BY: LES LEBA
I will begin this weekâ€™s article with a reference and excerpt from veteran journalist, Bisi Lawrenceâ€™s piece titled â€œOh to spray againâ€ in Saturday Vanguard edition of 10/10/09 .Â The indefatigable Bizlaw had failed after several attempts to take value for his naira coins at various locations, from exquisite shopping malls to your regular petrol attendants and pepper sellers!
Worst of all, his last bastion of hope of redemption, the banks, who literally trade in money also refused to relieve him of his heavy metallic burden.Â In apparent despair, Bizlaw wisely concluded that â€œâ€¦ I also knew why the coins were, so to say, unmovable.Â It was because they were in denominations at which the naira had become practically without value.
I recall that a one kobo (coin) loaf of bread was enough breakfast for me when I was youngâ€¦ and I also remember that young women almost dislocated their waists whilst dancing at parties for the joy of being appreciated with a ten kobo pieceâ€our veteran journalist noted with apparent nostalgia and added that â€œâ€¦to â€˜sprayâ€™ these days, you even need a sack full of currency notesâ€ before finally concluding with the inevitable truth that â€œwe do need these coins in our commercial life.
They last much longer than currency notes, and are so adaptable because they can be slotted for sundry services.Â We really need to increase their value and there is nothing stopping usâ€.Â I couldnâ€™t agree more; I do not know if Bizlaw studied economics, but it is clear that he can still teach the eggheads and so-called experts who determine our economic policies a thing or two about commonsense!
In our article titled â€œRedenomination of Ghana â€™s Currencyâ€ published in this column on 15/01/2007 we discussed the imminent redenomination and the promise of a successful return of primary coins (pesewa) in Ghana .Â The Ghana pesewa is counterpart to our kobo, and at inauguration in 2007, one pesewa was about US$0.12 (12 cents).Â Thus, one new Ghana cedi (i.e. 100 pesewa)=GHÂ¢1=N160.
Thus, while a Nigerian may forego change of N1, his Ghanaian counterpart would be reluctant to forego change of one cedi because of its over 160 times higher purchasing power!
In spite of this reality, our Central Bank under the erstwhile leadership of our â€˜all is wellâ€™ erudite Governor obviously failed to recognize Bizlawâ€™s commonsenseÂ observation with regard to value and went ahead in 2006 to release the almighty N1000 note (less than $8 at the time) and later that year also released new 50k, N1 and N2 coins into our currency profile, because the former existing note forms had become cumbersome and were generally rejected by all and sundry, including the lowly beggars on our streets!
However, CBN in its â€˜wisdomâ€™ chose to ignore the reality that the old 50k, N1 and N2 notes were not rejected on the grounds of the material of construction, but as Bizlaw effortlessly deduced, as a result of their negligible purchasing value!
Nonetheless, our Economics Professor went ahead, to ascribe rejection to the material of construction and speedily embarked on production of coins for these obviously â€˜valuelessâ€™ denominations.Â Such decision must have been motivated by other factors other than related professional knowledge!
Not yet done, and as if to force commonsense out of nonsense, Soludo directed that all the banks must accept at least 2% coin component for every batch of currency supplied from the CBN !Â In an action akin to throwing good money after bad money, the CBN embarked on a massive enlightenment campaign on billboards, print and electronic media at an estimated cost of over N10bn of tax payerâ€™s money in addition to the the actual cost of production of the new currency!
In another article titled â€œHurray! The Coins are Back, Butâ€¦â€ of 26/02/2007, we noted that â€œthe economic wisdom in coin production is in their long lifespan (coins can last over 50 years)â€¦ and that the initial production cost can be amortized profitably over its lifespan, but that is assuming that the coins are available and remain in useâ€.
â€œIf, however, the coins disappear or receive the undue patronage of makers of jewelry, gift items, modern art, etc, because of their relative purchasing power, the lifespan of the coins will have been truncated, and our CBN may unwittingly end up funding or indirectly subsidizing the cost of finished products made from melted and recycled Nigerian coins!
If this scenario becomes reality then, the new currency profile, including coins may die a premature death and our expectation of a damper on inflation or the facilitation of change for consumer purchases may become unrealized; in spite of the attendant heavy cost of production and promotion.â€
Alas, I regret that less than three years after, this prediction is bang on target!Â The CBN has since admitted that the coin introduction was misguided and they have since been withdrawn and offered for sale, no doubt, at a heavily discounted price!Â Oh my country!Â In October 2009, as if in demonstration that the CBN has not learnt its lesson with regard to profligacy with public funds, N5, N10 and N50 denominations which had earlier been released as new design note issues in late 2006 were again re-released, this time, with much more expensive polymer material.
