 Okay, we're glad to know that you're still there. Remember that currencies change. Its impact on financial issues in the country is what we are discussing right now. And joining us to do this conversation is Mr. Shergoune Chokwiton, principal partner Woodridge and Scott Consulting. Hello and welcome to the program, Mr. Chokwiton. Thank you for having me. Good morning. Okay, well, today we were expecting the president to unveil the new Naira notes. Maybe it has been done, but we haven't had that information. We're wondering how you would react to this sudden change of date for unveiling the new Naira, at least more than 20 days to a proposed date of unveiling the new Naira notes. Yeah, it came as a bit of a surprise, but then when you also think about the wider implications of this policy and perhaps the objectives of the policy, you sort of realize maybe it's not such a big surprise after all. So there are economic considerations for this policy, for doing this. And then there are political considerations. And it will seem as though there is quite a bit of political pressure on the central bank to shift ground on this policy. And you would have heard the CBN governor allude to that. And in fact, he was very empathetic in the way he addressed that issue and insisted that they were not going to shift the deadline, the January 31st deadline when the old currency would no longer be legal tender. So I think that what perhaps has happened is, as a way of a bit of shifting ground, they have increased the concurrence window. So before now, the number of days that the two currencies would have run in parallel with each other was about 45 days. And I think all they've done now is just increase that window to roughly a bit over 60 days. So hopefully it won't have too much of an impact on the overall success of the policy. But it would appear as though this is just politicians trying to buy some time. But I was expecting, or some of us were expecting that if he has to shift ground, it will be the direct request that was made by some quarters that it should be shifted forward like the end date for the use of the old Naira notes as it were should be shifted from that date that he set it in January, that is the 31st of January. But now he brought forward the unveiling. I don't know how has that impacted, or how will that impact on this whole process? How will it make it better? Because it seems like it is more sudden now. I don't seem to understand. Well, it's no longer sudden if you realize that the cat is out of the band. The work on in quotes that the CBN has had has been the element of surprise and that element of surprise is no longer there. From the moment that this policy was announced last month, it became clear that this is what was going to happen out. The responses, the reactions and all of that, especially from the politicians, if you remember the very heated debate that happened on the floor of the National Assembly over this matter, you will realize that politicians are not finding this money at all. So that politicians, the political class in particular now know that this is happening. And obviously what has happened now is that the central bank has now increased the window during which the swapping is allowed because as soon as you are going to build, then the new notes become legal tender and then you can start sending in your own notes so that you can start collecting the new ones, even though it would appear as though the collecting of the new ones may not have been triggered immediately. But I would imagine that that time frame also would shift. You have to understand that the CBN is really, really under pressure over this. There are people that want this policy request. So I'm particularly pleased that the central bank of now, I'm not a fan of he is by any stretch of the imagination, but on this one, I am 100% in his corner and will have been urging that he must stand his ground, the CBN must stand his ground and not shift grounds on this policy. They must implement it and for me, I'm not even happy that they've shifted at all this little shift because it gives a bit of an advantage to the people that this policy is targeted at primarily. Initially when the announcement was made about the redesigning of the Naira, what part of the reasons that was given by the apex bank is how that a great percentage of the Naira already printed and in existence are outside the quarters of the banks. Most of them are outside. We don't know where they are and they claim that this redesign would help manage the Naira in circulation and manage how money flows in and out of the banks. How do you think that redesigning the Naira will be able to help them achieve this? So what tends to happen because of the peculiarities of the Nigerian economy? Our economy is, some would say 50-50 between the formal and the informal economy, informal sectors. Some would even argue that the informal sector is far bigger than the formal sector. So what that does from the policy making point of view is that a lot of transactions are happening that are simply not accounted for, it's not going through the banking system at all. And if it's not going through the banking system and you have huge volumes of cash being used to initiate and complete transactions, a lot of those transactions slip through the cracks. In fact, you can no longer call them the cracks, they fall through huge holes in the data-gathering system of the government. So with that, you cannot plan adequately. If you are planning and you're saying that, for example, that your GDP, for example, is $500 billion, an informal economy means that possibly your GDP is doubled that. That's one of the implications. So what the CBN is simply trying to do is to bring in all of these transactions into the formal sector. So if you move up the cash, the primary objective of this policy is to bring the cash outside of the banking system into the banking system so that transactions can then be monitored, tracked, planned for, and policy making can be more accurate. So from that perspective, it's a very