What Manner Of Central Banking? – By Okachikwu Dibia

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In Nigeria, like other countries of the World, from time to time, there must be one issue or the other making the news and heating up the polity. Today it is the stubborn decision by the Central Bank of Nigeria (CBN) to print or mint N5000 currency note and this has been approved by the President and later rubber-stamped (could they have done otherwise?) by the Nigeria Economic Management Team (NEMT). So why should other small Nigerians like me talk about what Mr. President had approved? I just want to exercise my right to express my feelings on an issue I believe will affect my life negatively beginning from 1st January 2013 when the N5000 note will be put into circulation. Because currency must be printed, to me, this cost should be seen as given or sunk cost and therefore is not important in the decision to print or not. But what is important is how printing higher denomination note will affect the economics of Nigerians. Again, is it a priority to print N5000 note when Nigeria currently has eleven denominations (the first three are in coins and the rest in paper notes)? We also need to look at what other things needed to be done by the CBN that could have added positive value to the well-being of Nigerians instead of printing N5000 note.

The first most important issue to resolve here is whether or not raising Naira denomination to N5000 will lead to inflation, thereby eroding the purchasing power of the Naira. As a layman in Economics, let me assume that as at 31st December 2012, the total money in circulation (M1, others held constant) will be N4 billion made up of basically all the existing Naira denominations of 50k, N1, N2, N5, N10, N20, N50, N100, N200, N500 and N1000. Now on 1st January 2013, the CBN rolls out the N5000 notes into circulation in addition to the existing N5, N10, N20, N50, N100, N200, N500  and N1000 notes. The question is: will the amount of money in circulation still be N4 billion on 31st January 2013? The answer is no. The money in circulation will be N4 billion minus (50k + N1+N2 that will be phased out) + N5000 newly printed note. This clearly shows that money in circulation will surely increase. But will there be a corresponding increase in the quantity of goods to be bought at this point in time; the simple answer is no because nothing new was done to increase production. So Nigeria will have a situation where higher volume of money interacting with lower quantity of goods; the result will be that the prices of the goods will become higher than they were before the printing of N5000 note.  Is this not an inflationary situation? Sanusi Lamido Sanusi (CBN governor), Atedo Peterside, Shamsudeen Usman, Aliko Dangote, Ngozi Okonjo-Iweala, Aig-Imoukhuede should answer this layman’s question.

In Nigeria we have a habit of unilaterally raising the prices of what we sell to higher currency denominations, without increase in quantity. That is why the idea of coins in Nigeria will not work as long as there are higher denominations. For example, today in Nigeria, the 50k, N1 and N2 coins have long been neglected because sellers quickly raised the prices of their goods to match with the new higher denominations Obasanjo introduced (whether this made him a bad or good Economist, I do not know). Hence, nothing sells for 50k, N1, N2 and so these coins do not have any purchasing value. In his new proposal, the all-knowing Sanusi will convert N5, N10 and N20 into coins. What happened to 50k, N1 and N2 coins will happen to them and they will become useless. This type of Economics may not be orthodox, but it is Nigerian and it is a fact.

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Should the size of an economy determine its currency denominations? As at July 2012, the United States of America’s export volume for 2012 was 183.269 billion US dollars, while the United Kingdom recorded 41.396 billion pounds ( source: www.tradingeconomics.com). Their highest currency denominations are 100 dollars and 50 pounds respectively. Was it their respective volume that determined the highest denomination for each country? If the answer is yes, why then should their respective denominations not changed for higher ones knowing that volume increases have been consistent? Why were they not concerned about the issue of printing periodicity or time intervals of “5 to 8” years as noted by the CBN? The truth is that size of an economy may not be a determinant of currency denominations. If the answer is no, why should the omni-science Sanusi tell us that the size of the Nigerian economy dictates that higher denominations are needed? So, on both the size of the economy and periodicity, I think there are no universally agreed standards, each country does it the way it deems suitable.

Some Nigerians have also compared the face values of the Naira and other currency like the dollar and had recommended that since $100 is USA’s highest denomination, Nigeria’s should be N15, 000. Unfortunately they did not tell us why the US decided to have $100 as its highest denomination neither did they tell us the economic implications of having N15, 000 as Nigeria’s highest denomination. Will N15, 000 buy more goods or not? What will be its implication on foreign exchange? May be it is just to satisfy Nigeria’s zombie nature of imitating what should not even be imitated in the first place. Fela said so!

About convenience, it is not that Nigerians hate to carry coins (after all when they go to the UK or USA they gladly carry coins). It is also not in the main a rounding up issue, it is that coins in Nigeria hardly have value, so who wants to carry what does not have value? Sanusi and the Economic Management Team should watch how many goods will sell for N20 when it becomes a coin? “Pure water”, sweets etc will all settle from N50 note upwards. For “pure water” or sweet to sell for N50 in the future, compared to N10 they sell today, is it not inflationary? Please Nigerian Oxford, Harvard trained Economists should help to explain to us whether this upward movement in price is not inflationary? On the long run, will Sanusi provide the needed resources and technical support producers of “pure water” may need to boost their output? If yes, what is he doing presently in that direction? After all, like my Ikwerre people will say, “ wowhusi weze nu ise ochi”. This means you can predict what a person will do in the future based on what he/she is doing today.

