Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi stirred the hornets’ nest recently when he announced a revision of the denominations of the nation’s currency. Specifically, he announced that beginning from the first quarter of 2013, the apex bank would introduce N5,000 bank notes, 50 kobo, N1 and N2 coins; and would convert the N5, N10 and N20 notes to coins. Reports said the project would cost a whopping N40 billion.
Indeed, there may be nothing wrong with the proposed large denomination notes, since according to the CBN, doing so would mean printing a smaller quantity of bank notes and would also be more cost effective. In addition, on parity with other currencies like the Euro, Dollar and Pound Sterling, the naira has about the least large denomination. The N1,000 note which is Nigeria’s highest denomination, for instance, is equivalent to four British pounds, which are coins in the United Kingdom. Therefore, the CBN seemed convinced that the proposed N5,000 note would make more sense as a larger denomination since it would be the equivalent of about 20 British pounds.
Critics, however, have also rightly pointed out that the idea of introducing the N5,000 note appears a negation of the CBN’s cashless policy whose main target is to reduce the volume of physical cash used for daily transactions. To such critics, the N5,000 note project is a policy summersault. Besides, the introduction of N5,000 notes has the capacity to enhance public sector corruption and money laundering; as crooks can effortlessly exploit it to move huge sums of money around for criminal purposes such as funding terrorism and drugs, among others. This is in addition to triggering intensified counterfeiting and money doubling crimes.
Coming to the proposed coins, it is also public knowledge that Nigerians are no longer used to coins, let alone carrying or making transactions with them. It is not unlikely that many youths in their late teens and early twenties have not set their eyes on any Nigerian coin. Critics, again, say if the proposed coins are not accepted and used by the Nigerian public, as is most likely to be the case judging from past experience, it could worsen the country’s inflationary trend as small retail transactions, which represent a predominant feature of the country’s economy, may be hindered when retail prices are pegged at the nearest available bank note. Of significance also is the apprehension that the CBN has no guarantee that the coins when introduced, would do better than the ones dumped in the past by way of adequate functional values.
Reports have indicated that President Goodluck Jonathan approved the CBN proposal and that the Federal Government’s economic management team endorsed it as well. The National Assembly, however, appears nonexcited about the initiative. The Senate wants it suspended; while the House of Representatives has summoned Sanusi over the proposal in what many fear might lead to a face-off between the executive and the legislature. The Institute of Chartered Accountants of Nigeria (ICAN), eminent economists and the manufacturing sector have all condemned the initiative as counter-productive; but the CBN seems hell bent on carrying on with it.
Except the FG and CBN have other reasons yet undisclosed, we see nothing that warrants the proposed heating up of the economy through the latest CBN currency project. Indeed, the N40 billion purported cost of the project is a huge sum that could serve a better purpose if channelled to infrastructure provisioning that would have multiplier effects on the economy than the vanity of printing and circulating higher denomination notes. Even if the CBN is not spending as much as the said N40 billion on the project, the apex bank spent a total of about N125 billion in just three years (between 2009 and 2011) on the printing of currency notes. The CBN has also not come up with any superior or special argument on why the nation’s present currency regime should be suddenly changed.
We therefore view the proposed huge spending on currency rejigging as a needless adventure which the CBN wants to embark upon strictly for the purpose of self glorification or other reasons unknown as yet. It is, therefore, crucial that the NASS should thoroughly scrutinise the necessity or otherwise of the project against the backdrop of the pitfalls of similar exercises elsewhere as have been pointed out by experts. The inflationary setbacks of the new currency regime should be closely examined especially considering the problems such initiatives created in countries like Argentina, Zaire/DRC and Zimbabwe. If the purpose of the project is to facilitate the easy movement of election funds come 2015, as is being speculated in some quarters, then the project is dishonest and would spell doom for the nation. We believe the NASS has the muscle to put a stop to the charade; and we so urge it.