*Says withdrawal of polymer notes by the CBN is based on durability

BY UDEME CLEMENT

The move by the Central Bank of Nigeria (CBN) to jettison polymer naira notes less than a decade after it was introduced by the same bank has sparked controversy in the financial sector. While some experts stressed that the new development is a clear case of policy inconsistency on the part of the monetary authority, others said the sudden change in currency printing in the economy is based on the durability of the existing notes in circulation. The deputy governor, banking supervision, Mr Tunde Lemo, explained that the decision by the CBN to halt the printing of polymer is due to the discovery that the notes fade easily, notwithstanding earlier experiments, which showed that the notes could last longer than paper money. In the same vein, the sudden decision by the apex bank to scrap polymer notes because of poor quality contradicts the result of the previous experiment conducted by its officials, which concluded that polymer was superior to paper notes in terms of quality and resistance to water.  Dr. Olu Ajakaiye, a professor of Economics and one time Director General, Nigeria Institute for Social and Economic Research (NISER), speaks on the need to support government policies aimed at developing the financial sector for tangible economic growth.

Only six years after the polymer notes were introduced into the system, the apex bank is putting measures in place to reverse the policy by June 2013, on the condition that polymer notes fade easily.  Don’t you think that currency instability can have adverse effect on the economy?
To begin with, we have to look at the period of introduction of the polymer notes and the policy evaluation during that period. The monetary policy on polymer notes was introduced by the apex bank under the leadership of the former governor, Professor Charles Chukwuma Soludo.  It was in 2008 economic year that Soludo first unveiled the 20 naira polymer note to the public, initially to test its acceptance by the public. After that initial demonstration, the current governor of CBN, Sanusi Lamido Sanusi, who came in as Soludo’s successor, went ahead in 2009 to formerly release the remaining 5, 10 and 50 naira versions of the polymer notes.

So, within the period of six years that these notes have been in circulation in the country, the CBN must have been carrying out systematic experiments on the notes to ascertain the quality and durability of these notes, which informed the decision to reverse the policy. What I am saying in essence is that  the  pronouncement by the CBN to halt the policy may be anchored on the condition of durability of the existing polymer notes in circulation. During the process of evaluation and experiments carried out on the polymer notes, the CBN must have discovered that the polymer notes fade quickly, and, as such, are not durable like the paper notes.  So, coming to the issue of economic implications, I want to believe that the CBN must have done its home work exhaustively before making that pronouncement on the need to reverse the policy. This implies that the CBN does not just wake up to make any pronouncement on monetary policies without carrying out a thorough assessment of the economic situation in the country.

The Federal Government spent huge sums of money to replace the paper notes with polymer in circulation now as a printing firm– Securency- partly owned by Reserve Bank of Australia, was contracted in 2006 to produce the notes,  and suddenly, CBN wants to reverse the policy. Do you consider the financial implications?
The interesting thing is the fact that the apex bank has also openly declared that switching to paper naira notes for some denominations may not attract additional cost of printing, which implies that CBN must have done some underground work before making the pronouncement. Aside from that, the issue of counterfeiting, which people complain is common with paper notes can easily be addressed with the use of modern technology. So, the issue here is that the CBN is concerned with the durability of the notes.

CBN Gov Lamido Sanusi

As a professor of economics, how will you assess the economy in the first quarter of 2013?
Currently, the growth rate of the economy stands at between 7 and 8 per cent. So, in terms of growth rate, the economy is doing well. The major challenges are unemployment and poverty in the country. This shows that the rate of growth now does not reflect on creation of jobs and poverty alleviation. In analogy, what we are experiencing now is jobless growth.

In that case, what will you advise government to do?
Government should refocus on job creation. To achieve this within a short  time, government can tie-up incentives to creation of jobs. What I mean is that  government should give incentives to agencies and enterprises to the extent in which they create high quality jobs for the people, especially jobs in the expansion of manufacturing firms to enhance speedy economic transformation.

Agriculture is doing relatively well at the moment, but what we need is to expand our capacity to achieve optimum production.  We can realise this by embracing large scale agriculture using modern technology like what obtains in developed countries. Small scale agriculture is not what we need in Nigeria with a population of over 160million. Aside from that, government should invest more in agro-allied businesses to enhance processing of agricultural produce into finished products. All of these are channelled towards the direction of growth and development. As I said earlier, the major issues are transforming the current growth rate into job creating growth, by giving incentives to large scale manufacturers and enterprises creating jobs in Nigeria, and also giving the desired attention to infrastructure development.

How can this be done?
Through reduction in taxes for such enterprises and giving other incentives based on the number of quality jobs created. The job creation I am talking about here is not people selling recharge cards along the road, but massive manufacturing and industrial development. If this is done, the economy will achieve rapid transformation and increased growth within the next three quarters.

Many people think Nigeria may not achieve the much-talked about Vision 20:2020. Do you have similar opinion?
Achieving the target of being among the top 20 economies by 2020 depends on the approach. For instance, the services we have right now are not sophisticated enough to support and enhance a knowledge-driven economy, especially to achieve the Vision 20:2020 target. If you look at the banking industry you mentioned earlier, you can see that the sector is doing well in terms of monetary policies formulation and implementation. The reality is that the CBN will do its own aspect but other sectors of the economy must be developed as well to achieve holistic development. Doing this will create a synergy in the system for tangible growth and development.

You were a member of various planning committees  in Nigeria, including the Joint Planning Board, National Council on Development Planning and National Economic Empowerment and Development Strategy (NEEDS). What measures will you advise government to put in place to address the issue of food security in the country?
The challenge of food security can be tackled through massive investments in agriculture, agro-businesses as well as Small and Medium Enterprises (Sees) in the country. This also involves formulation and timely implementation of policies that are best suited to address these issues holistically.