The Supreme Court on Wednesday restrained the Federal Government from implementing the Friday deadline for the currency swap.
A seven-man panel of the apex court led by Justice John Okoro, in a unanimous ruling, granted an interim injunction restraining the Federal Government, the Central Bank of Nigeria and commercial banks from implementing the Friday terminal date for the old naira notes.
Also on Wednesday, the International Monetary Fund and the World Bank urged the CBN to extend the time limit.
The advice of the international organisations was in line with the Supreme Court ruling against the Friday deadline
The IMF and the World Bank stated that the short timeframe for the currency was causing hardships in the country.
Delivering the ruling in the application filed by the governors of Kaduna, Kogi and Zamfara States, Okoro granted the relief as prayed.
He stated, “An order of interim injunction restraining the Federal Government through the Central Bank of Nigeria or the commercial banks from suspending or determining or ending on February 10, 2023, the time frame with which the now older version of the 200, 500 and 1,000 denomination of the naira may no longer be legal tender pending the hearing and determination of their motion on notice for interlocutory injunction.”
The court further held that the FG, the CBN and commercial banks must not continue with the deadline pending the determination of a notice in respect of the issue on February 15.
Recall that three northern states had in a motion ex parte filed on February 3, urged the apex court to halt the CBN naira redesign policy.
Moving the application on Wednesday, counsel to the applicants, Mr Adul-Hakeem Mustapha, SAN, argued that the policy had led to an “excruciating situation that is almost leading to anarchy in the land.”
He urged the apex court to grant the application in the interest of justice and the welfare of Nigerians.
He referenced the CBN statistics which put the number of people without bank accounts at over 60 per cent.
Mustapha lamented that the few Nigerians with bank accounts had not been able to access their money as a result of the policy.
The senior lawyer further averred that unless the Supreme Court intervened, the situation would lead to anarchy because most banks were already closing operations.
Justice Okoro adjourned till February 15 for a hearing of the substantive suit.
But in its statement on Wednesday, the IMF resident representative in Nigeria, Ari Aisen, observed the challenges facing the currency swap initiative and called for a different approach.
He said, “In light of hardships caused by disruptions to trade and payments due to the shortage of new banknotes available to the public, in spite of measures introduced by the CBN to mitigate the challenges in the banknote swap process, the IMF encourages the CBN to consider extending the deadline, should problems persist in the next few days leading up to the February 10, 2023 deadline.”
IMF advises CBN
In a separate statement after an official staff visit to Nigeria by the IMF, the multilateral organisation equally asked the CBN to continue tightening its monetary policy.
The statement read, “Looking ahead, directors recommended decisive fiscal and monetary tightening to secure macroeconomic stability, combined with structural reforms to improve governance, strengthen the agricultural sector, and boost inclusive sustainable growth.”
It added, “Directors urged decisive and effective monetary policy tightening to avoid a de-anchoring of inflation expectations.
‘’Noting recent increases in the policy rate, they encouraged the Central Bank of Nigeria to stand ready to further increase the policy rate if needed, and to implement additional actions, including fully sterilising central bank financing of fiscal deficits and phasing out credit intervention programs. Strengthening the CBN’s independence and establishing price stability as its primary objective is critical.”
The IMF also encouraged the Nigerian government to remove the fuel subsidy by June and increase well-targeted social spending, alongside boosting revenue mobilization.
The global institution also urged the Nigerian government to finalise securitization of the CBN’s Ways and Means Advances, while emphasizing that the bank’s budget financing should strictly adhere to the statutory limits.
It called for a continued move toward a unified and market-clearing exchange rate by dismantling various exchange rate windows at the CBN.
On its part, the World Bank Nigeria said though it was normal to have periodic currency redesigns and demonetisation, such a transition usually takes about one year or more.
In an email response to our correspondent’s enquiry on Wednesday, the World Bank’s Senior External Affairs Officer for Nigeria, Mansir Nasir, noted that the bank was concerned about the short transition period announced by the CBN.
The email response read, “Periodic currency redesigns and demonetization of older notes are normal internationally. However, they usually involve transition periods of one year or longer so as to minimize economic disruption.
“After the Central Bank of Nigeria announced the naira redesign on October 26, 2022, with a short implementation timeframe through January 31, 2023 (now extended for a short additional period until February 10, 2023), the World Bank expressed concern about the timing and short transition period (see Nigeria Development Update, December 2022).”