N5000: CBN dismisses inflation fears

AUGUST 29, 2012 BY NIYI ODEBODE AND FRIDAY OLOKOR 

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The Central Bank of Nigeria on Tuesday dismissed fears that the planned introduction of N5000 note could engender inflation.

The apex bank said the fears expressed by Nigerians, including economists and finance experts, had  no basis in economics.

It  threw a challenge to  economists  against  the move to make public,  any theory that  opposes  higher currency denominations.

The CBN  Director of Corporate Communications, Mr. Ugochukwu Okoroafor, in an interview with Channels Television on Tuesday, said,“I have heard that the introduction of the N5, 000 will bring inflation. I challenge anybody, who is an economist to tell me an economic theory that says when you have a higher denomination in your pocket, it will change how you spend money.”

Okoroafor’s reaction  is  the first  from the apex bank since its Governor, Lamido Sanusi, announced the controversial proposal to review the nation’s currency last Thursday.

The introduction of a N5000 note is a major component of the  review which would also see the conversion of the N20, N10 and N5 notes into coins.

But the proposal  angered many who submitted that the introduction of higher currency  denomination could lead to inflation. They also argued that  it  contradicted the cashless policy of the government.

But defending the new policy, the CBN insisted that it was line with the international best practices, which, it said,  allowed the periodic review of a nation’s currency.

The bank, which also said the review would reduce the amount of money in circulation, added that the currency was being reviewed to ensure that counterfeiters would not be able to forge it.

On the claim that N5,000 would lead to inflation, Okoroafor said, “If you have N100,000 in your pocket, will it change the way you spend if you have a bag of N100,000.

“We want to make currency that counterfeiters cannot forge.”

He  had also on Tuesday told the News Agency of Nigeria that  the bank did not intend to implement the review  without the approval of the Senate.

“We have entered discussion with the Senate because we want its  approval. The law is very clear on this matter and it must not be forgotten that the CBN Act empowers us to restructure our currency system.

“I am sure that in a day or two, we will end all discussions on the matter.”

The Senate on Monday said that said it would stop the introduction  of the  N5, 000 note because its approval  was not sought  by the CBN before announcing  it.

The House of Representatives had also said that as far as it was concerned,  the proposal did not exist.

Efforts by The PUNCH to get Okoroafor to provide further clarification on the CBN proposal did not succeed as calls to his mobile phone indicated that he had switched off.

Meanwhile, the Amalgamation of Niger Delta Youths for Peaceful Initiative, on Tuesday criticised the N40bn reportedly earmarked by  the CBN for the production of the new notes and coins.

 The ANDYPI stressed that instead of embarking on such adventure, the Federal Government should have spent the money on better ventures.

National President of the organisation, Henry Nwabueze; Vice-President, Raphael Ogbuji and Public Relations Officer, Ebi Spiff, stated this at a press briefing on the postponement of its national annual achievement awards.

The awards had  earlier planned   to  confer awards on 47 Nigerians, including Dame Patience Jonathan, Governor Godswill Akpabio of Akwa-Ibom State; his Lagos State counterpart, Mr. Babatunde Raji  Fashola (SAN);  and Senate President  David Mark.

Managing Director of Financial Derivatives Company Ltd., Bismarck Rewane, had on Friday faulted the CBN  move, saying it would negate the cashless policy of the government.

He said, “The impact of the cash-less economy is most profound in Nigeria and in the next two to three years, nobody will carry cash around. So, why do you need a N5,000 note?

 “The $1,000 note exists, but I have never seen it because people don’t have to carry it about. This is a case of contradictory monetary policies. In fact, the long term effect of this new policy is neutral to the economy.”

The Registrar, Institute of Chartered Economists of Nigeria, Mr. Peter Ikpamejo, also said that  N5, 000 bill would lead to an increase in the prices of goods and services.

“Somebody should caution the CBN governor because the introduction of the N5, 000 note will fuel inflation. We feel he should have redenominated the naira by removing one zero and making N100 the highest currency,” Ikpamejo had said.

SOURCE: The Punch - Nigeria's Most Widely Read Newspaper 29 August 2012.