By UDEME CLEMENT

The plan by the Central Bank of Nigeria (CBN) to introduce 5,000 naira note into circulation by first quarter of 2013 and to redesign the existing N50, N100, N200, N500 and N1000 notes with new security features, while N20, N10 and N5 notes would be changed to coins has sparked controversy in the country.

The governor of CBN, Sanusi Lamido Sanusi, explained that the policy initiative formed part of the currency restructuring exercise by the apex bank, adding that the front side of the new currency will  be adorned with the pictures of the late Margaret Ekpo, Funmilayo Kuti and Hajiya Gambo Sawaba, while the back side would have the National Assembly structure on it.

While some financial analysts say  the policy may contradict the cashless regime already on-going, others frown at the CBN’s plan to spend N40.3 billion for the printing of the N5,000 note, when the country is facing perennial security crisis, abject poverty and unemployment.

Some  entrepreneurs say  the action is clear monetary policy failure on the part of the CBN, which is capable of triggering inflation and at the same time devaluing the naira. Mr. Etim Udoh, a  legal practitioner and the national co-ordinator, Centre for Societal Values and Development, speaks on the legal right by the apex bank to introduce a new currency, the swift intervention by the National Assembly to put the policy on hold and the long-run impact on the economy.

The plan by the CBN to introduce the N5,000 note, to some experts, constitutes illegality in the system. Do you share this opinion?

I do not share this opinion. To start with, CBN is the monetary authority and has the autonomy to formulate monetary policies and ensures implementation to enhance economic growth and development. As such, the  introduction of  the N5,000 note by the apex bank is legal, because the CBN is the regulatory authority in the financial sector and has the capability to determine the quality of currency as well as the volume of money to be circulated in the country in the overall interest of our economy.

However, the problem now is with the value of the currency and the present economic realities on ground. From all indications, the present economic situation does not give rise to the introduction of a new currency like N5,000, especially with the CBN’s current policy on cashless economy. The cash-lite monetary policy already in the implementation stage places restriction on cash withdrawals limit as well as the volume of money to be carried about.

Therefore, it would be worthless to introduce a higher currency like N5,000, because it may not serve any useful purpose. For instance, people are already trying to key into the cashless policy, which commenced on January 1, 2012, in Lagos and is expected to be implemented in other regions across the country. So, introducing a higher currency may significantly undermine the cashless  policy and the socio-economic development of  Nigeria .

We could recall that in 2005 fiscal year, the former governor of CBN, Mr. Charles Soludo, embarked on currency restructuring, which paved the way for the introduction of N20 polymer banknote and subsequent conversion of N5, N10 and N50 paper banknotes into polymer notes in 2009. What value did that policy add to the economy? This is the question we must ask now. For instance, the inflation rate currently stands at 12.8 and the CBN is trying to introduce a higher currency that could worsen the inflationary situation in the economy.

Don’t you think the N5,000  bank note must have been in the pipeline for some time now? This is because international best practices encourage the monetary authorities to review their nations’ currencies at intervals of between five and eight years to address the challenges identified in circulating banknotes and coins.

Initiating an important economic policy also requires adequate monitoring of the economic indicators to ascertain the appropriate time to introduce new policies, particularly in the financial sector. For example, if Sanusi had intended to introduce the  N5,000 note, the cashless policy should have been put on hold.

Putting the economy on cashless trend and coming back to introduce higher currency seems as if  the intention is to make personal profit from the project, especially considering the huge amount of N40.3bilion needed to implement  it. You can see the massive rejection of the policy even before the intervention by Senate.

Also converting 20, 10 and 5 naira notes to coins does not make any economic sense  and may not serve any useful purpose in terms of reducing the  prices of goods and services in the economy, or increasing the wages of workers. Instead, it may trigger inflation and at the same time devalue the naira. For example, efforts made in the past to give recognition and value to our coins did not yield positive results.

So, the decision to introduce it now can not be seen as being radical. This should have been his vision on assumption of office. Formulating such monetary policy at the time the nation is facing security crisis and alarming rate of poverty may not make any impact. For example, Nigeria has a population of 168million, which is expected to hit 400million between 2020 and 2015.

Currently, the economy is growing at about almost eight per cent without employment generation. The national level of poverty rate in the country is above 60 per cent.  So, everyone is concerned about investments in infrastructure and creation of jobs to make the economy thrive like what obtains in developed countries and not in currency project that requires a huge sum of N40.3 billion, which at the end of it may not add value to the economy.

What is your opinion on the intervention by National Assembly notwithstanding the fact that CBN has autonomy?
The prompt intervention by the National Assembly putting the policy on hold shows it is the highest law making body, which, through amendment or resolution within the House, could regulate any section of the society, even on economic issues to promote national development. The Senate needs not wait for the economy to collapse or  allow wrongly introduced policies  to bring hardship on the citizenry by waiting to undergo due process of amendment before intervention.

The Senate has inherent power, which could be applied in any situation that requires urgency in the country. I want to commend the prompt intervention by the Senate in this regard and I am advising the CBN governor to initiate monetary polices capable of adding value to the naira, to tackle inflation, create jobs and strengthen the banks to make the economy function optimally within the short and long-run expectations.

Some analysts are saying that job creation is the primary responsibility of the Federal Government and not the duty of CBN?

We are aware of the fact that employment generation is the duty of Federal Government while the CBN focuses on monetary policy formulation and regulation of the financial sector. But the reality is that  the CBN could initiate policies that would pave the way for job creation and poverty alleviation by strengthening the commercial banks to support development of Small and Medium Enterprises (SMEs).

This requires also that the apex bank should be in the forefront of building a synergy between the financial and real sector of the economy in order to enhance easy accessibility to capital for operators of SMEs in the country.

The initiative should be to ensure that the operators of SMEs have access to low cost funds to boost their operations and for start-ups to enhance expansion of smaller units of businesses across the country. This would bring about long-term benefit of boosting domestic production capacity for local manufacturers, such that they are able to carry out operations with reduced cost.

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