Tolu Lawson: So, Mallam Sanusi, what really’s the big idea?
I read through Mallam Sanusi’s statement announcing the proposed currency restructuring. His usual sharp clarity and persuasive effectiveness is missing. And this is sad. What’s left is a number of genuine problems identified by the governor, and proposals that do not definitively resolve the identified issues, at times even seeming completely wide off mark.
For the CBN, this is a missed opportunity. The proposal raises more questions than it answers. I’m left scratching my head, wondering how this can be a good thing.
One of the reasons advanced for the planned restructuring is the apathy towards the usage of the earlier introduced coins. The others are solely about the polymer notes: they are rather difficult to process and destroy, have failed to meet expected longevity, and possess tactile features for the visually impaired have been similarly ineffective.
The solution to these problems? Reintroduce the 50k, N1, and N2 coins; convert the N5, N10 and N20 notes to coins; and introduce a new N5,000 note.
Mallam Sanusi hopes to achieve cost savings by redesigning the currency to avoid paying royalties for patented security features and by reducing the volume of cash in circulation. He also hopes to get people to begin using coins by throwing in more in addition to the ones previously issued. That pretty much sums up his case.
Much of Mallam Sanusi’s proposals are solutions in search of problems. Take the reintroduction of previously issued coins and issue of new higher denomination ones. The Governor hopes that the new coins would be used in things like vending machines, parking meters and the like. The CBN has admitted the public apathy to the use of coins but has failed to address the real reason behind this apathy: the coins are worth so little they can buy next to nothing. Converting higher denominations to coins does not resolve this — creeping inflation and said apathy mean that it’s only a matter of time before even the proposed N20 coin would be able to buy next to nothing. Then, what shall we do? Convert even higher denominations to coins?
Besides, it’s rather petty when the decision to convert notes to coins is so they can be used in vending machines, parking meters, etc. At present rates, the top N20 coin would be inadequate for any of these purposes. N20 can’t buy a drink, a snack, or whatever else a machine is supposed to vend. I don’t know of a parking lot that charges N20 for parking. Nor a laundromat that charges N20 to clean even one shirt. Even a humble motorcycle must pay N50 to pass through the Lekki/Ajah toll gate. That’s two N20 and one N10 coin. Three at just a toll gate! Because the coins are simply inadequate for the purpose the CBN is envisaging them for, they’re bound for irrelevance like the ones before them.
Regulators change policies every now and then but the CBN deserves an Olympic gold. It was the same CBN convincing us only a few years ago about the superior benefit of the polymer notes for lower denominations. A pilot run beginning with N20 polymer notes was even carried out to determine their suitability. If none of the problems now being raised by the same CBN weren’t envisaged only about 5 years ago, a big doubt must be cast on the ability of the CBN as it is presently structured to chart a course for Nigeria’s monetary policy. A central bank that flip flops on policy this often is plain incompetent. Simple.
The CBN provides cherry-picked examples and statistics to backup its latest policy. Yes there are countries like Singapore and Japan that possess large denominations worth much more in dollars than the proposed N5,000 bills. But there are also countries like the US and Australia where the highest denomination is 100 units of their respective currencies. The Bank of Canada stopped issuing its $1000 bills in effort to fight money laundering.
If the CBN would foist a policy on Nigerians, it must be for its own merit as applicable to the Nigerian situation and not merely because some other countries have similar policies.
The CBN has identified genuine problems with the present currency structure. But those problems are largely due to creeping inflation and the Bank’s past policies. Cosmetic changes like conversion of notes to coins and introduction of higher denomination notes would not provide long term, or any, solutions. At best, the economy would require another round of similar adjustments in the not too distant future. The CBN needs to admit the failure of its past failures, do better job of explaining its proposals and proving they’ll work, and most importantly, address the underlying issues.
Tolu Lawson wrote in via email@example.com