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Naira Redesign, Withdrawal Limits And Credit Worthiness of Nigerians.

 


Currency redesign by the Central Bank of Nigeria and its complementary withdrawal limits have come to stay.


The recent news from the Central Bank of Nigeria (CBN) is an indication of the near irreversibility of the policy implementation. The news claimed that volume of currency in circulation, not in vaults of banks has dropped by at least 5 percent in just one month.


So withdrawal limits are going to be enforced to the letter but Nigerians may not have the luxury of time (Senate is urging CBN to set June 30, 2023 as the new deadline). 


In the event of no deadline extension beyond January 31st, 2023, how're Nigerians going to make urgent purchases above weekly withdrawal limits? Or even make long term arrangements?


Financial transactions are often done on two bases, cash and credit. In many economies, where individuals take their creditworthiness serious, most financial transactions are done on credit basis. In Nigeria, it's mostly on cash basis and soon, this is no longer going to be possible for transactions that involve a lot of money. 


Payments for large purchases would be made mostly either through the online banking channel or on installmental basis (this is where trust or positive goodwill would be a major consideration).. 


The installmental payment arrangement would force many Nigerians to pay serious attention to their creditworthiness. The time to start doing that is now.


Nigerians have to begin to build their capacity to meet current maturing liabilities (pay what's due as at when it's due). To build this capacity successfully, Nigerians would have to learn to make budgets and stick to them.l (time for strict fiscal discipline).


Budgets should include amounts and time to pay all outstanding current liabilities. When you think other distractions may cause you to forget, give your banker standing orders to effect payments to your creditors when they fall due. Failure to pay what is owed at agreed time would not improve credit worthiness. 


Don't buy on credit and make an arrangement to pay installmentally in anticipation of a cash inflow that is not regular. Credit purchases and commitments to pay should be tied to only regular income. 


When you fail to pay up when payment is due, it affects the business of a creditor negatively. The creditor may no longer have the fund to restock and continue in business. 


And when the creditor is forced to go out of business because of indebtedness, the world would get to know about how seriously unworthy of credit some people are (bad character, bad publicity). Make sure your name is never on that list.

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