Nigeria (CBN) to introduce N5, 000 notes early next year came under a hail of
criticisms yesterday, with industrialists and economists expressing fears that
it might shoot the prices of basic necessities through the roof.
Many citizens
also demanded a return of the suspended policy of redenominating the currency
initiated by the immediate past CBN governor, Professor Chukwuma Soludo.
The apex bank also
plans to turn N20, N10 and N5 notes into coins.
Manufacturers and
some economists yesterday told the Nigerian Compass on Saturday that the two
policies would trigger inflation.
The Congress for
Political Change (CPC) and the All Nigeria Peoples Congress (ANPP) also
declared that the policy would worsen the already poor living conditions of
Nigerians and boost corruption, a scourge that has continued to earn the
country a bad image across the globe.
If the N5,000 note
is introduced and N20 downwards become coins, those coins will simply disappear
and the prices of most basic items will start from N50, according to many
citizens who spoke with the Nigerian Compass on Saturday.
If the policy is
effected, a sachet of bottled water, commonly called pure water, will soon go
for N50. It is currently sold for N5 in many parts of the country and N10 in
some other parts.
Similarly, a roll
of tom tom and biscuits, which currently sell for N5 minimum may shoot up to
N50, the citizens said.
Dr Ifediora
Chimezie Amobi, a former Senior Special Assistant to the President on National
Development Matters, in the administration of Chief Olusegun Obasanjo,
expressed strong concern about the plan.
He said: “As
laudable as this policy prescription portends, there is a fundamental issue
that keeps lingering. Printing new higher-denomination notes under the current
currency regime will be a never-ending exercise as the CBN is responding to
increases in demand for Naira by printing higher-denomination notes.”
He noted that
printing higher denominations is gradually becoming a fad in the country.
His words: “It is
on record that in less than 20 years, we are going from a high denomination 50
Naira note to a 5,000 Naira note. A pedestrian would question whether this is a
true measure of our inflation or a measure of how our currency has devalued, given
that 5,000 Naira today will purchase almost what 50 Naira would have bought in
1991.”
He threw posers at
the policy makers, asking: “Has printing higher denomination notes over the
years controlled inflation, strengthened the Naira, increased its purchasing
power, or stabilized the economy?” Amobi continued: “Coining to the lower Naira
denominations –20 Naira, 10 Naira and 5 Naira notes will be a send-forth
ceremony, as it would lead to their eventual retirement. CBN’s plan is to use
them as legal tender along with the existing 2 Naira, 1 Naira and 50 kobo
coins, which today are recording less than 2% circulation and acceptance
success nationwide. It is not realistic to advocate the use of coins where
high-denominated bank notes are prevalent in circulation.”
He added that a
more practical approach to restructuring the Naira and succeeding as a
‘cashless’ economy is for the apex bank to re-denominate the Naira, a move that
he said, would not only further strengthen the naira but also make it a benchmark
or a reference currency in Africa.
“It will enable us
operate in an environment where people carry less cash, where coins are
reintroduced into our system, and where our financial assets, such as ATMs,
etc. work more effectively. Also, more people would use Naira as a store of
value since its exchange will be almost at par with the major currencies,
thereby reducing the demand for dollars and strengthening the Naira,” Amobi,
who is the newly appointed Executive Director, African Institute for Applied Economics
(AIAE), said.
The Director
General of the National Association of Chambers of Commerce, Industry, Mines
and Agriculture (NACCIMA), Mr. John Isemede, expressed sadness by the
development.
He said: “My own
observation is that I am sad because I am a student of Economics. I specialize
in International Business and Globalisation. So, if you look at the world,
which we today believe is now a global village, it is clearly that we are not
part of the global equation. If you look at Brazil, there was a time they were
having three exchange rates in one day. But, they were able to look inward to
solve their own problem.
There was a time
there was a total financial collapse in Argentina, they were reasonable to look
inward, not the IMF or the World Bank, they were able to solve their problem.
