Nigeria’s top court adjourned a hearing on the use of old naira banknotes after more states joined a lawsuit challenging a central bank decision to outlaw them, prolonging the chaos across the country amid a shortage of the new currency.
(Bloomberg) — Nigeria’s top court adjourned a hearing on the use of old naira banknotes after more states joined a lawsuit challenging a central bank decision to outlaw them, prolonging the chaos across the country amid a shortage of the new currency.
The case before the Supreme Court will resume on Feb. 22, Kogi state Governor Yahaya Bello told reporters Wednesday in the capital, Abuja. The central bank in October announced that it would redesign its highest-value banknotes in a bid to mop up excess cash and rein in inflation.
A panel of judges last week ordered the central bank not to bar the use of the old 200- 500- and 1,000 notes pending a ruling on a lawsuit brought by three state governors contesting the policy. The original case brought by Kaduna, Kogi and Zamfara states was joined on Wednesday by others including Kano and Ondo. All five states are run by the ruling All Progressives Congress.
Governor Bello and Kaduna’s Attorney General Aisha Dikko both said the court’s injunction remains in force until next week’s court session — just days before Nigerians vote to elect a new president. A spokesman for the Central Bank of Nigeria declined to comment on the matter.
While the case makes it way through the court, Nigerians are struggling to find either old or new banknotes in a nation that runs on cash, which is stalling Africa’s biggest economy.
The crisis has divided the ruling All Progressives Congress, with its presidential candidate, Bola Ahmed Tinubu, and allies saying the policy will damage the party’s chances in presidential and legislative elections scheduled for Feb. 25.
The move to limit cash has disrupted everyday life throughout Africa’s most populous nation, where only 60% of households have access to a bank account, a figure that falls to 41% in rural areas.
Banks have received a fraction of the new currency to exchange with the old, leading to large – sometimes angry – queues outside ATMs and bank branches.
Sporadic protests have broken out in parts of the country as the cash shortage has made an ordeal of ordinary activities such as paying to ride the bus or buy food. Those living in the countryside often live hundreds of kilometers from banks, making it difficult to deposit their savings even if they have an account.
The central bank said on Jan. 29 that 1.9 trillion naira ($4.2 billion) — representing 70% of the currency being held outside the banking system — had been returned.
The “demonetization drive” is likely to “hit consumer spending and boost demand for foreign currency, aggravating foreign-exchange shortages,” Fitch Ratings said on Tuesday.
Buhari Silent
President Muhammadu Buhari has remained silent on the issue since Feb. 3 when he asked citizens to grant him a seven-day window to “resolve the currency crunch.” His justice minister, Abubakar Malami, asked the Supreme Court on Feb. 8 to dismiss the governors’ case.
In their initial suit, the three APC governors said their states were “on the verge of anarchy” due to the “untold financial, economic and social hardship” caused by the central bank’s rushed program. Nasir el-Rufai, the governor of Kaduna state, urged Nigerians to keep on spending the old notes, saying the Tinubu will overturn the policy if he wins the election.
Amid the uncertainty over the status of the old notes, central bank Governor Godwin Emefiele has continued to defend the measures, blaming others for any problems associated with its rollout. He singled out “hoarding and predatory activities” and “staged and sponsored propagandas” in a speech given in Abuja on Feb. 14.
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