Polymer currency: waste, deceit & commonse- by les leba
I will begin this week's article with a reference and excerpt from veteran journalist, Bisi Lawrence's piece titled “Oh to spray again” in Saturday Vanguard edition of 10/10/09. The indefatigable Bizlaw was apparently confronted with the problem of what to do with his rich cache of naira coins and had failed after several attempts to take value for the money in various locations, from exquisite shopping malls to your regular petrol attendants and pepper sellers! Worst of all, his last bastion of hope of redemption, the banks, who literally trade in money also refused to relieve him of his heavy metallic burden. In apparent despair, Bizlaw wisely concluded that “… I also knew why the coins were, so to say, unmovable. It was because they were in denominations at which the naira had become practically without value. I recall that a one kobo (coin) loaf of bread was enough breakfast for me when I was young… and I also remember that young women almost dislocated their waists whilst dancing at parties for the joy of being appreciated with a ten kobo piece” our elder journalist noted with apparent nostalgia and added that “…to 'spray' these days, you even need a sack full of currency notes” before finally concluding with the inevitable truth that “we do need these coins in our commercial life. They last much longer than currency notes, and are so adaptable because they can be slotted for sundry services. We really need to increase their value and there is nothing stopping us”. I couldn't agree more with our doyen of the print media. I do not know if Bizlaw studied economics, but it is clear that he can still teach the eggheads and so called experts who determine our economic policies a thing or two about commonsense!
In our article titled “Redenomination of Ghana's Currency” published in this column on 15/01/2007 we discussed the imminent redenomination and the promise of a successful return of primary coins (pesewa) in Ghana. The Ghana pesewa is counterpart to our kobo and at inauguration in 2007, one pesewa was about US$1.2 cents, and the equivalent of our 120 Nigerian kobo (N1.20). Thus, one new Ghana cedi (i.e. 100 pesewa) GH¢1=N120. Thus, while a Nigerian may forego change of N1, his Ghanaian counterpart would be reluctant to forego change of GH¢1 because of its over 120 times (now 150) higher purchasing power! In spite of this reality, our Central Bank under the erstwhile leadership of our 'all is well' erudite Governor obviously failed to recognize Bizlaw's commonsense observation with regard to value and went ahead in 2005 to release the almighty N1000 note (less than $8 at the time) and later in 2006 also released new 50k, N1 and N2 coins into our currency profile, because the former existing note forms had become cumbersome and were generally rejected by all and sundry, including the lowly beggars on our streets!
However, CBN in its 'wisdom' chose to ignore the reality that the existing 50k, N1 and N2 notes were not rejected on the grounds of material of construction, but as Bizlaw effortlessly deduced, as a result of their negligible purchasing value! Nonetheless, our Economics Professor went ahead, to ascribe rejection to the material of construction and speedily embarked on production of coins for these obviously valueless denominations. Such decision must have been motivated by other factors other than related professional knowledge! Not yet done, and as if to force commonsense out of nonsense, Soludo directed that all the banks must accept at least 2% coin component for every batch of currency supplied from the CBN! In an action akin to throwing good money after bad money, the CBN embarked on a massive enlightenment campaign on billboards, print and electronic media at an estimated cost of over N10bn of tax payer's money so that the public would embrace his worthless coins! We note that the publicity expenditure excluded the actual cost of production of the new currency.
In an article titled “Hurray! The Coins are Back, But…” of 26/02/2007 in this column, we noted that “the economic wisdom in coin production is in their long lifespan (coins can last over 50 years)… and that the initial production cost can be amortized profitably over its lifespan, but that is assuming that the coins are available and remain in use”. “If, however, the coins disappear or receive the undue patronage of makers of jewelry, gift items, modern art, etc, both at home and abroad, because of their inherent purchasing poer, the lifespan of the coins will have been truncated on the altar of commercialism, and our CBN may unwittingly end up funding or indirectly subsidizing the cost of finished products made from Nigerian coins which have been melted and recycled! If this scenario becomes reality, then, the new currency profile, including coins may die a premature death and our expectation of a damper on inflation or the facilitation of change for consumer purchases may become unrealized; meanwhile, Nigerians would have wasted the economic cost of production (running into tens of billions of naira) and the additional cost of promoting the acceptance of the new currencies!”
