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Abdullahi Aborode: CBN’s Proposed N5000 Note – Good or Bad?
It’s been an ongoing debate for a while now and a very tough one at that. Many intellectuals have come to defend while some have protested against the N5000 note policy by the present CBN Governor Sanusi Lamido Sanusi and as expected, some are indifferent to it, but it will only be wise if we open our minds and see the two sides to the issue before making a final conclusion.
The CBN Governor claims the production of the new notes will help to reduce the cost of production and recycling of lower denominations. This is a valid point by SLS. If for instance, to produce N 1,000,000,000 (1 billion) in N1000 notes (i.e.1000,000 pieces) will cost N20 per note, the N1000,000,000 worth of notes will cost N20,000,000. Conversely, if the N 1,000,000,000 worth of notes were to be produced in N5000 notes (i.e.200,000 pieces), it would have cost the CBN N4,000,0000 as against the N 20,000,000 in N1,000 notes. Now on a larger scale, with the nation’s budget of about N 5,000,000,000,000 (5 trillion), the CBN will use N4,000,0000,0000 (4 billion) for currency production in N5,000 notes as against N20,000,000,000 (20 billion) in N1,000 notes, thus saving N16,000,000,000 (16 billion) for the economy.
Also the introduction of coins which we all know lasts longer than notes will reduce the cost of recycling from time to time.
There have been arguments about diminishing values of our currency. We can look at a scenario of fueling one’s car, by assuming that the fuel capacity of the car is N5,000 at the current pump price, paying with one N5,000 note or five of the N1,000 notes will have no effect on how long the fuel will take you, provided all other factors remain the same. So the new notes will have no effect on the value of goods and services. Another scenario is having 2 individuals with different income, one has a monthly take home of N20,000 and the other N500,000, the person on N20,000 take home will naturally withdraw in lower denominations of, may be, N100, N200 and or N500 whereas the individual on N500,000 take home will also naturally withdraw in higher denominations of N1,000 and or N5,000. And naturally, individuals will stay on denominations that are commensurate with their purchasing powers. Under simple economics, the denominations of a nation’s currency will have no effect on inflation provided the factors of inflation are not tampered with. Inflation is basically more money chasing fewer goods and services, and unless government increases money in circulation, raises taxes, devalues the currency, increases pump price of gasoline, increases lending rate and absurd increase in wages etc, there will not be inflation because of redenomination or adjustment to the denominations of the currency.
Extinction of coins
It is a myth that Nigerians don’t have a culture of carrying coins, my parents and uncles spent coins. In the seventies and early eighties, my dad’s breakfast used to be 15 kobo and school dinners at around 10 kobo. And even more recently before the June 12 crisis of 1993, a liter of gasoline used to be 45 kobo. Uncontrollable inflation crept into the Nigerian economy when successive government continued in their drive for devaluation of the naira leading to prices beyond the scope of the coins. As they are devaluing the naira, they complement that anti-growth policy with increase in the pump price of gasoline from about 45 kobo in the early nineties to N97 in 2012 translating to more than 200 fold increment. Over the same period exchange rate skyrocketed leading to astronomical decrease in value from about N10 in the late eighties to N160 to a dollar in 2012 translating to about 16 times increments. The twin policy of anti-people economic policy of pump price increase and currency devaluation led to the unfathomable inflation and hence the death of our coins. The N1 and N2 coins earlier introduced by Soludo were inactive because there was nothing to purchase for that rate. The truth of the matter is that the values of our current coins do not have the power of purchase for the household commodities that coins are meant to buy.
Considering our current security ‘excellence’ it will be very unwise not to know the introduction of N5000 will save us a whole lot of stress in that terrain. I can easily stuff N500, 000 in my pocket and no one knows how much I have on me as I can carry it and move cheerfully without causing attention.
This is one factor that we can’t shy away from, majority of Nigerians prefer to do hand in hand transactions, majority don’t have bank accounts to aid transactions, and majority don’t have access to internet to enable online transfer. So if we are to save their lives against armed robbery and the likes, its better they have huge bills that can be easily kept without causing attention. Imagine a situation where you hire an illiterate labourer and you intend paying him via bank transfer, will you be making any sense?
If we are thinking of Point of Sale terminals, where we have to pay at shops with our debit/credit cards, we have to know; how many Nigerian institutions/shops are registered with CAC, and besides, do we have the technology because POS are linked with bank accounts of buyers and sellers. If SLS wants a practicable policy, he should convince himself that the required security and technology network that will support the 24 hours service of ATMs and POS are in place. Also, saying cashless society doesn’t mean we won’t have any cash in circulation, we will have them at a controlled rate and the introduction of bigger bills will help reduce the circulation of lesser bills and we will be forced to use bank transactions on a lot of occasions. But with our no supply of electricity across the country, SLS and the government should just forget about the so-called cashless society because it is a brainwave.
The former president has come out to go against this policy like majority of us have done, but it will be wise to remember Baba introduced N20 to ‘honour’ General Muritala Muhammad in 1977. Also, under Baba’s nose; N100, N200, N500 and N1000 notes were printed. Baba didn’t condemn it then and now, but a new note under another administration will lead to inflation in Baba’s economic context or school of thought.
Is Sanusi part of the conspiracy against the Nigerian nation? As the Central Bank Governor, I know he does not have the power to build roads, improve security nor produce ATMS. But as the CBN Governor he has the power to push for revaluation of our currency. When our currency is revaluated, there will be absolutely no need to print larger bills, there will be no need recycling large amount of notes from time to time, the coins will be widely used and they will last longer and drastically reduce the cost of maintaining our currency. It is obvious to Nigerians of endowed reasoning capability, that the policy of devaluation and increase pump price of gasoline are wicked taxes imposed on the average Nigerians to cater for the greed and avarice of the few at the corridors of power.
The cabal or the 1% of our population that by default, covet the wealth of the nation, controls our oil wells, killed our rail system, destroyed our refineries, and bankrupts our power generation and distribution system. They come back through the back door to import generators and fuels. They are the ones dictating the values of the currency because their ill-gotten oil income, gives them access to dollars and they want Nigerians to part with the meager income and add to their own in thousands folds through devaluation. They are collecting more dollars from the government as subsidy on fuel they aren’t importing and round tripped it in the black market to further impoverish the common Nigerians that will carry the burden of inflation occasioned by their wicked acts.
As we all know every policy has its advantage and disadvantages, these are few reasons why I’m now in support of the introduction of the N5000 note and if it will be implemented ‘diligently’ it will not ruin the economy.
I may be wrong, you may be right. I may be right, you may be wrong. I stand to be corrected!
By Abdullahi Aborode @abdulahiaborode