Lawrence Williams: Sierra Leone Telegraph: 17 July 2022:
Almost two weeks after the redenominated currency came into force, some commercial banks in the country are experiencing cash shortages. Last week saw new restrictions imposed on the amount of money individuals are permitted to withdraw from their bank accounts.
Many banks, including the United Bank for Africa, and Rokel Commercial Bank, capped over-the-counter withdrawals for individuals at NLe1,000 (1 million leones in the old currency).
It was reported to Fritong Post that some clients who went to the banks to withdraw more than NLe1,000 were utterly disappointed after being told that the maximum amount they could withdraw is NLe1,000.
One of the banks mentioned above informed Fritong Post that the withdrawal limit for cash transaction was NLe1,000. The bank said this was due to an insufficient supply of cash from the central bank.
The Bank of Sierra Leone (BSL) official spokesperson, Beresford Taylor, claimed in a telephone interview last week, that the central bank was unaware of this situation, as he denied any knowledge of this ugly development.
“There has been no such notice issued to any commercial bank in the country, and the BSL is unaware of this,” said Taylor. When contacted again, Taylor acknowledged that the central bank was aware of the situation and had authorised actions to address it.
In accordance with Section 65 of the Bank of Sierra Leone Act of 2019, BSL issued a directive on 8 July 2022 stating that the over-the-counter cash withdrawal limits for individuals and corporate entities should not exceed NLe30,000 (30 million leones in old currency) and NLe100,000 (100 million leones in old currency) respectively.
This directive was to be complied with until otherwise revoked or suspended by a notice published in the gazette.
In section 5 (a) of the Act, the central bank is responsible for issuing and managing the local currency. This authority is further reinforced in Section 27 of the Act, with a particular emphasis on subsection 5, which states that the bank is responsible for “maintaining an appropriate supply of banknotes and coins” in order to maintain financial stability.
In Section 65 of the Act, the central bank is required to issue orders, directives or guidelines to bodies, institutions or organizations under its regulatory authority. These institutions are mandated to comply with those orders, directives, or guidelines issued by the central bank.
It is also important to note that commercial banks and other financial institutions regulated by BSL are prohibited from imposing restrictions that contravene the central bank’s authority.
So, it is understandable why BSL claims that the limiting of cash withdrawals to NLe1,000 has not been sanctioned by them.
But while this situation is concerning, it raises the question of whether the country has enough of the recently issued bank notes in circulation.
Additionally, it imposes a duty on Parliament to summon the Bank Governor to explain to the nation how much of the re-denominated currency was printed and why the country is still undergoing this kind of economic crisis.
Good luck to the Bank Governor. He has either done his homework, photocopied someone’s template or he is attempting a great leap into the unknown. At least you might not for now a Ghana must go bag to collect some Leones from the bank or make a deposit. I thought all along the Leone will be soon superseded by the Eco – the common West African currency – in 2027.
https://iari.site/2022/03/01/the-eco-common-currency-in-west-africa/
Or is it the case the learned Governor sees a fat chance of Sierra Leone meeting the stringent conditions set for joining the common currency?
Not sounding too cynical, I will be curious to see how long it will take before the New Leone regains its deleted three 000s. Ten years? Thirty years?
It is a fact that the old Leone has depreciated by almost 100percent since 2018. About four zeros have been added since the Leone was unpegged from the pound.
Well done that we have a new currency. But wait a minute!
I have been quiet about this bank Governor, thinking he would make the right decisions to save our economy and currency. But he is becoming an embarrassment to his ideas. That isn’t nice. Let’s be fair with him on our country’s inflation which he handled very well. But his currency management policies have always been catastrophic and a waste of money. He told us that with the redenomination of the Leone, he would take care of currency hoarding. But just twelve days after the launching of the new money, NLE 8 000,000,000(Eight Billion New Leones) cannot be traced. Mr Bank Governor, the problem we have in Sierra Leone is that the people don’t have trust in the banking system. Do you know that or agree with me? The best thing you should have done was to find ways to let Sierra Leoneans have faith in the banking system. Period!
Now, you have placed a policy that will slow down the economy. Limiting the number of money people could withdraw from their bank accounts will devastate the economy, which you don’t want to happen. Sierra Leone is a cash-driven economy. So, any restriction on the money flow will drag the economy down. Let common sense prevail, sir.
President Bio told us clearly that “he is not an economist” after launching the new leone. It means that no one should blame him if anything goes wrong. That’s a fact in my view. The bank governor should take full responsibility if there are any problems. Where has all that colossal sum of money gone? Are we talking about Eight trillion leones in the old leones? Oh Boy. That’s insane.
The Bank Governor should resign because of the missing eight billion new leone fiasco, or president Bio should sack him. The hoarding of the currency that he promised would stop with the introduction of the new Leone has already started to fail. We cannot continue playing the trial and error methods with our economy. That is dangerous and unacceptable.
It is the third time I’m asking President Bio to sack individuals who make policies that have been either controversial or failed. I reckon these individuals are not telling the president or telling the truth to power. Take the outcome of the census, the recent PR bill sent to parliament, and the new money backlash. President Bio is not obliged to take my recommendations, but it will be a good idea if he does. We can’t continue like this in Sierra Leone. God bless President Bio and Sierra Leone. Yeah.
Which is which ?Either the Bank of Sierra Leone is telling the truth about not giving the directive to limit over the counter withdrawals of the new Leone or the commercial banks are trying to hoard as much cash to cushion any future uncertainties that are hidden in plain sight. The Bank of Sierra Leone and the commercial banks can not be right and wrong . One institution most be telling the truth and the other telling pokies. With a run-away inflation and rising cost of living hitting house holds , the real reason why the government is by extension applying legal tender laws to get a grip on price controls , is now rapidly becoming clear to us all. Former President Doe of Liberia tried it in the late eighties to get a grip of inflation in the stagnant Liberian economy it never works. Even the American economist sent by the Reagan administration to advised Doe on government economic policies have to at the end pack up and leave .This policy is a carbon copy of that when a government lost it’s way. More like applying a plaster to a gapping wound. Maybe for the short term it will appears to heal but in the long term the problems will persist.
According to studies “usually governments using price control or legal tender laws can affect the equilibrium price levels of two domestic currencies , with the goal of affecting the old currency out of circulation and replacing it with the new one.It is shown that some equilibrium solution that exist is a laissez-faire environment disappear with government monitoring . Additionally , when the old currency is made illegal its equilibrium value is affected differently by public measures such as conversion , tax and redistribution polices .Finally, if the enforcement power of legal tender laws are strong enough the old currency cannot be more valuable than new one and the probability that it changes hands in that when introducing lotteries , cannot be smaller than one ” This goes to the heart of why our country is such an economic mess .The problem we have the people that have the authority to make things happen in our country , they never pay attention to details .
The ideas are there but the pros and cons are never debated fully .We just make up things as we go along .Frist the board at the Bank of Sierra Leone denied making such directives .Nevertheless after coming under pressure from the press to explain themselves they were quick to acknowledged about it existence.The problem we have in Sierra leone there is no transparency and accountability mechanism that is robust because too much power is concentrated in the hands of the Presidency .A one-man show that decides what is good and bad for our country .
Mr Jalloh, can you please read and edit your comments before submitting, otherwise they will no longer be published. And the same advice for Mr Brima Sesay. Thank you.