good policy and ultimately it will succeed. The challenge is that the people that are responsible for a significant chunk of the cash that is outside of the banking system will resume their antics as soon as the new currency is unveiled. And we may find ourselves back at the same junction in another three to four years. So which is why you find that in some clients, currency redesign happens as frequently as every five years, frequently as every four years. It's a very expensive project. So ordinarily it's something you don't want to do too frequently about. When you have a segment of society determined to undermine your economic planning, your national planning, monetary policy planning, and all of that, then you may want to look at the pros and cons and do this more frequently. And I think that's what the CBN is doing now. So I wouldn't be surprised if you have a new CBN governor coming and also do this in another three and a half years because the volume of cash outside of the banking system will begin to grow again as soon as this exercise is completed. All right. Just a follow-up from what you said because you mentioned how the whole process of redesigning the currencies is quite expensive. Can you take us through the cost implication or what it would cost Nigeria to have this redesign done? The CBN, there was an infographic that was shared publicly and the cost is somewhere around about, it's a lot of money, we're talking about 600 billion nair. Because what you are doing is you are practically changing your entire, you know, the currency. We are printing millions and millions of new notes, and remember, these notes are not ordinary paper. There's a lot of security features that are included. There's hologram stickers, there's see-through transparent tapes, you know, so many different types of features that are embedded in this currency in addition to the fact that in fact the currency is no longer ordinary paper. People are suggesting to the CBN, we don't know what they do, obviously they are keeping it a secret, but that most likely even the higher denominations will probably be polymer rather than paper-based, you know, which would make it significantly more expensive. So we're talking in the hundreds of billions range as being the cost of this exercise. So clearly it's a cost you can't afford to carry too frequently in terms of the impact on government finance, but if you look at the potential benefits then clearly I think that the benefits far outweigh the costs and the policy must be pursued at the same route, a logical conclusion. How confident are you about the entire process in light of the fact that, okay, it's understandable that some people who are storing money for instance in septic tanks and other places that only God knows where, it's understandable if you say the target is for these people. But in Nigerian society we still have a chunk of people who are doing legitimate business and it's either they do not have faith in the banking system or they don't even have access to this banking system and all that, maybe because they are illiterate or maybe because of where they live. How confident are you in this whole process that it will not deprive some people of their hard-end money? Because we're just telling a story here before this program how some people are calling some of us in the townships so to speak to ask us whether it is even true that this money is going to be changed, which means the information has not even gone around. So do you think the CBN thought it through to come up with this policy factoring in this kind of people who may not have access to the banking system? Yeah, when the press statement that the CBN gave out yesterday or the press briefing that he did yesterday, he actually spoke about this. So clearly they thought about it, whether the time is enough is debatable and I suspect that we'll find out soon enough. So one of the things I think that the CBN hasn't done enough of at all is to run a very big enough public information campaign about this because you are right, there are people in the hinterland who may not have heard about this but having said that I think it's also important to note that it is very, very likely that even after the exploration, don't forget what will happen is that the old notes will cease to be legal tender. So you can't spend them, you can't use it to transact business anywhere but I would imagine that the CBN may want to allow banks to continue to muck those old notes up even after the exploration of the deadline for when those notes will cease to be legal tender which will be January 31st because if the CBN finds by virtue of data gathering, for example by virtue of the volume of cash that came back into the system as a result of this, that there is still a significant portion out in the wind then they may need to extend that deadline for depositing the old notes so the notes will no longer be legal tender very clearly but I don't see too much of damage that can be caused if the CBN allows those old notes to continue to come back in and I say this because for example there is a concept of mutilated notes so there is a certain extent of damage that your currency notes in particular would have suffered that would make them to cease to be legal tender it can't be accepted in the course of exchange of goods and services but banks are allowed to collect them because the banks can collect them and serve as an extension of the CBN in withdrawing them from circulation and getting them destroyed as the CBN's mandate provides so I don't think there's anything wrong if after January 31st the CBN continues to allow people to bring the old notes in what you can't do is you can't spend that money anywhere else so people that get caught in the crossfire so to speak because they didn't have the information about this may still may not end up losing the value in that currency I don't think if they lose that money the economy loses as well because that's value okay I think the internet won't let us continue talking to him but he made a point and one question I