By
•From left: Chairman of Forte
Oil, Mr. Femi Otedola, President of Dangote Group of Companies, Alhaji
Aliko Dangote, Group Managing Director of Access Bank, Mr. Aigboje
Aig-Imoukhuede, and the President’s Special Adviser on Performance
Monitoring a
Economic Team endorses plan
Opponents of the N5000 banknote may have lost the battle, it emerged yesterday.
The National Economic Management Team (NEMT) – a conclave of some senior government officials and prominent businessmen – blessed the idea, following a briefing by Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi.
The President had earlier approved the proposal.
But the battle to stop the new banknote got onto the street yesterday, with protesters seizing the frontage of the CBN office in Abuja.
The new higher denomination will be introduced along with the new coins of N5, N10 and N20. The policy is expected to take effect in 2013.
Meanwhile, the National Asembly has asked the CBN to pull the brakes on the proposal - for now.
But NEMT argued that it was the primary responsibility of the CBN to effect changes in the nation’s currency with the approval of the President.
The economic team also allayed the fear that the note will heighten inflation, saying that there is no link between inflation and currency denomination.
Besides, the group argued that the introduction of the higher currency will help shore up the naira’s value as most people who store money in hard currency will now embrace the high denomination.
The NEMT, which is headed by the President, comprises the Minister of Finance and coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, Sanusi, Minister of National Planning Dr. Shamsudeen Usman, Director General of the Security and Exchange Commission (SEC), Director General of the Bureau for Public Enterprises (BPE), one representative each of governors of the South and the North as well as key private sector players.
Usman spoke at the end of yesterday’s NEMT meeting presided over by President Jonathan.
He explained that contrary to criticisms that the introduction of the N5,000 note will bring about inflation in the economy, the new denomination according to him, will rather assist in big business transaction.
The note, he said, will not be high in circulation but will be used mostly by the banks.
Usman said the higher denomination is not at variance with the cashless economy proposed by the CBN.
His words: “Clearly, the N5000 note will not lead to higher inflation. There is absolutely no link. I am an economist; I have been deputy governor (Operations) of the Central Bank.
“During the last review of the introduction of N1000 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.
“Mr. President had already approved; 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.
“ I personally had some concerns about the coins but since some discussion with the CBN governor, he has actually clarified that even the media didn’t undertsand. 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 other notes but they will run concurrently with the notes. 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 one naira and two naira today; what can you buy? So because they are higher denomination, they may be accepted.
“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 note. They are like testing the waters; if they get accepted and are being utilused, only then will they take subsequent actions.”
On the N5000 note being at variance with the cashless policy, Usamn said: “It is not . 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 in parts of the United States where you draw the $100 bill and give it to somebody and they start looking at it as if it is something strange; they probably have not seen it. So, the higher denominations are there to create higher value. There will not be in the widest of circulation but other countries usually have this higher denominations. And I think what is important is that there is no link between it and inflation.”
On the question that there is a link between the N5000 note and corruption, the minister said: “It’s an area that I obviously know nothing about. I think people alleged that part of that corruption is being done in dollars, a $100 bill is N16,000, N5000 note will be $30. So which one is bigger to carry, if you are doing corruption? So, I don’t think it’s necessarily going to increase the level of corruption. Those doing corruption will probably find that too small; the $100 bill is still bigger than the N5,000 note.”
Atedo Peterside, a banker and NEMT member argued that besides the fact that it does not add to increase in cost of printing of currency, money, being a store of value, the higher the denomination, the better it is for the economy as those who made money legally and illegally will want keep their loot in naira rather than hard currency.
He said: “If I were the CBN governor, I will prefer to print N10,000 notes. Last year, Nigeria spent N47billion to print these small, small notes. If we were printing bigger denominations, we will print fewer number and you make 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 and reduce the demand for the hundred dollar notes and move into our own currency as opposed to the use of $100b to hide their loot 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 roguesbecause the US dollars offer the higher store of values for them and two, we squander our resources printing large volumes of worthless notes.
“There is no inflationary impact; that is voodoo economics. Let me tell you one thing, if you know that printing N5000 notes will create more inflation, why don’t you reduce the value of your notes and see whether you will not experience inflation in the process. This is simple logic.”
Access Bank Managing Director Aigboje Aig-Imoukuede described the reactions trailing the N5000 note as unfortunate.
He said: “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 N5000 note which is in effect a $30note is not strange.
“The greatest argument I have heard about is causing of inflation; the other argument is that it will cost money to introduce the new note. There is no relationship between the issuance of higher legal tender and inflation. It is unfortunate that some have misled people into thinking that it will lead into higher inflation.
“Every central bank by the nature of currency management will issue new notes all the time. So, printing of notes is an ongoing operation that every central bank engages in.
“As you are introducing five thousand Naira note you print less of one thousand and five hundred naira notes. It is not going to add to the cost of printing; it is going to basically fall into your normal annual budget for printing. What you should also understand is that with less notes in circulation, it is cheaper in the long run based on quantities ordered to print N5000 denomination than lower denominations; it’s just logical.”
Frontline businessman Alhaji Aliko Dangote said: “The introduction of the N5000 note has nothing to do with inflation. I think it is even to protect the economy. The cost of printing is not anything different from the amount they are using in printing any other note. It is the same cost.
“The only difference is the design and the figure printed on them. Sometimes minting the coins can even help. If I have a product, which I am selling for N5 and I want to raise the price to N6, I wont be able to do that. It is either I swallow the bullet and take it to N10 or I don’t increase at all.
“A lot of companies have not been able to increase their prices even though they are losing money.
“People are saying that Central Bank is going to spend N40 billion on the new note. Of course, last year, when you look at the budget, they spent N47billion to print currencies. So it is not different at all.”
SOURCE: 5 September 2012.
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