country's currency has attracted heated debate, which clearly
indicates the apex bank's public relations shortcomings, and raises
doubts regarding the extent to which the policy itself has been worked
through.
Under the plan, code named "Project Cure", the CBN is to reissue the
current N50, N100, N200, N500 and N1,000 notes with new security
features, as well as issue a new N5,000 note while lower banknote
denominations of N5, N10 and N20 will be coined.
The CBN Governor, Mallam Sanusi Lamido Sanusi, said the changes were
aimed at achieving certain objectives, ranging from upgrading the
design of the entire existing range of currency; redesign and
redenomination in order to enhance the quality and integrity of the
banknotes, and achieving an optimal currency structure that will
ensure cost effectiveness, balanced mix and utilization of all the
currency denominations. He added that the proposed restructuring was
due to the fact that Nigeria's currencies were last reviewed between
seven and 13 years ago, as against five and eight years in line with
international best practices.
Sanusi also said that the CBN conducted several stakeholder meetings
on the proposed restructuring and accepted their advice to coin lower
denominations of currency up to N100, encourage the usage of coins,
enhance the quality of banknotes; as well as introduce higher
denominations of banknotes in order to discourage dollarization and
reduce the volume of banknotes.
Aside from the unusual anti-Sanusi chorus mostly caused by the
drastic, but welcomed measures to sanitise Nigeria's banking sector,
the healthy debate going on regarding these proposals is a welcome
development. The CBN needs to take it seriously.
Printing new notes to reduce the tattered and smelly ones in
circulation, redesigning existing ones with enhanced security
features, even the introduction of higher denominations and coining
lower notes, are all within the powers of the CBN. However, in a
democracy, all public organs need to carry the people along and this
the CBN has not been very successful in doing. This has led to the
raging controversy and even criticism from other public organs,
including the National Assembly.
The fundamental issue, which the CBN appears not to have thoroughly
worked out, or which they have failed to explain, is how the proposed
measures relate to their stated objective of cashless banking in the
country. Given all the steps taken by the CBN to address money
laundering and corruption in the country, such as know-your-customers
via re-validation of banks' customers documents, setting limits to
cash withdrawals, the ongoing experiment with cashless Lagos, which
have not yet work themselves out, would the proposed introduction of
higher denomination of N5,000 notes not undermine all these efforts?
If the laudable intention of forcing corrupt officials, drug lords,
money launderers and terrorism financiers to leave paper trails is
still desirable, why disrupt this very early in the day by making it
easier to carry millions in untraceable cash? Or has the war against
corruption been won and the government able to discover and disrupt
terrorism financing?
The co-existence of two contradictory policies often guarantees their
mutual failure. When a third is added, as seems to be the case now,
there is the need to go back to the drawing board. The third in this
case is CBN's stated objective of using the higher denomination notes
to "discourage dollarisation". While it is true that the dollar is the
preferred currency for giving or taking bribes, at least, the money
could be traced through the system. By domesticating the preferred
currency, the monetary authorities are making the process more opaque.
The CBN should take the advice of the National Assembly and suspend,
for the time being, the issue of higher denomination until it resolves
these wrong signals, potential conflicts and contradictions. By all
means let them go ahead with redesigning to enhance security features
and longevity of the notes. Existing procedures for withdrawing and
substituting torn, tattered or defaced notes should be strengthened
and made less cumbersome. Even now mint notes are available on the
roadside at between 15 percent and 20 percent premium for those
wishing to spray at occasions and festivals.
Coins are a different matter altogether and would require much more
thorough study. Coinage itself may not necessarily lead to inflation.
However, they are out of circulation as they cannot buy anything, thus
requiring that the CBN reconsider the matter of revaluation and usage.
As at now, many bank vaults are filled to the brim with coins nobody
wants and the CBN is unwilling to accept or change.
The popular concept that new and higher-value notes are issued just as
the country approaches an election period, and often end up with
ruling politicians before they are even recorded in the system must be
countered by clean and transparent measures of reassurance.
Laudable as aspects of this new proposal are, it still does not appear
that some of the main concerns have been sorted out, or fully
explained, suggesting that the CBN may have to go back to the drawing
board.
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