would have wanted to ask him is are you there can you hear us okay there are the lots of questions to us we thought we had lost your audio there let me just before I forget maybe it's a bit of a digression but this thing we're talking about is Naira notes like paper money and it is not long ago that we were talking about a cashless economy and then there was the E Naira that was launched it didn't raise as much dust as the Naira or the paper money is raising now do you think the E Naira has any significant role to play in our economy was it even important to launch that E Naira when in our country now the in thing is still the paper money can you hear me yes we can hear you yes we can hear you as far as the Naira you know yeah the E Naira project is concerned this remember the E Naira is digital currency is digital Naira it doesn't speak particularly to this we thought without this policy the E Naira policy was something that was going to happen at some point simply because of increasing of cryptocurrencies globally you know so we're getting to a point in the global economy where cryptocurrencies are beginning to become means of exchange of transactions in regular day-to-day feelings including to the up to the point where you can now have ATM cards issued to you in you know with a based on cryptocurrencies so you can actually transact business on the web and pay with crypto using your card using your card number so so the the primary objective of of keeps breaking it's keeping you know hello mr. shock what's on yes okay here you know okay so it doesn't speak to the cashless policy it doesn't speak to it doesn't speak to online electronic transfers and all of that it's simply moving the Naira to the world of crypto and I think that's where that stops so the success of that is still you know it's obviously adoption rate is very low because primarily um crypto adoption generally is still is still is still a bit of a niche niche market a lot of people I mean you know the three of us that are having this conversation who probably don't have never transacted in crypto you know if you ask one out of ten people on the road most of them haven't had any kind they just hear about it oh crypto crypto but well actually don't you know don't have to buy cryptocurrency and has investment in it and all that it's still a bit of an elitist thing for now you know so so that's why the adoption of the Naira appears to be slow but it will become because cryptos are becoming like I said before more more prevalent all right during the press conference yesterday with the governor of the cbn but one of the things he said is that in the light of emerging trends it had become appropriate to develop a currency that was you know that would be a legal tender that would be able to play in the digital economy space does this mean that what we had before the Nairas that we had before wouldn't or were not able to play favorably in the digital economy space well um fiat currency is fiat currency printed money is printed money and I am not sure I see convergence between printed money and the digital space if you if you include within that digital space blockchain and crypto if however by digital space you mean for example just electronic transfers pos transactions even if even if that's what you're talking about printed money is printed money so excessive the cbn governor is perhaps alluding to the possibility that it's you know you can scan the new naira notes or something like that and then have its value transferred as a result of that I don't see the correlation between um you know the redesign of the currency um and the digital economy maybe as the new features of the currency becomes obvious what he said might make sense but for now for me I don't I'm not sure I know what exactly um he was talking about okay how much confidence do you have in the banking system generally I did mention earlier on that some people might be having their money in their pillows just because they have no confidence in the banking system but what is your assessment of the banking system in Nigeria whether it is their charges whether it's their services whether it's their interest rate whatever it is how confident are you in them or if you're not what areas do you think they need to grow well I'm not I'm not sure the problem is you know the confidence of somebody like me I mean I'm a stakeholder in the banking industry um I work there for decades I still have interests there at the moment so um it's not about me I think it's about the confidence of the public in the banking system and the evidence of how high or how low that level of confidence in is is in the financial inclusion ratio and as far as the last report if I'm not mistaken we have a financial inclusion ratio of about 55 percent 55 percent of Nigerian adults having one form of banking account or the other on from of yeah let's let's let's call it that so whether whether you're talking of mobile money for example or you're talking of the traditional banking accounts um about 55 percent of Nigerian adults are now in that space now that's very low when you compare to other parts of the world where percentage is as high as 70 80 percent and the reason for that and that's even an improvement on where we were just about 10 years ago when inclusion was as low as 35 percent so there has been consistent improvement in this as a result of you know some of the products and services that the banks have been bringing you know into play as a result of the the entry of mobile phone operators into that space and as a result of some policies of the CBN for example the cashless economy policy but have been said that the banking industry has a long way to go in terms of winning the confidence of the average man on the street um that i think goes without again saying whether you want to talk about the usual of charges you know people when you have a public that believes that i put my money in the bank and i just leave it there the money will reduce in value over time then you have a problem then people would keep their money away from