The Nation Editorial–Flip-flop At CBN

Posted: August 28, 2012 in Uncategorized

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It first came as a rumour a few weeks back when a national newspaper broke the news that the Central Bank of Nigeria (CBN) was to introduce the N5,000.00 ‘super note’ to the Nigerian currency. The apex bank’s official promptly discountenanced it, stating that there was no such plan. However, it is now official that the board of the CBN has decided to introduce N5,000.00 note as Nigeria’s highest denomination of currency. Also in the offing, is the restructuring of the Nigerian currency which entails the conversion of the N5, N10 and N20 notes into coins. The new coins are expected to complement the existing 50k, N1 and N2 coins which though, have been long out of circulation.

So many rather disquieting issues have arisen from this decision of the CBN that a welter of condemnations and controversy have trailed the announcement. The first question being raised is, what is the point of a higher denomination note now and why such a costly review of the nation’s currency?

The CBN noted that higher currencies are more economical. But opposition parties, labour unions and financial experts have risen as one to query the rationale for what is considered a wasteful venture in the face of numerous pressing national problems and an obvious paucity of funds. What major economic value would this imbue the nation? That seems to be the refrain from every quarter.

Many have also pointed out that the new ‘super note’ flies in the face of a key component of CBN’s on-going reform which advocates a cashless economy. For about six months, the apex bank had embarked on a massive campaign designed to make Nigerians carry less cash and, in its stead, use virtual money products such as cheques, ATM card, debit and credit cards as well as online cash transactions. Limits were even set on the amount bank customers could withdraw or deposit. The entire purpose is to reduce the use of cash which is very expensive to produce and even more so to distribute and manage on a daily basis by the apex bank. Nigerians are just beginning to get attuned to dislodging cash from their consciousness and now CBN is about to throw in an alluring big ‘note’.

There is also the concern that the new note will only drive inflation. It has been suggested that the introduction of higher face value notes by any country signposts inflation. Examples of countries like Argentina, Peru, Zaire, Angola and Zimbabwe have been cited where raging inflation had driven currency notes to be printed in higher and even higher notes to no avail. Time was when the highest note in Nigeria was the N20 and coins were in common use. But coins disappeared in Nigeria as the currency denomination got higher. Attempts to reintroduce the coins a few years back failed because they could hardly give value anymore. And they are so cumbersome to carry, to boot. They disappeared naturally out of disuse. Why would CBN spend so much money to mint new coins when it had not determined why the last ones failed?

We dare say that this is another disappointing move by the CBN under the headship of Mallam Sanusi Lamido Sanusi. We have witnessed too many policy flip-flops under his regime of a seemingly endless reform in the last couple of years. More worrisome, neither the banks nor the financial system has been the better for it. We therefore urge Sanusi and members of the board of the CBN to take another look at this higher currency policy and indeed all others that seem inimical to the system, with a view to acceding to the will of the people.

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