The problem with workarounds
A workaround is defined as a plan or method to circumvent a problem without eliminating it. The term is used mostly in software development. It is used to describe a temporary solution for a software problem used until a permanent solution is found. The problem with workarounds is that people tend to abandon the effort to fix the system and look for solutions outside the system. Workarounds are like sticking band-aid on a problem without addressing the underlining issues.
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In many cases in our national life in Nigeria, we have devised workarounds for problems that would be better solved if the system was rebuilt or simply operated properly. The solutions to the problem are already built into the system but we always like to take the complex route.
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According to CBN, the re-design of the naira and withdrawal limit would reduce money laundering and drive the cashless policy of the apex bank. In addition, the policy is geared towards making it difficult for politicians to buy votes using the cash they have stashed away over time. The average Nigerian is specially interested in this last issue of stashed funds and for good reason. Nigerians have heard stories of billions of Naira stashed away by politicians and they have seen pictures and videos of bank notes with wrappers from banks which stopped business in 2011. However, no matter how plausible this sounds, the law has provisions to deal with illicit fund movements and money laundering. If the law enforcement agencies can prove that cash is stored in different locations by politicians, they should be able to investigate and try the culprits. It is not the job of the CBN to enforce those laws. However, in a society where the laws that apply to the poor do not apply to the rich, enforcement can become a political issue. Even if most ordinary Nigerians support the reasons behind the Naira redesign, the execution has been a great failure and the same poor man is the one suffering untold hardship.
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The frustration and suffering witnessed in the last few days across the country has been inhuman. ?Customers resume on queues in front of bank branches and ATMs only to get N2,000 or smaller amounts. The number of hours devoted to sourcing for money and the premiums that people have been paying to acquire the new notes is simply ridiculous. The question is, is it worth this trouble? In other climes, several class action lawsuits would be brewing by this time.
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The long-term effects are even more serious. The CEO of Financial Derivatives Company, Mr. Bismark Rewane has projected that Nigeria would suffer a total GDP loss of $18m per month due to the negative effect of the redesign. The CBN did not understand that the politicians who stashed money away would still be able to ‘hijack’ most of the reprinted cash and still stash away while the poor people stay on queues without respite?
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Apart from the impact on the GDP, at least the myth around the supposed autonomy of the CBN has now been shattered. It is reported that the IMF has joined others in calling for an Amendment to the CBN Act to strengthen its autonomy and governance.
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But the biggest loser in the long run are the banks. Banks have worked hard in the last decade to drive financial inclusion and reduce the number on the list of the unbanked. Banks have always had a major credibility and trust problem with consumers in Nigeria, especially the retail customers. According to the Nigeria Inter-Bank Settlement System (NIBSS), the total number of active bank accounts increased to 133.5million in 2021. The report quoted the number of inactive bank accounts within the same period at 57.9million. NIBSS also cited that within a period of one year, the volume of financial transaction through mobile devices has surged by 151%. The adoption of Mobile Money has also grown. Banks should expect high withdrawals immediately consumers have access to the new notes. But the greatest withdrawal is the withdrawal of trust- cash will now start heading back to the roofs and under mattresses. To make matters worse, the pressure on the digital banking platforms have also heightened the incidence of service failure in the same period.
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In conclusion, the 2023 Edelman Trust Barometer is titled Navigating a Polarized World. According to the report, there are four factors that lead to polarization. They are economic anxieties, institutional imbalance, mass-class divide and the battle for truth. Across the polled countries, trust in government declined across board with Nigeria featuring as one of the countries with the greatest distrust for government. While trust in industry sectors remained table, trust in financial institutions remained at ‘neutral’ which is the closest to the ‘distrust’ band. The final point here is that people are going through a period of extreme economic hardship already and they are less hopeful about the future. Therefore, policy makers must work towards building trust and confidence. The citizens should not be used as cannon fodder.
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2 年Thank you, Tunji for this very insightful article. Anyhow you look at this CBN move, it is a loss for everyone in Nigeria. As you pointed out, the move has set the banks back in their effort to reach the unbanked who have now withdrawn their trust and waiting to withdraw their cash. It has also dented consumer trust in the digital payment system which is being positioned to become a key component in financial services in the country and has been enjoying great momentum in the last few years. Amending the CBN Act as suggested may not do much with the same actors and attitude of total disregard for the wellbeing of the citizens. Hoping the government will respect the recent Supreme Court judgment on the matter and begin to ease the pains of ordinary citizens.