Meanwhile, cost-effectiveness and security of currency which were touted as the objective of billions of naira expenditure on refurbishing CBN controlled â€œNigeria Mint and Security Co.â€ had been jettisoned.Â The promise that the new mint could supply over 80% of our currency issues (with the exception of the then newly introduced and very expensive N20 polymer note) has also been reduced to an empty boast!
The October 2009 introduction of imported N5, N10, N50 polymer notes in addition to the existing N20 note of same fabric, probably now means that, our new refurbished mint will produce far below installed or efficient capacity!
Again, what waste!Â Worse still, some Nigerians may lose their jobs to a security printing company in Australia.Â Incidentally, (see Punch editorial 8/10/2009 ) Securrency, the beneficiary printing company for polymer notes has lately been accused of giving bribes of over US$6m to the proxy of some top Nigerian government officials to win the 2006 polymer printing contract!Â It is not clear whether the new polymer notes of N5, N10 and N50 were part of this 2006 contract or if the bribe relates only to the first batch of N20 polymer notes released in 2006!
We note with a sinking feeling of dÃ©jÃ vu, that the CBN has embarked on an extensive and expensive media blitz to promote the acceptance of these new notes, but the question as to their utility and adoption would, no doubt, depend on their perceived purchasing power!Â The superiority of the polymer notes are identified in ongoing CBN adverts as being user-friendly; they look better and remain crisp over a long period; and they do not stain, rumple or tear easily.
The CBN also claims that polymer notes will save the nation huge sums of money used for reprinting.Â What the adverts do not say is that the polymer notes are multiple times more expensive than paper notes; although the polymer notes may be more durable than the paper version, we do not know anything about cost effectiveness vis-Ã -vis coins, which can last for over 50 years, in spite of any rough handling or our harsh climate.
However, the Nigerian public, as noted in our article â€œThe Putrid Mess Also in CBN (3)â€ of 28/09/08, have recognized that polymer notes fade and peel easily, especially when they are wet or folded; polymer notes will shrivel when they come in contact with any heated object and they are less amenable to the abiding Nigerian culture of folding notesâ€¦â€
But more importantly, they will fail because of their insignificant purchasing power.Â I recall that eight months after our admonition to CBN to emulate our Ghanaian brothers in our article titled â€œRedenomination of Ghanaâ€™s Currencyâ€ 15/1/2007, Soludo emerged with his Strategic Agenda for the Naira in August 2007.
His agenda included redenomination, which inevitably entailed the production of another fresh design of currencies!!Â Soludo displayed incredible courage in floating this kite, especially in view of the fact that he had only recently produced and lavishly promoted new note and coin denominations within a structure which went against the grain of wisdom with regard to value being essential to currency acceptability!
Besides, between 2006 and 2007, N1000 note made its debut, and all other notes were redesigned in addition to introduction of the failed coins project, with the hope that such CBN arbitrariness and profligacy would go unnoticed!Â It will be a big tragedy if Lamido Sanusi, the current CBN Governor also hopes that Nigerians wonâ€™t notice that the king is in public place without clothes!Â Truth is, we need coins (including one kobo) with value!Â Shikena!
The above piece was first published in November 2009.Â In a press release dated 3rd March 2010, the CBN confirmed extension of the terminal date for the circulation of old N5, N10, and N50 paper notes indefinitely!Â Thus, the earlier CBN directive that these notes would cease to be legal tender by 31st March 2010 is no longer applicable.Â However, the CBN has put a benign spin on another policy flip flop with the clarification that the indefinite extension would â€œallow for the seamless transition from the N5, N10, and N50 paper notes to the polymer notes, and the gradual withdrawal of the existing paper notesâ€.
The CBN then went on to concedeÂ that its earlier 31st of March 2010 deadline â€œwas not in line with the best practice.â€ What is, however, not clear in the light of the preceding article, is whether or not it is also best practice to issue currency denominations with values of 50 US cents ($0.50) or less, as paper or indeed polymer notes!
Commonsense would inform that such currency units are best served as hard metal coinsÂ because they are hardwearing and durable and last literally for 50 years or more!Â Â Meanwhile, in spite of the relatively much higher cost of the polymer notes, there appears to be a growing resentment against them because of their unstable prints and fragile fabric!
With the recent lifting of deadline for paper notes as legal tender, CBN may have recognized above observations, andÂ good sense may have prevailed so that Nigerians will be now excused the burden of the short life, low purchasing value, highly expensive polymer notes.
However, in line with best practice, still better sense should triumph so that popular coin denominations â€˜with valueâ€™ will return to our currency profile; but I am aware that this can only be meaningful and beneficent if our currency profile is redenominated and dollar certificates adopted for disbursement of dollar revenue as proposed in earlier articles!
SAVE THE NAIRA, SAVE NIGERIANS!