5000 naira
Once again, Nigeria is in the throes, as it were, of another currency tinkering, except that this time it is in the realm of currency redesigning and new addition.
In recent memory, Nigeria has had major currency tinkering in the early 70s (under Yakubu Gowon’s regime) when it changed from pounds, shillings and pence to the present naira and kobo, and again in early 80s (under Buhari’s regime), when colours of different denominations of the naira were changed.
In-between these periods and to date, new additions, both in terms of paper currencies and coins, were effected. Another major tinkering would have occurred under the late Yar’Adua’s presidency, when the Central Bank of Nigeria (CBN) sought to re-denominate the naira, albeit without success. Many reasons had been advanced to justify every move along the way.
The most recent tinkering that is expected to be in place in 2013 will, apart from having the ‘reinforcement’ of 50k, N1 and N2 coins, see the emergence of the present N5, N10 and N20 in coins and the redesigning of the current N50, N100, N200, N500, N1,000 and, wait for it, a brand new N5,000 note to boot. Nothing is said of the lower denominations of coins such as the 1/2k, 1k, 5k, 10k and 20k. As usual, the monetary authority is not short in reasons for the move. But of what good is the present move to the health of the economy?
The CBN, and indeed any central bank anywhere in the world, is primarily concerned with price stability in the economy that is a sine qua non for a sustainable economic growth and development. Underlying this is the need to keep inflation at bay as much as possible. Within the Nigerian context, the present CBN leadership has pursued this objective with single-mindedness. The one before it also had its own way. It tried to put certain measures in place, the least not the reintroduction of coins to help curb inflation, though not much success was recorded in that regard.
Situating the present move to introduce the N5,000 bill within the context of the cashless policy being currently pursued by the CBN seems not in sync with the objective of discouraging Nigerians from carrying cash for daily activities. When CBN was introducing the cashless policy (which, by the way, is yet to be introduced in other parts of the country, apart from Lagos), it made it clear that one of the major objectives is to checkmate money laundering with its attendant corrupt practices, so pervasive in the economy. With the anticipated introduction of a high bill like the N5,000, where will this objective be situated?
To achieve the objective of bringing down inflation to a single digit, one would have expected the current leadership of the CBN to pursue with vigour, alongside other policy measures, the campaign for Nigerians to embrace the use of coins, which the immediate past leadership pursued initially with some gusto but lost steam midway. That the CBN is not thinking of re-introducing the lower denominations of coins earlier highlighted, at this point in time, calls for serious concern.
It is a truism that there is no civilised and advanced economy today that does not deal with very low denomination of coins. This has made it possible for commodities (goods and services) in these economies to be properly priced. You do not get to see people arguing or exchanging blows over ‘change’ as we have it and will continue to have it here in Nigeria until the issue is properly addressed.
I had a personal nasty experience some time ago when the immediate past leadership of the CBN was campaigning for the use of coins. I had then in my PHCN bill some kobo fractions and I wanted to pay the exact amount in the bill and to the last kobo. At the back of my mind was to test the efficacy of the campaign with a government establishment, having failed woefully at previous efforts with ordinary citizens.
And, was I disappointed? Disappointment would have been milder; I was rather greeted with hostility at the counter by the cashier on duty as if I came with some contraband. He yelled at me but I stood my ground, until a superior officer emerged and resolved the matter in my favour. And to think that this is a government establishment that should be a partner in progress as far as the campaign was concerned! At that moment, it was evident to me that the CBN had to up its game in all ramifications.
An important issue to consider in this present move is for the CBN to convince Nigerians that the redesigning of the present N5, N10 and N20 notes into coins will not result in the extinction of these denominations. The fear is quite real considering the country’s experiences in the past with coins. The implication obviously is that at the end of the day, the lowest denomination for transaction in the economy will be the N50 note. Nobody will like to touch the coins, not even the beggars! What will this portend for the inflation rate in the country and the general economic growth and development?
Methinks that no reasonable person will stand in the way of progress, but any move to progression must be constructive, well thought-out, and intended result assured. Trying to make Nigerians, for example, embrace the use of coins, especially the lower denominations, should be uppermost in the policy agenda of the CBN in the area of any currency tinkering. As pointed out already, the immediate past leadership of the institution tried to revive interest in that but couldn’t see it through.
One would have thought that any further currency tinkering by the CBN would be in the area of making coins very attractive to Nigerians, especially the lower denominations, as has been highlighted earlier.
Is it not curious that it is only in Nigeria that sellers, with the acquiescence of buyers (do they actually have choice?), always round up prices with kobo fractions, thereby making proper pricing of commodities ineffectual? Today, only few department stores (not more than three) dispense with coins in Nigeria in their daily transactions.
And, what about the cost of the re-designing and new addition? A lot of figures have been bandied about in respect of the cost. The CBN can be excused for currency redesigning in conformity with international best practice that requires countries to carry out such exercise every seven years, but at what cost? Any safeguards for currency faking that usually characterises introduction of high denomination of currencies? Any lesson from America when $500 bill was once introduced but its withdrawal from circulation was almost instantaneous?
The bottom line to all the foregoing is that the Research Department of the CBN already has its work cut out for it in the present scenario.
The department, more than ever before, should research on Nigerians’ aversion to the use of coins here, even though they readily embrace them abroad, and what must be done to check the trend and the impact on the economy of introducing a very high denomination like the N5,000 note at this point in time. These it ought to have done exhaustively before the pronouncement of the policy, but as is often said, better late than never.
That department must be proactive at all times and must be properly structured, if not yet in that mould.
