N5,000 Naira Notes causes controversy in Nigeria

N5,000 Naira Notes causes controversy in Nigeria

The new N5,000 note just approved by President Goodluck Jonathan will end the use of $100 notes now in vogue among looters, industrialist-businessman Atedo Peterside told journalists yesterday while supporting the introduction of the new currency.

The Central Bank's proposal to launch the new note has met with widespread criticism from the general public as many feared inflation and corruption as likely consequences. The president's approval announced yesterday by minister of national planning Shamsudeen Usman in Abuja at the end of a meeting of the Economic Management Team (EMT) put paid to the controversy.

Mr Peterside, a member of the team, rose in defence of the introduction of the new currency by giving it a bizarre twist.

"Money is a store of value. All these thieves, rogues and vagabonds running around various states and all over the country when they steal money will want to keep it outside the banking system, so they need higher denomination notes," he said.

"Right now they are using $100 notes all over Nigeria because they are the best store of value for them. If you give them a better store of value in Nigeria, they will move away from those dollars and move into our own currency as opposed to the use of $100 to hide their loot," the businessman added.

Mr Atedo Peterside said if he were the CBN governor he would have preferred to introduce a N10,000 note instead of N5,000 "Right now the country is losing by importing massive US dollars to finance the activities of all these rogues because the US dollars offer the higher store of value for them and also by squandering resources to print large volumes of worthless notes."

In another twist to the issue, however national planning minister Shamsudeen Usman, who claimed to know nothing about the link between the new note and corruption, declared: "I think people alleged that part of that corruption is being done in dollars but a $100 is N16,000 and N5,000 will be $30; so which one is bigger to carry if you are doing corruption?"

He argued that the new note will not necessarily increase the level of corruption as "those doing corruption will probably find it too small".

Business mogul Alhaji Aliko Dangote argued that the introduction of the N5000 note had nothing to do with inflation. He told State House correspondents after the Economic Management Team meeting, "I think it is even to protect the economy. The cost of printing is not anything different from the amount they are using in printing any other note. It is the same cost."

The only difference is the design and the figure printed on them. Sometimes, minting the coins can even help. If I have a product which I am selling for N5 and I want to raise the price to N6, I won't be able to do that. It is either I swallow the bullet and take it to N10 or I don't increase it at all. "A lot of companies have not been able to increase their prices even though they are losing money."

On the cost of printing the new note said to be at a cost of N40 billion, Dangote said last year the CBN spent N47billion to print currencies, it is not different at all," he said.

Managing director of Access Bank Mr. Aig-Imoukhuede Aigbojie, who also lent his support, said the reactions by Nigerians were rather unfortunate.

He said, "I have tried to analyse the cause for these reactions. Legal tender and restructuring of currency are normal parts of the Central Bank's functions. It is very rare for you to have a central bank that does not look at the issue of currency management and issue new notes from time to time based on the reality of the economy.

"In the case of Nigeria, our economy is such that a N5,000 note, which is in effect a $30 note, is not strange. The greatest argument I have heard about is causing of inflation; the other argument is that it will cost money to introduce the new note. There is no relationship between the issuance of higher legal tender and inflation. It is unfortunate that some have misled people into thinking that it will lead into higher inflation."

He also explained: You are introducing the N5000 note, you print less of N1000 and N500 notes. It is not going to add to the cost of printing. It is going to basically fall into your normal annual budget for printing. What you should also understand is that, with less notes in circulation, it is cheaper in the long run based on quantities ordered to print N5000 denomination than lower denominations."

Peterside continued: "Right now, the country is losing in two ways: one, we are importing massive US dollars to finance the activities of all these rogues, because the US dollars offered the higher store of value for them and, two, we squander our resources printing large volumes of worthless notes.

"There is no inflationary impact that is voodoo economics. Let me tell you one thing: if you know that printing N5000 notes will create more inflation, why don't you reduce the value of your notes and see whether you will not experience inflation in the process. This is simple logic."

National Planning, Dr. Usman disclosed to State House correspondents after a meeting of the Economic Management Team (EMT) that the endorsement of the N5000 note by the team followed approval by President Goodluck Jonathan.

"Obviously, the discussion today was basically to endorse. The president had already approved; that is the only requirement by law. The CBN is to propose and Mr. President is to approve. And since Mr. President has approved, really what is important is to just explain. I personally had some concerns about the coins but, since some discussions with the CBN governor, he has actually clarified that even the media didn't get it," the minister said.

Arguing that the N5,000 note, contrary to public perception was not going to lead to higher inflation, Shamsudeen hinted that CBN was going to explain to Nigerians that the coins will run concurrently with the naira notes they are replacing as a test-run for Nigerians to accept them first.

He said, "There is absolutely no link. I am an economist. I have been deputy governor, operations, of the Central Bank. In the last review of the introduction of N1000 note and the various coins I was deeply involved, it was my responsibility at the Central Bank. There is absolutely no link between inflation and the currency denomination.

