It is no longer news that the Central Bank of Nigeria (CBN) will introduce the N5,000 note into circulation in 2013 as part of a comprehensive currency restructuring exercise and also the lower naira denominations of N20, N10 and N5 will be made coins. The front face of the highest denomination will be adorned with the pictures of late Margret Ekpo, Fumilayo Kuti and Hajiya Gambo Sawaba. BLESSING IKANI analyses the implications of introducing the N5,000 note.
According to the Central Bank of Nigeria (CBN), Governor Sanusi Lamido Sanusi, the existing N50, N100, N200, N500 and N1,000 would be redesigned with new security features and launched at the same time stressing that president Goodluck Jonathan has approved the new currency series and also approved that the N20, N10 and N5 be converted into coins and used as legal tender along the existing coins of 50k, N1 and N2. This new development is believed to be the first major currency restructuring in seven years which was done by the then CBN Governor, Prof Charles Soludo, in 2005 leading to the introduction of the N20 polymer bank note.
According to Sanusi, the introduction of the new currency will be a gradual process, adding that “the banknote will circulate simultaneously with the old series until they are fully withdrawn from circulation and as long as the old bank note is in circulation, they will remain legal tender”.
The introduction of N5,000 note is in line with international practices which stipulate monitory authority to review their nations’ currencies between five and eight years with the aim of addressing inevitable weakness and challenges identified in the circulating bank notes and coins. The CBN’s currency operations Department, Nigerian Security Printing and Minting Company Plc, along with international consultants are expected to collaborate in the redesign project.
Since the CBN announced intention to introduce the N5,000 note and convert the N20, N10 and N5 notes into coins, there have been mixed reactions on the issue. Prominent among those who have reacted is the Senate Committee on Banking, Insurance and other Financial Institutions.
The Committee headed by Senator Bassey Otu has declared that the planned introduction of N5,000 note by the CBN as illegal.
The committee chairman said that the lawmakers were not consulted by the management of the CBN, therefore describing it as illegal since it did not pass through the Senate before the pronouncement by the Governor of the CBN, Lamido Sanusi. He stated that a huge decision such as considering introducing a new naira note requires parliamentary approval, adding that the CBN should be careful not to send the signal that the Nigerian currency was valueless.
“We believe it is definitely not and that for every unit of value, they is need to carry a large quantity of cash. Previously in 2008 and 2009, the CBN came up with a proposal to re-denominate the currency; that was even to remove the zeros. Here we are in 2012, and we are seeing a kind of policy summersault even though we understand the dynamics of the sector very well.
“In 2005, the CBN undertook a major currency restructuring which ran into billions of naira. Till date, the proper value assessment has not been done to know the cost to the Nigerian tax payers, and in that 2005 coinage, I think it did not work at all because both goldsmith and the blacksmith converted the coins to moulding bangles, earrings and so on”. According to him, the committee needs to be formally briefed on the proposed introduction of the N5,000 note in 2013 by the CBN, as also the cash-less policy is yet to be fully explained to Nigerians.
The Senate has already asked the CBN to stop all further actions until the Senate of the Federal Republic is properly briefed.
Meanwhile, the House of Representatives has summoned the governor of the CBN to appear before the House to brief them on the proposed introduction of the N5,000 note.
Meanwhile, the Congress for Progressive Change (CPC, has condemned the planned introduction of the N5,000 note by the CBN, saying it will aid corruption in the country, stressing that the introduction of a higher denomination is not in the interest of Nigerians and the economy.
The National Publicity Secretary of the party, Engr Rotimi Fashakin, said, “The era of Ghana-must-go bags dwindled with the introduction of the N500 and N1000 notes in the past. It became easier to carry millions of naira in moderately sized brief cases and inexorably, increasing the incidence of high- profile bribery scandals in the polity.
“Recently, we witnessed the allegations and counter allegations of solicitation for and receipt of bribe money levied against certain highly influential politicians in the country. It is axiomatic to infer that those transactions were opaque to the banking system because of the facilitating ambience of high currency notes. We insist that the introduction of N5000 currency note shall further exacerbate the corruptive tendencies in the Nigerian polity”.
The All Nigerian Peoples Party (ANPP) have also argued that the introduction of the N5000 note will mark the beginning of suffering for Nigerians. The two parties in separate communiqué issued said, “We don’t need it”.
A financial expert, Bismarck Rewane, said the introduction of N5,000 note may not aid corruption and encourage more spending but it is not likely to stir up inflation. “I don’t think there is any correlation between reduction in denomination and inflationary trend. It is more or less coincidental rather than aiding each other because there is a proof to show that the higher the rate of inflation in a country”.
“But it might encourage corruption and encourage more spending. If for instance I go to a supermarket and I have N5,000 note with me, the moment I bring it out, there is a tendency to spend more. Also, if I want to bribe you and I want to give you N1 million, I will only give you 10 bundles. But these are not issues. The truth is that if we are going cashless, we should be reducing the denomination; the lower the denomination the better”.
The decision of the CBN to introduce the N5,000 note in 2013, and to honour some prominent people might seem like a good idea. However, considering the fact, that the economy of the nation is at a fragile stage, the CBN should put into consideration the effect the new system will have on Nigerians.
Possible effects of the introduction of the N5,000 note are: the devaluation of the naira, inflation leading to an increase in the price of goods and services, the promotion of money laundering and corruption in the country, scarcity of money, an increase in the rate of arm robbery attacks in the country and others.
The decision of the CBN to introduce the N5,000 is not in the interest of Nigerians especially those at the lower wrung of the socio-economic ladder. Rather, it is only few Nigerians who will benefit from it, including the corrupt public office holders and some selfish? politicians.
In a country where there is high unemployment, inflation, poverty, looting of public funds, non-existing price control mechanism and so on, it will be appropriate for the CBN to come up with better policies that have bearing with the present predicament most Nigerians find themselves in.
The CBN should come up with economic policies that will address unemployment, insufficient power and water around the country, improving on the provision of healthcare services, educational institutions and so on. Nigerians will massively support any of these policies that will better their lives because Nigerians are tired of the changes and introduction of currencies that do not add value to their lives.?