President Goodluck Jonathan
By Muhammad Bello
Notwithstanding the wave of criticisms against the plan by the Central Bank of Nigeria (CBN) to introduce a N5000 banknote, the apex bank Tuesday got a push from the Federal Government to go ahead with the project.
The government also dismissed fears that the new note, when introduced, would cause inflation.
The Economic Management Team (EMT), at a meeting in Abuja, presided over by President Goodluck Jonathan, said there was no link between a higher currency note and inflation.
At the meeting, CBN Governor, Mallam Sanusi Lamido Sanusi, gave the EMT members a comprehensive briefing on the benefits of the impending currency regime, under which the current N5, N10 and N20 notes will be turned into coins alongside the introduction of the new higher bill.
The team explained that since the introduction of the N5000 note has no inflationary effect, the fears that the introduction of the currency will affect prices and upset the market are unfounded.
It said there was no correlation between inflation and the new currency denomination, adding that rather, the introduction of the higher currency would strengthen the naira.
Minister of National Planning, Dr. Shamsudeen Usman, told State House correspondents after the five-hour meeting that the introduction of the N5, 000 is not in conflict with the cashless economy that the CBN is driving.
Usman said: “Clearly, the N5, 000 note, unlike what some people think, is not going to lead to higher inflation. There is absolutely no link; I am an economist, I have been deputy governor, operations of the central bank.
“The last review of the introduction of N1, 000 note and the various coins I was deeply involved; it was my responsibility at the central bank. There is absolutely no link between inflation and the currency denomination.
“So, obviously the discussion today was basically to endorse (the proposal). Mr. President had already approved of it and that is the only requirement by law. The CBN is to propose and Mr. President is to approve. And since Mr. President has approved, really what is important is to just explain it.
“I personally had some concerns about the coins but after some discussions with the CBN governor, he has actually clarified the point even the media didn't get. The coins are being introduced on an introductory basis so that if people accept them and are using them, then gradually they will withdraw the notes but they will run concurrently with the notes for now.
“Those were my concerns initially because you remember during my time in the CBN, we introduced the one naira and two naira coins. Unfortunately, they were not utilised at all. Part of that is really the value of N1 and N2 today what can you buy? So, because they are higher denomination, they may be accepted by the people.
“I think even that aspect didn't come out well in the communication and so the CBN is going to communicate to Nigerians that the coins will run concurrently with the notes. They are like testing the waters if they get accepted and are being utilised, only then will they take subsequent actions.”
Usman also dismissed the notion that the introduction of the N5, 000 note is at variance with the cashless policy.
“It is not at variance. In most of the economies you look at, the euro has the €500 note, if you go to the countries where euro is in use, you will not get the €500 note in normal circulation. But it is used by the banks and a few other heavy cash users to store higher value. I have been to parts of the United States where you draw the $100 bill and give it to somebody and he will start to look at it as if it is something strange; they probably have not seen it. So, the higher denominations are there to create higher value. They will not be in the widest of circulation but other countries usually have these higher denominations. And I think what is important is that there is no link between the higher denominations and inflation,” he said.
He faulted the arguments that the introduction of the N5, 000 note would aid corruption, saying that it would not necessarily increase the level of corruption in the country.
Another member of EMT, Mr. Atedo Peterside, argued that besides the fact that the introduction of the N5, 000 note would not increase the cost of currency printing, it is better for the economy as people would prefer to keep their money in naira rather than in hard currency.
He said: “If I were the CBN governor, I will prefer to print N10, 000 notes. Last year, Nigeria spent N47 billion to print these small, small notes. If we were printing bigger denominations, we will print fewer numbers and you make a phenomenal savings. Secondly, money is a store of value, all these thieves, rogues and vagabonds running around in various states and all over the country, when they steal money, they will want to keep it outside the banking system.
“So, they need a higher denomination notes. Right now, they are using the $100 notes all over Nigeria because they are the best store of values for them. If you give them a better store of value in Nigeria, they will move away from those dollars, reduce the demand for the $100 notes and move into our own currency as opposed to the use of $100 to hide their loots and so on.
“Right now, the country is losing in two ways; one: we are importing massive US dollars to finance the activities of all these rogues because the US dollars offered the higher store of value for them; and two, we squander our resources printing large volumes of worthless notes. There is no inflationary impact; that is voodoo economics.”
Chief Executive Officer/Managing Director, Access Bank Plc, Mr. Aigboje Aig-Imoukhuede, who is also a member of the EMT, said the demonstrations and criticisms trailing the planned policy are uncalled for.
“It is very rare for you to have a central bank that does not look at the issue of currency management and issue new notes from time to time based on the reality of the economy. In the case of Nigeria, our economy is such that a N5, 000 note which is in effect a $30 note is not strange,” he stated.