Mar 8, 2023
The Supreme Court (SC) judgment of 3rd March 2023 ordering the validity of N500 and N1000 notes as legal tender currency up till 31 December 2023 came to us, professional bankers, as a surprise.
It is a surprise because the SC failed to take a holistic look at the law relating to banking, of which their judgment has become a part in taking such a far-reaching decision that is capable of truncating the Central Bank of Nigeria (CBN) monetary policy which is already being implemented in the current year.
In particular, the policy targets moderation of inflation and encourages business transactions to be routed through the banking system.
For the avoidance of doubt, banking practice by convention overrides banking law. Against that background, the SC judgment extending the validity of N500 and N1000 notes as legal tender up to 31 December 2023 is not enforceable. This is so because there is a gap between banking law and banking practice. Let me explain this intriguing point.
Under s.9(2) Bills of Exchange Act 1990 as amended, “when the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the words is the amount payable”. But in banking practice, such cheques are dishonored by nonpayment with the reason “Amount In Words And Figures Differs”.
Again under s.3(4)(a) Bills of Exchange Act 1990 as amended “A bill is not invalid by reason that it is not dated”. Yet in banking practice, an undated cheque is dishonored by nonpayment with the reason “Date Required”. This practice may seem naive but one reason for this practice is the practical effect of the date on a cheque which fixes the time the drawer of the cheque assumes liability on it.
This matter becomes clearer in Woods v Martins Bank and Anor. ( 1959) 1 QB 55. Salmon J on page 70 said “In my judgment, the limits of a banker’s business cannot be laid down as a matter of law. The nature of such a business must in each case be a matter of fact and accordingly cannot be treated as if it were a matter of pure law”. Therefore the business of CBN in currency management cannot be treated as if it were a matter of pure law.
Another point to be added is that banking practice in Nigeria regarding currency management has international dimensions. There is no country in the world where the Supreme Court orders what is legal tender currency no matter how the matter is packaged and brought to it for adjudication. This is more so as the Nigerian Constitution makes currency-related matters an executive function with the CBN as an agent of the Federal Government with constitutional powers to issue and manage legal tender currency exclusively.
It is this writer’s considered opinion with all due respect that the Supreme Court Judges overreached themselves in making an order that nullifies the CBN’s actions on the validity of the legal tender currency. In all good conscience, is it proper to overrule the CBN on a matter that the Act or law establishing it mandates it to do? What is the motivation for such a far-reaching order? Will the Supreme Court stop legislators from legislative duties simply because it is the highest court of the land whose order is final when such an order is not sustainable?
The truth of the matter is that the Supreme Court of Nigeria has been politicized. And the political class has been using it as a convenient platform to commit unlawful acts. The Supreme Court judgment making a candidate that came fourth in a governorship election the winner is a case in point.
In the matter under discussion, the Supreme Court listened to the plea of politicians that are not knowledgeable in matters of currency management to make a political order. The complainants claim that the CBN deceived President Muhammadu Buhari into approving the Naira redesignation policy which dates back to 2012 as part of the cashless policy.
Let it be said that the Naira is in danger if the International Monetary Fund, the World Bank, and other Multilateral Organizations have the slightest reason to believe that the issuing, management, and circulation of the Naira are driven by political considerations. Such a situation will invariably increase Nigeria’s sovereign risk which will negatively affect the exchange rate of the Naira vis a vis other international currencies.
It is indeed heartwarming that President Muhammadu Buhari told the Supreme Court when they issued the interim injunction extending the validity of the N500 and N1000 notes to March 10 that much as he follows the rule of law, he will not obey their order. The CBN on their part followed suit by saying that they are not bound by that interim injunction. Now the Attorney General of the Federation is saying that currency matters are not part of his brief.
Because banking practice overrides banking law, the Supreme Court order on the N500 and N1000 is a mere academic exercise. The CBN which is mandated by law to issue legal tender currency has stopped issuing the old N500 and N1000 notes and withdrawn them from circulation. On what then does the Supreme Court order attach? Nothing, absolutely nothing. That is the crux of the matter.
The painful thing is that at the end of the day, it is citizens that were deceived by the governors to keep transacting with the withdrawn N500 and N1000 notes that will bear the loss. In that case, the claim of the governors that claim they went to court to defend their citizens who are suffering because of the CBN policy would have been proved to be an exercise in futility.
This writer will appeal to those asking the Federal Government and the CBN to obey the Supreme Court order to hold their peace. Currency management is very complicated and their wish if granted will only cause chaos in the Nigerian economy.
Enyinnaya is a fellow, chartered institute of Bankers