Still on convenience, with N5000 notes, I can carry five packets of 100 pieces each on me. That means moving about with N2.5 million and who said that the propensity to spend more will not be higher than carrying N50 notes of the same quantity? The truth is that I cannot carry about 500 packets of N50 compared to just 5 packets of N5000. The more money in my pocket the more I spend! Since there is no restriction on the amount I should spend per day, it will be inflationary to print N5000 notes that put more cash in my pocket to spend. This is anti-cashless regime.

I recall that N35 during my class one in secondary school ( that was in 1977 and having collected “saw-dust” from my mother) was able to purchase two to five tins of Geisha, three tins of peak milk, a packet of cabin biscuit, two packets of Omo detergent, one packet of sugar, one tin of small size bournvita-beverage, five tablets of lux or joy toilet soap, two tablets of sunlight or premier washing soap plus my transportation from Rumuakunde Emohua (my home town) to the then Government Secondary School Creek Road, Port Harcourt and I would still have cash balance left for use in school. As at today, I am sure N5000 cannot do that feat. So, which makes better economic sense: a lower denomination that can buy more goods for me or a N5000 note that can buy less?  In this sense, using convenience as a factor for printing higher denominations of a currency cannot be based on economic sense.

Given the state of the Nigeria economy, is printing of N5000 note a priority? Why is the CBN not worried about the 23% unemployment rate in Nigeria? Will printing N5000 note assist Nigeria in reducing this rate? Will printing N5000 note increase productivity in Nigeria’s manufacturing and agricultural sectors? Nigeria’s inflation rate is 12.8% and official interest rate is 12%. How will the printing of N5000 note help to reduce these rates?

The all-knowing Sanusi and his supporters said that the N5000 note will not be used by everybody in Nigeria. Therefore it will be discriminatory. So, how will it support small scale businesses grow? If I were Sanusi, I will see to it that industries and factories spring up just like churches and mosques are springing up daily in almost all the streets in Nigeria. Sanusi should be more interested in productivity of Nigerians than printing of N5000 note that is backed by no additional output.

Why is Sanusi not worried that Nigeria imports over 80% of her petroleum products consumption; while she remains one of the highest producers of crude oil in the World?  What kind of Economists does Nigeria have who think so un-seriously in rectifying the ills of the economy? Minus the wasting asset called crude oil, where is the productivity of 160 million people to back up the extra one packet of N5000 notes that will be released in January 2013? Assuming Sanusi prints 10,000 packets of 100 pieces each of N5000 notes, where are the goods it will buy in January 2013? Where is Dr. Pius Okigbo? Where is Prof Sam Aluko? Nigeria is in deep economic trouble!

How will the printing of N5000 note discourage the high level stealing in government as epitomized by Chief James Onanefe Ibori who is currently languishing in jail in the UK? If he were to be in Nigeria today, he may have been a free man controlling the levers of government and who knows, become the CBN governor. In Nigeria, everything, especially the absurd, is possible. The higher the denominations, the more attractive to steal public funds.

In about 2009, Sanusi reprinted the N10, N20 and N50 notes and made them look like a polythene paper. My mother called them “iwai waterprufu”. In Ikwerre where I come from, money is called “iwai” and “waterprufu” means a material that is not water permeable. She was trying to describe the notes as looking like polythene papers. But what economic value did that exercise add to the Economics of Nigeria? In real terms, should Sanusi not do a research and show Nigerians the economic, social and political gains the country has been enjoying for printing “ iwai waterprufu”? In Harvard where they all schooled, is this not a relevant question?

Again, Sanusi should try as much as possible not to mislead Mr. President. Why rushing to Mr. President to approve an action before letting Nigerians know about it? Even his colleagues in government were hand-tied from truly expressing their minds because Mr. President had already approved it. Yet Sanusi knows that Nigeria operates a democratic system of government? As such one would have expected him to first of all mention the idea to Mr. President and seek his approval in principle to let Nigerians have the matter thoroughly debated. After the debate, the matter is taken to the relevant government economic agencies for further discussion and articulation. Thereafter he would present the result to the Federal Executive Council (FEC). At FEC, members are allowed to freely express themselves on the issue. The position of the FEC is the major consideration for Mr. President’s approval; not Sanusi’s one-man-show to the Villa. Once the President approves, Sanusi can thereafter implement Mr. President’s approval. Nigeria is a democracy!

Given all these questions and lapses, I advise Mr. President to withdraw his earlier approval given to Sanusi. Withdrawing it is never a sign of weakness; rather it makes better sense to do so especially in the interest of integrity and public value. Otherwise, Sanusi should quickly print and give Nigerians N50, 000; N100, 000; N200, 000; N500, 000 and N1, 000,000 currency notes because it is cheaper and more convenient to do so. Q. E .D.


Okachikwu Dibia





  1. What a down to earth analysis! I only wonder why our president always rush to approve policies that are not well thought out. I think Mallam Sanusi has overstayed in CBN and has become stale. GOD bless Nigeria!

  2. should sunusi, mr. President and the the nigeriao economic group read Ikechukwus well-thought analyses thex will surely give it a second thought to skip the printing of the said note



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