The case of Thailand is there. I worked in Zimbabwe when the Zimbabwean Dollar
was almost at par with the United States Dollar. It is not printing of more
money. Ghana was able to solve their problem and reduce inflation not by higher
denomination. Rather, the Ghanaians cancelled four zeroes and the Ghanaian
Cedis became more important than the American Dollars.”
He added: “Let us
look at the Nigerian scenario; our own currency is the worst in the world in
terms of the type of paper used. If you look at N20, N10 notes, after two or
three days it looks like pure water in the dustbins. Is that not? The cost of
printing this money, the cost of distribution across this country and the cost
of bringing them back because the CBN currency centres are not allowed, destroy
money. It is even worth more than the value of the money.
Should you be
thinking of printing more money or shoring up the value of the Naira? The
actual value of the American Dollar is 25k. If you go back to Bretton Woods
Conference in America in 1944, I have the exchange rate from that day to the
present day, So, if you now say you have N5, 000 note being introduced, what is
the value of that money? What the CBN should be looking at is the way of
growing the economy, the way of looking at infrastructure, the way of
developing the economy so that we can produce locally and have excess for
export that which will shore up the value of the naira.”
The NACCIMA boss
predicted that the introduction of the new naira note may further devalue the
Naira against the Dollar.
“With the
introduction of N5000 note, will the Dollar not be equivalent to N200? With
this, will the inflation not blow up the roof?
Isemede added that
the introduction of N5000 note would run counter to the cashless economy that
the CBN is introducing.
“Is it N5000 note
that will solve our problem or develop the economy for us to be part of the
21st century? We should be talking of cashless economy, we should be talking of
ATM, we should be talking of exchange rate of N100 to $1US. Brazil was able to
do it, Argentina was able to do it, Ghana was able to do it. Why can’t we do
it? It is not the amount of paper being printed called money that is our
headache in the OPS, (Organised Private Sector) it is the value, the purchasing
power, what it can buy.
What is the minimum
wage, N18, 000, which some state governors have refused to pay or they cannot
pay. Pensioners are not paid and all that. If you now say N5000, how will it
now help the economy? Will printing more money help the economy or fuel
inflation? This is our concern; it will only create more confusion and problem
and capital flight,” he said.
Also speaking on
the issue, an economist and apostle of deregulation of foreign exchange, Henry
Boyo, said the introduction of the new note is an admission of failure on the
part of CBN.
“It means that the
people who are managing our monetary policy are totally confused. Here they are
promoting cashless economy and they are busy introducing N5000 note. The
introduction of N5000 note is totally out of context. They are really taking
the direct and opposite step. It is an indication that the CBN and the monetary
team have abandoned their crusade or fight against inflation,” he said.
“According to the
new arrangement, there will be no kobo anymore. In other words, you cannot
price anything in kobo. The reality of what they are doing now is that they
have canceled Kobo. Don’t forget that the equity prices, most of them are
denominated in 50k.
But, in a different
perceptive on the issue, a consultant on Organization Management &
Leadership, Dr. John Ekundayo, described the introduction as a good development.
He said: “It is a
good omen as it is coming on the heels of the cashless economy being advocated
strongly by the Central Bank of Nigeria (CBN). I do not see the hue and cry of
some citizens on this development. For instance, how many Nigerians have spent
1 Naira and 5 Naira in the last few years? In essence, converting these
currency notes to coins is good. I will not advocate a phase out of these
denominations even though practically Nigerians are not spending these lesser
denominations but for the purpose and process of proper accounting, they are
useful and valuable.”
He added that
introducing a single 5,000 Naira note makes one to handle large quantities of
cash, when there is the need to do so, without much stress and strain. He,
however, urged the CBN to begin to put into practice before the issuance of the
new notes, the cashless policy nationwide not just restricting it to a certain
part of the country.
“Looking at 5,000
Naira, that is just around 31 US Dollars. In Singapore, the highest
denomination that I have seen is 1,000 Singapore Dollars (about US $700),
whereas in Malaysia, the highest denomination is 100 Ringgit (about US $33). In
the two nations, the currency is not a function of the robustness of their
economies, neither is it an indicator of inflationary trend or tendencies.”
