August 27, 2012 – N5, 000 Currency Note: The Death Knell For N5, N10 & N20 Notes
Outrage raised by the impending introduction of N5,000 currency note in January 2013 by the Central Bank of Nigeria will take a long time to settle. naijagists.com
Opinions have been divergent following the announcement by the governor of the Central Bank, Sanusi Lamido Sanusi, last week. While some Nigerians have applauded the move, others believe the introduction of such a higher currency note negates the Central Bank’s much vaunted cashless economy. Besides, it will worsen the current high inflation, they argued.
We align with those who believe the negative consequences of the introduction of the N5,000 note far outweigh the perceived advantages. It is on record that each time a new currency note with higher denomination is introduced, the lower currency notes changed into coins become useless. Even though they do not cease to be legal tender, they no longer serve as a medium of exchange because traders reject them for reasons best known to them. We are afraid that this same fate will befall N5, N10 and N20 notes which will be converted into coins in January 2013 when the N5,000 note will be introduced. What it means is that all the items being sold for N5, N10 or N20 as the case may be, will attract a new price tag of N50 which will become the least currency note in circulation.
For instance, a consumer item such as sachet water which now costs N10 will go for N50 from January next year. This will definitely worsen the existing inflation and exacerbate poverty in our country. Unless the Central Bank of Nigeria comes up with a strategy to compel Nigerians to embrace the culture of using coins as a legal tender and as a store of value, we believe we may well be singing the death knell for the current N5, N10 and N20 notes.
The cost implication is another sore point entirely. The Central Bank says it would cost N40 billion to mint the new N5,000 note, redesign the existing N1,000, N500, N200 and N100 notes as well as convert the existing N50, N20, N10 and N5 notes into coins. Can’t that huge sum of money be used for something more pressing such as providing jobs for the youths? This is a colossal waste the nation can ill afford in the present circumstance.
The introduction of the N5,000 note will also worsen the level of corruption in the country. It means looters of the nation’s treasury will easily cart away billions without getting noticed. Each time a higher currency note is introduced, the economy is always the worse off. Hence it is a poor decision by the Central Bank which will not do anyone or the economy any good except the corrupt elements who will profit from it by looting easily.
Nations such as Zimbabwe, Zaire, Bolivia, Russia, Angola, etc., had at various times introduced higher currency denominations and their economies paid dearly for it. The case of Zimbabwe is even more profound as the country has one of the worst rates of inflation in the world following the introduction of the Z$100 billion note in 2007. The country has since abandoned its own currency and now uses other countries’ currencies that have higher face value. Sanusi should learn a lesson or two from Zimbabwe whose economy is now in absolute tatters.