CURRENCY RESTRUCTURING WILL INFLICT MORE PAIN ON NIGERIANS – EXPERTS
There are fears that if the National Assembly, does not prevail on the presidency and the Central Bank of Nigeria (CBN), to jettison the idea of a N5,000 bank note, the policy will heighten the misery of already impoverished Nigerians.
Respondents who spoke to LEADERSHIP said the policy would ensure that N5, N10 and N20 cease to exist as the old N1 and 50 kobo, though still legal tender, have vanished from circulation.
They recalled that, after the partial removal of government subsidy on petrol price early this year, the price of sachet water which had been N5 for many years rose to N10. They expressed worry that if the National Assembly allows the presidency and the Central Bank to reduce N5, N10, and N20 to coins, the price of sachet water will automatically rise to N50, a situation that will add more misery to the already impoverished masses.
John Okolo, a public analyst in Lagos, said it was appalling that decisions are taken for the benefit of just a few Nigerians with complete disregard for the majority of the masses.
He wondered how many Nigerians were using the United States of America dollars to the extent that the reality on ground concerning the Nigerian economy is being overlooked.
Okolo, who was vexed that some people would say the N5,000 note is just a mere $30 or more, reminded those making such assertions that the majority of Nigerians feed on between $1 and $2 a day.
Tope Asalu, a businessman in Lagos, said the decision would only widen the disparity among Nigerians, a trend he described as a time-bomb because the few wealthy Nigerians will find it difficult to hide from the wrath of the masses.
Asalu said a situation where the Central Bank continues to pursue agenda inimical to the growth of the economy and the common masses will lead to a possible uprising against government.
Even former President Olusegun Obasanjo last week said the introduction of the N5,000 note would kill production and affect small businesses negatively.
The issue of the new currency structure was recently discussed at the 'USA-Africa Dialogue Series' moderated by Toyin Falola, University of Texas at Austin.
A report posted by Professor Adigun Agbaje on this matter during the week described it as yet another neo-liberally informed policy.
'As an appendage of the US government with its double standard on free market economy, our government will not have the political will to re-denominate the naira, even if that is the best decision. You may wish to know that the dollar as the main currency for international transactions remains the pride of the United States of America. As much as they are able, they will try to ensure our currency remains weak in exchange to dollar.
'When you compare the proposed policy to the various advice by the International Monetary Fund (IMF) that the naira is overvalued and that it should be further devalued, you will know that this is a decision that is not purely based on economics,' said Agbaje.
He said his worry was that 'we (opponents of the policy) may actually not be able to get the government to rescind the decision. The worry is turning out to be true with the presidency endorsing the action.
'The CBN governor as we all know thinks economics is rocket science that only people like him can understand, forgetting that, in any discipline, there are always divergent schools of thought and that the relevance of a policy and the knowledge that informed it is to what extent it impacts positively on the lives of people,' he said.
He wondered what proportion of the population has access to this dollar they claim people carry around in their wallets. Is it the poor farmers in the village, the jobless and frustrated graduates on the streets, the civil servants with N18,000 minimum wage, the retired civil servants with a meagre pension, which even remains unpaid for years?
'To me, the introduction of the N5,000 at this time, given the current rate of inflation, is another misguided policy, which must be resisted through all lawful means,' said Agbaje.
Also, a press statement by the Obafemi Awolowo Institute of Government and Public Policy, Lagos, posted on the dialogue, says CBN's new N5,000 note is a step in the wrong direction and a slippery slope towards hyper-inflation, adding that it was time to abandon inadequately thought-through experiments.
The report said irrespective of the desirable objectives that may have informed the plan to introduce the new currency, including possibly the need 'to raise government revenue' and 'reduce the cost of transactions', such objectives are also likely to have 'unintended effects' or inflict 'collateral damage'.
It listed four of such effects: 'First, it would signify not only a regime of increased and sustained fiscal deficit financing, but also inevitably generate further inflation that would 'erode the real value of the seigniorage revenue derived' from the higher face-value currency.
'Second, it is likely to be perceived as an indication of government's failure to effectively control inflation. Once this perception takes hold, increased inflation expectations can be built up quite rapidly. These have pushed many countries in the past, including Argentina (1975-1991), Bolivia (1984-1987), Zaire/Democratic Republic of Congo (1986-1996), Nicaragua (1987-1990), Peru (1988-1990), Poland (1989-1992), Angola (1991-1995), the Russian Federation (1992-1998), and Zimbabwe in the first decade of this century into a situation of hyper-inflation, which culminated in the redenomination or even complete abandonment of the entire currency system.'
Thirdly, the report said, it runs counter to the recent policy of the Central Bank to promote a 'cash-less' economy by encouraging the increased use of non-cash transaction instruments. This policy which is aimed at reducing the use of cash has been justified by the need to reduce the burden of the cost of printing and distributing currency notes. The introduction of a high face-value currency note actually does the opposite. 'By reducing the unit cost of printing and transportation, it actually should promote the use of cash.'
'Fourthly, it also runs counter to the government's often-repeated commitment to fight corruption. It is widely recognised that large-scale corruption tends to be facilitated by the ease with which unrecorded and large cash transactions can be made in any country. Similarly, increased illegal/criminal, drug-related and terrorist activities, as well as money laundering are known to be facilitated by such unrecorded and large-scale cash transactions. The ease with which currency notes with high face values can be transported renders them as ideal facilitating instruments for these kinds of undesirable activities. In the Nigerian context, the N5,000 currency note is likely to be such an ideal facilitator.
'The introduction of the N5,000 currency note may be a step in the wrong direction, and down a slippery slope towards hyper-inflation. It is clearly time to abandon failed inflation-control policies and inadequately thought-through experiments. Effective price stability can only be restored and preserved by removing the mandatory obligation of the Central Bank and the rest of the financial system to finance government's fiscal deficits.'