the bank especially the um not so educated and maybe kitty retreats um so if if if i believe that if i put in 1009 to the bank and they want to take my 1009 back i i get um less than 1009 because the bank will take some charges off me then there's a problem um so for example the this thing we call we used to call cot in Nigeria with the central bank try to eliminate but then now introduce the account maintenance charge which is exactly what a commission on turnover is is an is an aberration is is a is a is a is a is a is a financial charge that doesn't exist anywhere in the world it's a Nigerian thing you know and you know there is no justification for you charging me for withdrawing money from my account the same money that i paid into my account when i know that when i give you that money i get to trade with it and make money from it so why are you charging me for it you know so and that track continues to exist so any business person a small business medium-scale business owner who values who understands the importance of the time value of money will not put their money in in the bank just for this reason alone and there are so many other issues there's the issue of cot there's the issue of the high fees and charges there's the poor very very poor service delivery standards in the banking industry you put your money in the bank and you want to go make a withdrawal you go to the banking hall and you meet those snake cues you know those snake cues the cues that run and and they form an s within the banking hall and sometimes overflow the banking hall in all to the streets you know those types of things will discourage them from bringing it bringing their money to the bank and i think the banking industry really really needs to look at a very hard look at the service delivery standards and pay more attention to how the customer feels about the services and financial inclusion will improve right now it's it really it leaves a lot to be desired kind of impunity they're working they're working for themselves and doing what the please at any time that they want to because if the cbn tried to abolish the cot for instance or some other charges and they still are existing uh where do we run to as as people how can we hold the banks uh to this kind of responsibility that they should that they owe us as the individuals are we are we going to say that it's a lost cost or there is still hope no it's not a lost cost we have to continue to advocate we have to continue to talk about these issues for example the federal consumer protection um competition um council fcc pc is is one tool that i think Nigerians have not used enough um i i am personally aware of how passionate you know the head of that the director general of that um a government agency is about quality of service i've had interactions with them in the past and i know that they take up these complaints um so some of this service issues that we have or complaints we have about charges we can take them to the fcc pc and they will you get a response and not that instrument that is available or mechanism that is available with the central banks consumer complaints department the cpd consumer protection department they're also quite responsive if you have any problem with any of the Nigerian banks bordering on service failures you know um illegal charges and what have you you do an email to that bank and copy cpd at send i think a cbn.gov now um you can you can google just go to google and you can get that email address and you send an email to them the cpd always responds and the banks are very wary of being reported to the cpd you know so there are things that the Nigerian public can do to keep the banks on their toes and get them to you know do better as far as service provision service quality standards are is concerned we can't give up we can't just throw our hands up and and uh in the in the belief that there's there's no hope there's always hope and there's always something that can be done in the course of this conversation you mentioned a couple of implications that you know would come with this uh narrow redesign part of the conversations that that had come up in the last two days is how that the cbn has increased the interest rates to 16.5 percent from what it used to be at 15.5 percent to stem inflation and of course the cbn hopes raising rates will reduce money supply in the economy and rein in inflation do you think that you know this is a good step or do Nigerians face the risk of you know having a slowing economic growth and do you think actually this redesign has any implication or is going to affect or change the inflation that we are in right now actually one of the um objectives that the cbn governor did um list out when they announced that the design was exactly this issue of money supply um and the impact of inflation with the the idea being that there's simply so much cash out there that is um that is actually driving inflationary forces upwards um so so yes in that sense um the the redesign the narrow the currency redesign project definitely have an impact on money supply um cash being one of the types of money that is in the economy flowing in the economy um but uh increasing the the the mpr to 16.5 um i'm beginning to get a bit worried about this uh because i think that there is only so high that you can go in terms of um interest rates without impacting access to credit and therefore productivity of the economy um so it it's always a balancing act by the cbn and by the mpc monetary policy committee they always it's it's always a consideration trying to strike that balance between reigning in the inflation and triggering a recession or slowing growth down i would have thought that at 15.5 they would have stopped i would have my expectation was that this mpc meeting would have recommend um a hold um policy which is you don't increase you don't reduce um so i'm a bit surprised that they've gone a hundred business points up again of course this is going to drive interest rates up this is going to make credit more expensive to the people that need