N5000 Note: Is Nigeria a Developing or Under-developing Economy?


By Chiwuike Uba, CPA, FCMA

The redesigning of Nigeria’s currency and introduction of N5000 into the economy as announced by the CBN Governor, Mallam Sanusi Lamido Sanusi during a press briefing has elucidated several opinions. The opinions, as expected, are divergent. Some supported the policy while others vehemently rejected the policy.

One interesting observation is that most experts, including non-experts have either shown their reservations or outright rejection of the policy because of its negative implications on the economy.

Personally, I have found it so difficult to understand and reconcile the rationale behind the policy. What a contradiction and summersault of policies. The CBN is currently wasting billions of our collective resources – revenue from taxes, levies and direct income from sales of our petroleum products on its campaign to promote cashless economy. Only God knows how much CBN has spent on this campaign as at date. While we are still assimilating and working to accept the cashless economy concept/policy, the CBN came up with this new irreconcilable policy, which in its entirety contradicts the cashless economy policy. Going by the report in the Punch of 27 August, 2012, CBN is expected to spend more than N40b of tax-payers money to execute the proposed policy. What a waste! Its either the current CBN leadership lacks the requisite knowledge, skills and expertise to manage the economy or they are positioned to constructively, in a wilful manner ruin the economy completely.

Nigeria’s Professor of Economics, Prof. Chukwuma Soludo could best be described as the “Nostradamus of the Nigerian economy”. He foresaw what is happening (and will still happen) to the Nigerian economy when he proposed the redenomination of the Nigerian currency. If we had accepted that proposal/policy, nobody would have been bamboozling us with these policies of contradictions. It is not in doubt that we would have been able to save our currency from further collapse, increase the citizens’ confidence in the naira currency, reduce corruption to the barest minimum and ultimately rebuild our economy for sustainability.

The only basic advantage of high denomination currency is reduction in transaction cost. Note that the reduction in transaction cost is for high/heavy business transactions as majority of Nigerian population will experience difficulties in business transaction activities as a result of the high denomination. Yes, it makes high value transactions easy, since a large amount can be carried with great ease but, on the other hand, cash transactions will not be traceable, since unlike in the bank, they leave no footprint. This is to say, the introduction of N5000 note will make it the preferred currency for storing black money created out of tax evasion and public fund looting.  Corruption will deepen and serve as the life-blood of parallel economy. The other terrible consequence of the introduction of the N5000 note will be gross reduction in the use of banking system in our economy. The direct result of this will be poor credit formation and inadequate capital supply to the economy.

Corruption and the breakdown of formal systems of governance together will fuel more social insecurity. The high prevailing cost of capital and the flawed taxation system will lead to high input costs. The high input cost will render our local industry uncompetitive, and result in more unemployment.

High denomination currency results in ease of corruption and weakening of banking system. In addition to its harmful impact is fake currency and its consequences e.g. weakening of official currency, most importantly this fake currency works as tool for anti-national & anti-human activities. High denomination facilitates printing of fake currency.

Majority of Nigeria’s population do not even use high denomination of currency. It is interesting to observe that other countries, realizing the detrimental effects of higher denominations in the economy, took currency cut- down steps. The US government in 1996 redesigned their currency after 67 years, and as a measure to stay ahead of currency counterfeits and also save cost of minting/printing currency, announced that currency redesign shall be for every 7 -10 years. It is only in Nigeria that a CBN governor wakes up to announce currency redesign and introduction without consideration to its implications to the economy.

The introduction of N5000 into the Nigerian economy shall worsen the existing annual fiscal deficits in the economy.  Government’s inability to provide the basic infrastructure, such as power and water, roads, efficient railway network, ports and airports and so on to Nigerians is as a result of Fiscal deficit. We have severally witnessed the face-off between the legislature and the executive on budget performance as a result of this problem.  We are now so used to the fiscal deficit, that we have accepted it as a fact of life. Our budget is a deficit budget. Some common measures normally taken to bridge fiscal deficit have an inflationary effect. The natural response to inflation is hardening of the credit policy. As credit gets scarce, lending becomes tighter.

The increase in high input cost arising from both poor credit/capital formation and less use of banking system will in turn lead to uncompetitive local industry/trade. On the other hand, further restrictions will be placed on subsidies given for agriculture, on which most of our rural economy is based. As the Agriculture sector fails, rural purchasing power is directly affected and as a result, there will be very little demand for goods and services. This will also hit the local industry.

The banks will tend to conserve their funds and become very selective in their lending instead of aiding credit creation and expansion. As a result, the economy will further starve for capital. The direct impact will be on business growth, leading to the slowing down of GDP growth.  As the business environment worsens, and cash flows dry up, a lot of businesses will fail and many loans will become non-performing assets. Who knows, CBN’s ultimate intention for this policy may be to inject more funds into the banking industry!

Current government’s efforts to reduce the gap in fiscal deficit will amount to efforts in futility if the N5000 is eventually introduced in the system. The current wave of privatization will persist and all subsidies will be removed. The consequence of these shall amongst others include the total loss of governmental control on the pricing of several essential commodities, downsizing of manpower both in public and private establishments, which actually is a threat to organized employment and Nigerian economy and ultimately entrench social insecurities.

Uba, Chiwuike N., CPA, FCMA

A Policy Analyst




  1. Well thought and very articulate write up. I’m afraid, where Sanusi is taking us to we may not see light at the end of the tunnel. May God save us from Sanusi and his evil plans against the Nigerian economy!

  2. In your article you tried a lot to be concise and precise. I can say that you have depth knowledge about nigerian economy more than sanusi lamido does by providing us contradicting policies.because for there is no relationship between cashless policy and the issuance of 5000 notes.you have got a very analytical mind kudos to you


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