N5,000 notes: Pure water, Sweets may sell for N50

PLANS by the Central Bank of 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.”

Source: Compass