it the most and which would have an impact on the cost of production on the cost of production of goods manufacturer goods and on the cost of access to services that are um you know in critical demand within the within the economy and therefore would drive it would drive you know invariably you know there are economic experts who will tell you that increasing interest rates is perhaps not necessarily a solution to stop in inflation especially when the inflation that we're dealing with might not necessarily be um driven from a monetary policy point of view there could also be the cost push push issue the structural and logistic issues that we know are behind some of this inflationary pressures that we're seeing right now the war in ukraine for example the the the crisis in the north east that has extended way beyond the north east and to north central and the north west where a lot of our food comes from and the part that you know food supply has been impacted negatively which is driving the prices of food food food up how does increasing uh monetary policy rates improve the supply of food you know so so i think that for me the cbn should will need at this point to to to pass on this continue this is the fourth consecutive price increase by the npc you know and and that's that's alarming i think it's about time that they put a pass on this and let the government use all that policy instruments you know to to to address the structural um uh courses of inflation beyond the monetary policy issues uh so so it's something that we want me to be worried about okay just finally because we've run out of time but very quickly now some projections from the international bodies have said that we are going to face a lot of hunger like from next year and even another one another report has said that soon if the government doesn't act very fast 250 nigerians will become poor i mean right now the population is not even up to 250 million but they're already projecting that 250 million will soon be very very poor in nigeria uh in the nearest future that means virtually everybody will become poor in nigeria but do you believe these uh projections the statistics that are being churned out by the international organizations that like the united nations and all that uh about nigeria judging from the economy that we are facing well yes we have to take a lot of those things with a pinch of salt um there is um economic policy the economic ideas and economic theories yes um and then there is a practical reality on ground in nigeria and i think that the duty of every government um must be to strike a very delicate balance between those two things to ensure that the common good is best served you know so so some of these statistics that um this uh international bodies and organizations especially the lending the international lending institutions the world bank the the i fc you know and all of those those people when they say these things we have to understand that there is an agenda um this is very very important we have to understand that there is an agenda um it's called there's something called enlightening self-interest whose interest precisely the world bank's serving whose interest is the i fc server um are they serving our interests are they really genuinely interested in uh the the economic growth and development of africa would that serve the interests of the western economies or would some of the benefits that they are getting from our being in the situation we are in uh who sees so when they say these things yes there may be some truth there may be some wisdom i'm not saying we should throw them all out the window but we have to be very careful about what we believe for example they are also in that same statement you refer to they're talking about the usual subsidies fuel subsidies subsidies for the power industry and a lot of other subsidies that exist you know in our economy today and they're saying you know those subsidies have to go we know that they have to go we know the impact these things have on on the on the fiscal you know side of the the equation on the ability of the government to finance a lot of things that that need attention but you cannot remove subsidies just like that because the impact on the standard of living on the lives of Nigerians will be swift and will be and will be glibious you know so if the government wants to take subsidies out there has to be a process there has to be it's it's going to be well planned and well programmed um so it's it's good for the IMF and the world bank to say these things but our government must be responsible about how they take those those those information at the daytime and at the statistics in and use them to ensure that Nigerian citizens do so far more um if the government follows some of the prescriptions of the IMF and the world bank then the prophecy of the world bank that Nigerians all Nigerians would become for might well become itself fulfilling prophecy because we listen to them so the the way not to end up fulfilling that prophecy is to take some of the things that they're saying with a pinch of salt thank you Mr. Chopiton for coming on the show the new Naira nodes by the way are out already and people have had the privilege to see them we'll just go on to show you some of these Naira nodes and then you'll have a feel but Mr. Chopiton we are so grateful that you were able to make it to the program today thank you so much for being a part of the program thanks for having me pleasure being here having me you too so as Nigerians we watch this and see what the new Naira nodes look like there's not much of a difference there is the color difference why is two of them looking red oh my god the good thing about the new Naira nodes is that we will all have them in mint it's a long time before you start having the toned nodes the old nodes and the dirty ones yes as we enjoy the sights of this we are going to take a break immediately afterwards and then we'll take the news after the news we'll be back with some newspaper by headlines and just wrap it up with that stay with us