Emefiele and the Folly of Bundling Policies The Error of Policy Agglomeration

Despite its intentions, CBN’s monetary policies—under Godwin Emefiele—of changing the currency, introducing cash withdrawal limits and transitioning to a cashless system caused hardship for Nigerians. While the pain and suffering this policy caused have drastically reduced, its effect is yet to be fully recognized. 

On 9 June 2023, President Bola Tinubu suspended Godwin Emefiele, the governor of the Central Bank of Nigeria (CBN), indefinitely. A day after, Emefiele was arrested by the Department of State Services. The closest thing to a reason the president gave for the sack was during an interactive session in Paris, France, on 23 June, where he described the financial system under Emefiele as rotten. ‘Few people make bags of our money, and then you stopped sending money home to our poor parents. Several windows… but that is gone now, is gone,’ he said, ‘the man is in the hands of authorities; something is being done about that; they will sort themselves out.’ The actual reason for the sack perhaps can be traced to decisions made by the CBN a year ago.

On 26 October 2022, CBN announced new monetary policies, including redesigning the naira, reducing cash withdrawals, and promoting a cashless economy. According to the apex bank, these policies aimed to curb counterfeits, reduce insecurity, discourage cash hoarding, and promote price stability, financial inclusion, and a cashless economy. While their merits are debatable, their implementation plunged Africa’s biggest economy into an unpalatable state.

CBN provided a three month-window for the exchange of the redesigned N200, N500 and N1,000 currency notes. The move, CBN claimed, would reduce the amount of cash outside the banking system—about ₦2.73 trillion out of ₦3.23 trillion in circulation. While CBN claimed this was of grave concern, many argue that it is expected in a country where the informal sector accounts for 50 to 65 per cent of its Gross Domestic Product (GDP).

Nevertheless, CBN was confident in recalling the old notes and circulating the new ones. However, given the timeframe, many were sceptical of the apex bank’s ability to pull this off. As the deadline, 31 January, neared, Nigerians deposited their old currency notes while CBN carried out awareness campaigns to help rural residents adapt to the new naira notes. By the start of 2023, after the notes had been circulating for two months—albeit with extended edges and fading colours—ATMs still dispensed old notes. By the end of January 2023, it became apparent that there wasn’t enough cash to replace the demonetized old notes. A ten-day extension of the deadline by CBN did nothing to improve availability, as neither the old nor new notes were (and are still) available. The queues at ATMs were long and hopeless as the machines weren’t dispensing cash, and banking halls were full of angry customers demanding any available naira.


The apex bank’s conviction with this policy didn’t translate into its implementation. Nigerians experienced fights at ATMs, bought the naira at huge mark-ups, traders who sold perishable goods went home with their wares, and banks issued worn-out notes. These scenarios, typical in war zones and areas with continuous restiveness, became Nigeria’s reality when the policy was in place.

Nigerians questioned how the country arrived at this situation. None of the elements in these policies were new or unique to Nigeria. In the past, the country changed its currency, replaced denominations, restricted cash withdrawals, and promoted cashless alternatives. However, the difference was that things were done systematically and separately in the past. This time, CBN attempted to accomplish multiple objectives simultaneously–new currency notes, cash withdrawal limits, and a drive for a cashless economy. These three distinct challenges ought to be addressed separately.

Retrieving all affected denominations of the old notes–about ₦2.73 trillion, and distributing the newly redesigned notes within three months is a logistical challenge, especially in a cash-based economy. Changes in currency notes typically take years to implement fully in most countries, and challenges are still involved even after a long period. Take the case of India in 2016, where the government under Prime Minister Narendra Modi demonetized the 500 and 1,000 rupee notes. According to the Indian government, the goal was to crack down on tax evasion, corruption and illegal cash holdings, known as ‘black money’. What happened in India following this policy is akin to what happened in Nigeria. The BBC reported widespread frustration with the government, the establishment of barter systems and informal banks, and considerable hardship. The policy led to the closure of over 250,000 businesses, slowed growth in the real estate sector, and the loss of millions of jobs in the country.

Nigeria, like India, relies heavily on cash and has an informal economy that constitutes 57.7 per cent of the total GDP. Nigeria is among the top three countries globally, where a significant portion of its population, about 40 per cent, lacks access to banking services. A survey conducted by the payment platform, Visa, revealed that 94 per cent of Nigerian businesses use cash as a payment option, compared to 71 per cent in Kenya. This shows a significant gap and challenge in adopting electronic payment (e-payment) options. In recent years, e-payment seems to be gaining traction, as CBN reported a 43.7 per cent year-on-year increase in its use in August 2022. However, this has not been without issues. Nigerians routinely complain about fraudulent electronic transfers from their bank accounts, failed transactions, and long wait times for redress. Also, digital banking growth has been limited in rural communities as they lack the infrastructure and systems needed to enable cashless payments. Over 45 per cent of people in the country lack access to electricity, and 31 per cent lack the basic literacy required to perform cashless transactions. Despite these institutional deficiencies, CBN claimed that the necessary infrastructure for a cashless economy was already in place.

