Cash redesign policy may batter first quarter 2023 results of companies despite return of old notes -Operators  

Some market operators have said that despite the decision of the Central Bank of Nigeria (CBN) to finally comply with the Supreme Court order and allow the old N200, N500, and N1000 banknotes to remain legal tender till December 31, 2023, companies might see declines in their first quarter 2023 earnings results.

The operators who spoke with Nairametrics said that the wrong implementation of the naira notes swap deadline, which led to cash scarcity, eroded investors’ confidence and affected commercial activities in the country. 

CBN’s compliance: The Central Bank of Nigeria (CBN) on Monday released an official statement last night to the effect that the old N200, N500, and N1000 banknotes shall remain legal tender till December 31, 2023. 

The CBN statement signed by Dr. Isa AbdulMumin, Acting Director, Corporate Communications noted that in compliance with the established tradition of obedience to court orders and sustenance of the Rule of Law Principle that characterized the government of President Muhammadu Buhari, and by extension, the operations of the Central Bank of Nigeria (CBN), as a regulator, Deposit Money Banks operating in Nigeria have been directed to comply with the Supreme Court judgment of March 3, 2023. 

Accordingly, the CBN met with the Bankers’ Committee and directed that the old N200, N500, and N1000 banknotes remain legal tender alongside the redesigned banknotes till December 31, 2023. 

Effects on Q1 2023 earnings: Mr. David Adonri, the Executive Vice Chairman of Hicap Securities Limited, in a chat with Nairametrics said the cash redesign policy may affect the first quarter results of companies operating in Nigeria. 

According to Adonri, this is because serious the scarcity of cash adversely affected the level of commercial activities in the economy between the last quarter of 2022 and the first quarter of 2023. 

 He noted that if CBN complies honestly with the judgment, it should urgently bridge the cash supply gap, and then restoration of economic activities can resume. 

• “However, I doubt if CBN will comply fully because they had said in the past that the bulk of the withdrawn cash has been burnt. And where will the bank have to resupply the old currency? Therefore the old currencies that will be in circulation will likely be the ones that were not deposited before the deadline,” he said.  

The Managing Director of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, said that the expectation in the capital market was that the first quarter results of a lot of quoted companies will be impacted negatively by the cashless policy.  

• “The first quarter of most companies will be impacted negatively by the cashless policy due to haphazard implementation. However, with the reversal of the policy and if cash is made available to the system, we might see a better second quarter of the year. The companies can only get relief on the policy reversal if the banking system makes the cash available to the public,” he said. 

Need for currency availability: Amolegbe noted that the CBN needs to follow the issue up with action by making the currency available, adding that there is no need to delay the availability of the old notes since they are now legal tender. 

• “They should be made available to the public as the circulation will kick start the economy again, especially the informal economy that suffered the impact of the haphazard implementation the most. 
• If the currency is made more available, that sector will start to recover and business will start to record boom. The banking sector should see it as a priority to make the old notes available as soon as possible,” he said.  

Need for public awareness: Amolegbe said the commercial banks and the CBN also need to do significant public awareness regarding the reversal of the policy so that the populace is made to be aware that all currencies are now legal tender and should not be rejected at any point. 

• “The banking industry needs to put in place further confidence-boosting measures because of the fact that the haphazard implementation of the cashless policy has negatively impacted public confidence in the sector. So it is expedient that measures are put in place to rebuild that confidence in the sector in the medium to long term,” he said. 

Cash withdrawal limit: The Chairman, of Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said that since the cash withdrawal limits for individuals and corporate bodies were not stopped by the court, the scarcity of cash for business transactions will still loom and impact negatively on the financial system especially the investors and listed companies. 

The CBN had increased the maximum weekly limit for cash withdrawals across all channels by individuals and corporate organizations to N500,000 and N5 million, respectively. 

The directive is contained in a circular issued by the bank and signed by Haruna Mustafa, director of the banking supervision department. 

Limitations for investors: Okezie noted that investors who executed contracts are finding it difficult to get contract fees paid and invest part of it in the market due to scarcity of cash and constant network failures. 

• “For instance, if I place an order to my broker for shares purchase, the broker can only buy the shares if my money hits his account, if there are network issues, it has affected my movement to buy equity. Because the network services are failing the broker won’t buy the shares,” he said.  

Impact on quoted companies: Okezie noted further that the listed companies are also being affected in no small measure because they cannot pay their suppliers and consumers in turn cannot also purchase their products due to cash scarcity. 

Need to improve network services: He called on the CBN should liaise with the Nigeria Inter-Bank Settlement System (NIBSS) to improve service delivery from one bank to the other. 

• “They should also form a synergy with network service providers to make sure that network services are working seamlessly,” he said. 

Need for stability: To the National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Mr. Moses Igbrude “the CBN is supposed to have complied since the court ruled to help return the economy to normality. 

• “However, my advice is that between now and December 31, the new money should be made available. When there is stability of money in circulation, people will invest more in the capital market, and investors’ confidence will return to the market. 
• “When there is instability in the system people will be apprehensive to approach the market and that will erode the market confidence. So they should ensure stability in the system to drive the capital market positively”.