Before N5000 Notes, Let’s Find the Soludo Coins by Sulaimon Mojeed-Sanni
On Thursday 23rd of August, 2012, the Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi (SLS) announced the bank’s intention to introduce N5000 notes. The CBN governor told reporters in Abuja that the planned restructuring of the Naira would lead to the conversion of existing N5, N10 and N20 to coins. And to enhance the quality of our currency by incorporating more effective features for the visually impaired as well as reduce the cost of production, distribution and disposal of banknotes.
According to Governor SLS, “Under the new structures, the existing denomination of N50, N100, N200, N500 and N1000 will be redesigned with additional security features.” The lower notes of N5, N10 and N20 will be converted to coins. The new N5000 note will bear the faces of three prominent Nigerian female activists; the late politician and social mobiliser, Margaret Ekpo (1914 – 2006); the late politician and activist Hajia Gambo Sawaba (1933 – 2001) and the late politician and women’s right activist Funmilayo Kuti (1900 -1978), will have their faces featured on the new note. The redesigned coins, improved notes and new N5000 notes will be launched early next year”. When introduced, the naira currency structure will become 12; six coins and six bank notes denominations.
But before we accede to yet another jamboree of banknotes restructuring and the addition of higher denomination, we must remind ourselves that currency reform was integral to the banking consolidation and financial sector reform of Prof. Chukwuma Soludo, former Central Bank Governor. He re-introduced coins, series of new naira notes and celebrated such with much funfair. Soludo compelled Nigerians to use coins and accept change in the new coins. The imminent return of coins was embraced by the public but hopes were dashed as the coins reported to have cost hundreds of millions to produce systematically went out of circulation and every goods that ought to sale in that line of our currency automatically jerked to N5. And, the higher denominations of N500 and N1000 reduced greatly the stress our politicians had to go through to steal large chunks of our common wealth. Rather than two Ghana-Must-Go bags of N100, just a fanciful suitcase filled with N1000 is all that was needed to dissuade preying eyes of journalist and the public. And now N5000!
If we are trying to reduce the amount spent on minting new notes by going “cashless”, why initiate the production of higher denominations? The argument by the CBN Governor, that the new note would further “complement the bank’s cashless policy, as it would substantially reduce the volume of currency in circulation, particularly in the long run” does not hold much substance. If that is the case, then the N5000 need not be in circulation for general usage but strictly an intra-bank document to ease movement of large sum of currency like what was witnessed in the United State of America where $5,000, $10,000, and $100,000 though legal tenders are used by banks and the Federal Government for large financial transactions. And had been last printed in 1945, and officially discontinued on July 14, 1969, by the Federal Reserve System. Just like in the US, the introduction of the electronic money system (Nigeria’s equivalent of Cashless policy of CBN), has made large-scale cash transactions obsolete. When combined with concerns about counterfeiting (which is rampant in Nigeria) and the use of cash in unlawful activities such as the illegal drug trade ( Nigerian politician’s blind looting and extravagant spending inclusive) , it is unlikely that the U.S. government will re-issue large denomination currency in the near future. So, if a developed economy like the US did away with high denomination currency over 40years ago, why should our supposed 21st century bank technocrat and risk management guru burden us with it? This is what can be called; “applying textbook formula” without considering the peculiarity of the socio-economic atmosphere it is being applied on. Amidst the barrel of challenges facing the country- insecurity, stagnant economy, corruption and even instability in the banking sector- introducing a new high denomination note and coins can only be economic sabotage and disservice to the nation.
While quoting countries where higher denominations of currencies had been introduced such as Japan, Singapore and Germany and their respective inflationary rate benched at 2.8, 1.1 and -0.7 respectively as of 2010, what Mallam Sanusi failed to tell us, is that none of the above mentioned countries can be compared to ours in terms of economic stability and development. Japan and Singapore are leading Asian Tigers while German remains one of the super powers of the world. He also failed to tell us, why we are a crawling giant whose inflation rate stood at a staggering two digit of 12.80 per cent despite effort by the Central Bank of Nigeria to keep it at 10 per cent by increasing key interest 6 times in 2011.
What continues to baffles me and indeed a large portion of Nigerians is the inconsistency in policy formulation of the apex bank. In 2008, the then former CBN Governor, Prof. Charles Soludo initiated plans to redenominate the naira at 1 new naira = 100 old naira but the plan was suspended when the then Late President Umaru Musa Yar’Adua refused to give approval to the bid for reason best known to him. And just like what Mallam Sanusi is trying to do now, Prof. Soludo anchored his policy on protecting the naira and check-mating inflation. My question goes thus, who is deceiving who?
According to Soludo the objectives of the redenomination exercise was to include the following: to restore the value of the Naira (in the short-term) close to what it was in 1985 before the commencement of the Structural Adjustment Programme (SAP) in 1986; To better anchor inflationary expectations; to strengthen public confidence in the Naira; to make for easier conversion to other currencies; to reverse tendency for currency substitution; to eliminate higher denomination notes with lower value. Also, to reduce the cost of production, distribution and processing of currency, to lay the foundation for the convertibility of the Naira as well as make it the reference currency in Africa and most importantly for the purpose of this piece, to promote the usage of coins and thus a more efficient pricing and payments system. If the Soludo coins where used as proposed, then it would be in circulation outside the shores of Nigeria because the coins strategically and systematically went out of circulation less than a month it was introduced. And every commodity in the coins buying range shots to N5. Today, we are talking about going that inglorious path again. Do our leaders learn at all?
From technical analysis and comparative advantage perspective, redenomination as proposed by Soludo is more in tone with Nigeria’s economic realities than Mallam SLS’s higher denomination shot. Redenomination is a more recent practice amongst nations of the world than introduction of higher denomination. For example, in January 2005, Turkey dropped or removed 6 zeros from its currency, the Lira (L), and replaced it with the new Turkish Lira (YTL) with conversion rate of million lira (1,000,000L) = one YTL (1YTL). Also, in July 2005, Romania dropped or knocked off four zeros from its currency, the leu (ROL), when it replaced it with the new Romanian leu (RON) with a conversion rate of 10,000ROL = 1RON. In July 2007, the Ghana Republic redenominated its currency, the cedi, by making one new Ghanaian cedi (GHc) equal to 10,000 old cedi (c), i.e. by dropping four zeros. Technically, currency redenomination is defined as the process whereby a country’s currency is recalibrated due to significant inflation and currency devaluation. In general terms, however, it is simply referred to as the dropping of zeros from a currency. Sincerely, this defines the state of the Nigeria’s economy not Mallam Sanusi’s white elephant project. Do we need to tell Mallam, that it is possible for currency redenomination to occur (pari passu) with revaluation or appreciation?
I feel, its more comfortable we emulate Ghana, and take our restructuring in piece meals. If Mallam Lamido Sanusi wishes to compromise and help our Politicians in their looting spree, he should at least consider average Nigerians whose shoulders might not be broad enough to bear the consequences of his restructuring. And lest I forget, the effort to recognise our past women heroes is well appreciated but considering what most of them stood for ( progressive activistism, human rights , collective social development e.t.c), demeaning their personalities with a project Nigerians are factually against, is more like kicking them in their graves. And more particularly, neither the spirit of late Madam Olufunmilayo Ransom-Kuti nor that of her late son, the Afro beat Legend, the “Abami Eda” of all times, Fela Anikulapo-Kuti, would appreciate her face gracing the filthy hands of politicians in the name of looting. Can somebody help pass this across to Mallam SLS
Sulaimon Mojeed-Sanni (SM-S)
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