However, the events of the past few months have shown that CBN’s efforts have not been adequate. The bank should have conducted extensive stress tests to assess the financial system’s strength to absorb the changes its policies would cause. Also, understanding the challenges, including the anthropocentric ones contributing to the reluctance to adopt cashless options, would have enabled CBN to implement these policies better. Furthermore, improving commercial banks’ customer service delivery, including strengthening redress mechanisms so that banks proactively identify fraudulent activities and quickly resolve failed transfers, would improve customers’ trust in e-payment options.

Furthermore, the judiciary’s involvement made the situation more confusing. The governors of three states in Northern Nigeria, Kogi, Kaduna and Zamfara, filed a case on 6 February against the federal government at the Supreme Court asking that the 10 February deadline by the Central Bank of Nigeria be extended. On 8 February 2023, the apex court nullified the 10 February deadline stipulated by CBN for phasing out of the old naira notes. Furthermore, on Friday, 3 March, the Supreme Court ruled that the old naira note should co-exist as a legal tender along with the new notes till 31 December 2023. Despite the country’s highest court ruling, the situation only started to ease out after CBN issued a statement indicating it would comply with the judgement and directed money deposit banks to confirm.

The presidential candidates for the May 2023 elections weren’t left out of the debate, as most of the top candidates had opinions on the roll-out of the policy and its adverse effect on the economy. In a tweet, Peter Obi of the Labour Party urged Nigerians to be patient with CBN over the redesigned currency, saying it has ‘some significant long-term economic and social benefits.’ The PDP candidate Alhaji Atiku Abubakar who backed the currency redesign, reversed his position, citing the hardship the policy had caused. President Bola Ahmed Tinubu, who then was a candidate, supported the currency change. However, he advised CBN to accept that the country’s informal sector depended heavily on cash transactions. Tinubu admonished CBN to let the old and new notes co-exist as legal tenders and extend the cut-off time for phasing out the old ones. However, on 9 June 2023, the secretary to the government of the federation announced the suspension of Emefiele, who incidentally had been in a closed-door meeting with the president a few days back. The information in the media claimed that the embattled CBN governor’s current situation is unrelated to the cashless policy but on suspicion that he funded terrorist activities. While it is difficult to establish the motivation for the suspension or link it to the cashless policy, it was not unexpected or surprising. President Tinubu, in his inauguration speech, didn’t hide his dissatisfaction with the previous monetary policies, especially regarding forex management.


Given the past unpleasant experience and CBN’s persistent interest in moving the country to a more cashless economy, it is necessary to identify steps that should have been taken to implement such a policy in a cash-based economy like ours. To ease the imminent pain such a policy will cause, the government and CBN should prioritize cash availability for the most vulnerable: Nigeria remains largely unequal; while many can perform their daily activities without cash, others cannot. CBN must ensure cash availability for the millions of unbanked  people in rural communities that depend on cash daily.  Secondly, there is a need to foster collaboration with other stakeholders. CBN should collaborate with commercial banks, mobile network operators, fintech companies and mobile money vendors to identify specific financial inclusion challenges and devise a synergized approach to resolving them. Thirdly, there is a need to increase digital infrastructure that supports electronic payment systems, especially in rural areas. Specifically, better network coverage and access to electricity are necessary to facilitate the adoption of digital payment solutions in these communities. CBN, in recent years, has invested in capital projects. The Central Bank could set up a facility to finance the development of ICT infrastructures in remote communities.

In addition, an argument exists to incentivize the adoption of cashless payment systems through rewards and discounts. High transaction costs associated with electronic payment systems can deter rural Nigerians from using them. To encourage adoption, CBN should reduce these costs. Also, mobile network operators could offer cashback in the form of free data or airtime to customers who use their mobile payment systems.  Lastly, to build confidence in cashless payment options, CBN must require commercial banks to take responsibility for cases of unauthorized withdrawals and failed transactions. Additionally, the timeframe for addressing such issues should be shortened to ensure prompt resolution and enhance trust in these payment systems.

Despite its intentions, CBN’s monetary policies, under Emefiele, of changing the currency, introducing cash withdrawal limits and transitioning to a cashless system caused hardship for Nigerians. While the pain and suffering this policy caused have drastically reduced, its effect is yet to be fully recognized

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