Alas, I regret that less than three years after, this prediction is bang on target! The CBN has since admitted that the coin introduction was misguided and have since withdrawn these coins and offered them for sale, no doubt, at a discounted price! Oh my country! In October 2009, as if in demonstration that the CBN has not learnt its lesson with regard to profligacy with public funds, N5, N10 and N50 denominations which had earlier been released as new note issues in late 2006 have again been re-released, this time, with much more expensive polymer material. Meanwhile, cost-effectiveness and security of currency which were touted as the objective of billions of naira expenditure on refurbishing CBN owned “Nigeria Mint and Security Co.” had been jettisoned. The promise that the new mint could supply over 80% of our currency issues (with the exception of the newly introduced N20 polymer note) has also been reduced to an empty boast! The October 2009 introduction of imported N5, N10, N50 polymer notes in addition to the existing N20 note of same fabric, probably now means that, our new refurbished mint will produce at far below installed or efficient capacity! Again, what waste! Worse still, some Nigerians may lose their jobs to a security printing company in Australia. Incidentally, (see Punch editorial 8/10/2009) Securrency, the beneficiary printing company for polymer notes has lately been accused of giving bribes of over US$6m to the proxy of some top Nigerian government officials to win the 2006 polymer printing contract! It is not clear whether the new polymer notes of N5, N10 and N50 were part of this 2006 contract or if the $6m relate only to the first batch of N20 polymer note released in that year!
Needless to say that the wider spread of new notes released in October 2009 would probably attract a higher kickback than for just the single N20 denomination earlier issued in 2006-7
Once again, with a sinking feeling of déjà vu, the CBN has embarked on an extensive and expensive media blitz to promote the acceptance of these new notes, but the question as to their utility and adoption would, no doubt, depend on their perceived purchasing power. The superiority of the polymer notes are identified in ongoing CBN adverts as being user-friendly; they look better and remain crisp over a long period; and they do not stain, rumple or tear easily. The CBN also claims that polymer notes will save the nation huge sums of money used for reprinting. What, of course, the adverts do not say is that the polymer notes are multiple times more expensive than paper notes; although the polymer notes may be more durable than the paper version, we do not know anything about its cost effectiveness vis-à-vis coins, which can last for over 50 years, in spite of any rough handling or harsh climate. However, the Nigerian public, as noted in our article “The Putrid Mess Also in CBN – 3” of 28/09/08, have recognized that polymer notes fade and peel easily, especially when they are wet or folded; polymer notes will shrivel when they come in contact with any heated object and they are less amenable to the abiding Nigerian culture of folding notes…”
But more importantly, they will fail because of their insignificant purchasing power. I recall that eight months after our admonition to CBN to emulate our Ghanaian brothers in our article titled “Redenomination of Ghana's Currency” 15/1/2007, Soludo emerged with his Strategic Agenda for the Naira in August 2007. His agenda included redenomination, which would inevitably entail the production of a fresh set of currencies!! Our eminent Professor displayed an incredible level of courage in floating this kite, especially in view of the fact that it was against the grain of wisdom with regard to value being essential to currency acceptability, he had within two years issued the N1000 note and changed all the other note denominations; he had also introduced the failed coins at great expense, but all that notwithstanding, he hoped Nigerians would not question what appeared to be arbitrariness and profligacy in the production of our currency. It will be a big tragedy if Lamido Sanusi, the current CBN Governor also hopes that Nigerians won't notice that the king is in public place without clothes! SAVE THE NAIRA, SAVE NIGERIANS!| Article source