How Nigerian Crackdown on Vast Cash Economy Backfired 

Nigeria’s government triggered economic chaos with a botched plan to bring the country’s vast informal economy under control. The idea was to get cash that was circulating under the radar into the regular banking system by compelling people to exchange their old money for newly designed naira bills. But banks couldn’t issue enough of the new notes to replace the ones being handed in, creating a cash shortage that frustrated citizens and disrupted businesses. The nation’s top court then ordered a halt to the currency swap, saying it was unconstitutional.

The central bank changed the colors of the 200, 500 and 1,000 naira notes and the new bills went into circulation from Dec. 15. The hope was that when people dropped their old money at the bank, many would choose that moment to switch to making electronic payments for their day-to-day finances. Banks hired 1.4 million agents to fan out to markets and rural areas to encourage people to open accounts, aiming to avoid a last-minute rush. The central bank suspended charges on cash deposits at banks and directed lenders to open their branches on Saturdays to encourage customers to turn in their old notes.