BY MICHAEL EBOH & NAOMI UZOR

The Lagos Chamber of Commerce and Industry (LCCI), has cautioned the Central Bank of Nigeria, CBN, on the proposed plan to restructure the country’s currency, saying that the exercise  will increase the risk of counterfeiting and threaten the success of the cashless policy.

The LCCI also called on the CBN to, instead of introducing the N5,000 in 2013, it should maintain an incremental sequence of the currency, such as the introduction of N2,000 notes.

The LCCI, in a statement by its President, Mr. Goodie Ibru, said the proposed policy will likely increase the incentive for currency counterfeiting in the country, adding that the risk of counterfeiting high currency denominations is high and might also undermine the use of electronic channels for transactions to an extent.

He said the CBN should ensure a proper alignment between the proposed currency restructuring and the cashless policy, while also focusing on improving access to credit and stimulating the economy.

Incremental sequence of higher currency introuction
He said, “The introduction of higher denomination should maintain an incremental sequence of N2,000 and N5,000 in line with historical trend and international best practice and the CBN should constantly ensure a proper alignment between the cash-less policy and its currency management strategy.

“What is paramount at this time is for the CBN to relax its current tight monetary policy and risk management guidelines in order to improve access to credit and reduce the cost of fund in the economy.  It is time to focus on efforts to stimulate the economy and promote growth.”

Ibru, however, said that the proposed currency restructuring will reduce the cost of currency management such as printing, movement, storage, counting and distribution.  He explained that the introduction of higher denomination would mean reduction in the volume of cash in the economy.

He said, “LCCI is aware that different economic policy has their own costs and benefits and to optimize the benefits, it is always important to be guided by the weight of merits and demerit of any policy reform, but key benefits of the proposed currency restructuring would reduce the cost of currency management such as printing, movement, storage, counting and distribution.

“It will enhance portability and facilitate business activities of some segments of the economy where a large amount of cash is required, especially in the informal sector.  It will reduce risk/vulnerability of cash carriers as higher value of cash can now be easily moved around with less visibility.

“It will enhance the capacity of Automated Teller Machines, ATM, machines to store more money, reduce ATM stock out time and serve bank customers better and facilitate the return of coin in circulation as some of the lower currency notes are going to be converted to coins. Of course, coins are relatively durable and our history of apathy on the use of coins is largely due to value consideration not the physical properties” he noted.

“We did not buy into the popular conjecture that the proposed introduction of higher currency note will cause inflation. There is no economic theory or empirical evidence suggesting a causal relationship between higher currency denomination, inflation and devaluation. From the monetary stand point, inflation can only be induced by increasing money supply, or the stock of money in an economy.  A new currency structure has no link with monetary expansion or contraction.