be legal tender? Once it stops being legal tender, it sort of becomes paper like any other. So can the CBN make ordinary paper into money again?

Although now that I think about it, the CBN is in the habit of turning raw paper into cash, literally. In recent times, the CBN has been accused of indiscriminately printing cash to fund the government beyond the total value the government possesses, a dangerous habit for the economy.

If the CBN does not extend the deadline, then it will align with its repeated opinion statement that it wants Nigeria to go cashless fully. Which is one of the more consistent policy statements that match its action.

There are simply not enough new notes in circulation to meet the Nigerian cash demand. The CBN is aware of this, of course. If it does not extend the deadline, then people and businesses have no other option than to accept payment by electronic means. That, or they could accept cash that is no longer legal tender.

What do you think about this? Would people just keep spending the money past the deadline? Knowing that they just can’t take it to the bank.