Following the announcement of impending currency change in the Nigeria market by the Central Bank of Nigeria (CBN) last Thursday, and the non-disclosure of the expenditure of the proposed monetary plan, a source has been quoted as saying the apex bank will spend 40.3 billion naira ($256 million) to produce the new currencies.
According to The Punch, a member of the CBN board revealed to the paper that “The bank is spending over N40bn on the production of new coins and notes. The N40bn is the total sum for the production of the coins and the new notes.”
Out of the amount, 11.8 billion naira ($75 million) will be spent on the new N20, N10 and N5 coins, the newspaper stated.
The CBN governor, Lamido Sanusi had stated last Thursday that the cost of the printing will be communicated at the end of the financial year. “The cost of printing the currency is publicly available information in the published account of the Central Bank of Nigeria and you will see the cost of printing the naira in our balance sheet at the end of the year.”
The newspaper source also revealed that only the N5,000 note would be printed by a foreign firm which had “the technology and the capacity to handle the sensitive features in it.”
In a related development, the announcement of the introduction of the N5000 note has been met with criticism by some opinion leaders in the country.
A statement released by opposition party, Action Congress of Nigeria (ACN) through its National Publicity Secretary, Alhaji Lai Mohammed, on Sunday stated that introduction of the N5000 may be detrimental to the economy of the country.
Citing the example of countries like Zimbabwe, Argentina, Bolivia, Nicaragua, Peru, Angola and Zaire/DRC; the opposition party argued that these countries experienced inflation as a result of the introduction of higher currency. It advised the country to learn from the bitter experiences of Zimbabwe and others that introduced higher denominations.
Speaking on Zimbabwe’s situation, the political party said, “On May 5, 2007, Zimbabwe issued currency notes with face values of Z$100m and Z$250m. On May 15, 2007 a new bank note of Z$500m was issued, followed by the issue on 20th May 2007 of currency notes in denominations of Z$5b, Z$25b, and Z$50b. Finally, on July 21, 2007, bank notes with a face value of Z$100b were issued.
“Eventually, Zimbabwe abandoned its own currency and legalised the use of only foreign currencies. Curiously enough, in certain places in Nigeria today the American dollar is the accepted legal tender.”
According to the opposition party, the issuance of such high value currency notes is likely to be perceived as an indication of government’s failure to effectively control inflation.
“Unfortunately once this perception takes hold, increased inflation expectations can be built up quite rapidly and these have pushed many countries into a situation of hyper-inflation in the past, which has typically culminated in the redenomination or even complete abandonment of the entire currency system,” the ACN said.
It disagreed with the assertion of the CBN that the introduction of reproduction of coin into the Nigeria monetary system will aid the effectiveness of the cashless policy. It said that “The introduction of a high face value currency note actually does the opposite because by reducing the unit cost of printing and transportation, it actually would promote the use of cash.”
Meanwhile, a statement issued by the Director-General of the Obafemi Awolowo Institute of Government and Public Policy, Lagos (an independent think tank and research institute), Prof. Adigun Agbaje, also enjoined that the introduction of the new currency is “a slippery slope towards hyper -inflation and that it is time to abandon failed inflation-control policies and inadequately thought- through experiments.”
He posits that the proposed plan “runs counter to the recent policy of the CBN to promote a “cash-less” economy by encouraging the increased use of non-cash transaction instruments. This policy, which is aimed at reducing the use of cash has been justified by the need to reduce the burden of the cost of printing and distributing currency notes. The introduction of a high face value currency note actually does the opposite. “By reducing the unit cost of printing and transportation, it actually should promote the use of cash.”
The institute stated that the impending consequence on the introduction of the N5000 note include the possibility to “raise government revenue”, “reduce the cost of transactions, with the possibility of inflicting “collateral damage” or having “unintended effects”.