On whether the N5000 note was at variance with the cashless policy, the minister explained: "It is not at variance. In most of the economies you look at, the Euro has the €500 note. If you go to the countries where Euro is in use, you will not get the €500 note in normal circulation. But it is used by the banks and a few other heavy cash users to store higher value. I have been in parts of the United States where you draw the $100 bill and give it to somebody and they start looking at it as if it is something strange. They probably have not seen it before." He said that higher denominations are there to create higher value and will not be in the widest of circulation.

A civil society organisation, the Anti-Corruption Network, yesterday stormed the CBN head office in Abuja, protesting the proposed restructuring exercise, particularly the introduction of the N5,000 notes, and asked the Federal Government and the regulatory banking institution to stop forthwith arrangements on the exercise in view of what it termed the likely negative socio-economic impact on ordinary Nigerians.

Organised private sector said the introduction of N5, 000 notes in the planned restructuring of the nation's currency, saying it will aid corruption. Director General, Lagos Chamber of Commerce and Industry, Muda Yusuf in his comment said although the idea of restructuring the currency is a welcome development, "there is a flip side to the policy."

The Nigeria Labour Congress (NLC) also described as unfortunate the fact the President Goodluck Jonathan would approve the proposed N5,000 note despite intervention by the House of Representatives to halt the process.

Mr. Bayo Babatunde, Managing Director, Avscon Nigeria Ltd said, " I think it is an improvised vessel for corruption and goes counter to the cashless policy of the Central Bank of Nigeria (CBN). It will facilitate easier exchange of bribes and reduce the quantity of Ghana must go bags required" he said.

On its part, the Director General of the National Association of Chambers of Commerce Industry, Mines and Agriculture (NACCIMA) Mr John Isemede, said he was more concerned about what the project would cost the Nigeria economy.

According to him "we want to know what the printing would cost the taxpayers." He also raised concerns on what benefit the currency restructuring would have for Nigerians stressing that there is a need to improve on the export capacity of the country.

He also noted that NACCIMA is watching the moves of the CBN as well as the stand of the lawmakers on the issue, stating that it is would be on the look-out for the process of the award of the contract.

Managing Director and Chief Executive of APT Securities and Funds Limited Mallam Garba Kurfi on the other hand said he is not as bothered about the introduction of the N5000 note as that of the conversion of the N20, N10 and N5 notes to coins.

In his reaction, Mr Lanre Ajayi, President of Association of Telecommunications Companies of Nigeria (ATCON) said "It doesn't look consistent with the cashless policy. My own understanding is that cashless policy is meant to reduce cash in circulation. I am not an economist but from the layman's perspective it doesn't augur well, while Mr Tim Akano, vice chairman, Wini Group, an IT security company said the introduction of the N5000 note will definitely have a negative impact on the economy. "The concept of cashless is to take cash away from people.

"Increasing currency to N5000 note is an indirect way of CBN telling people to dump cashless policy. To every discerning analyst, it is more political than economic. It is going to drive inflation up and support corruption. The money being used to print the N5000 notes could have been deployed to improve the standard of education", said Ajayi.

Leading about 300 hundred youths on the protest which was being closely monitored by the security agencies in the front of the CBN Headquarters, Abuja, a former Legislator and Executive Secretary of the Network, Otunba Dino Melaye, described the proposed measure which, he said, his group was prepared to mobilise millions of ordinary Nigerians to frustrate the plans as a proof of government's insensitivity to the plight of millions of poor Nigerians who, he said, were already over-burdened economically as a result of the partial withdrawal of fuel subsidy in January this year.

Also, President of the Chartered Insurance Institute of Nigeria (CIIN), Dr. Wole Adetimehin, said the introduction of N5, 000 note by the CBN would adversely affect insurance business in the country.

Melaye, who spoke with the media on why the protest was organised said it was to show to the CBN authorities and government that sovereignty resides with the people and that it was regrettable that despite the National Assembly's directive that the apex bank should suspend the plan, the Governor of the CBN, Mallam Sanusi Lamido Sanusi, was hell-bent at carrying out the plan in furtherance of his Islamisation agenda for the country.

According to him, the planned introduction of the N5,000 clearly contradicted the policy stance of the apex bank on cashless and electronic banking, pointing out that it would further devaluate the national currency with the attendant negative implications on efforts to make the economy's growth more inclusive and globally competitive.

He explained: "We want to say that the CBN Governor and indeed the Federal Government had proven that they are not a responsible and responsive government. This government is not equally sick but also suffering from what I call a dreadful continental abnormality. We suffered during the fuel subsidy and we are yet to recover form that pain. We have long discovered that N277 billion was budgeted for subsidy in 2011 budget and government went ahead to spend N2.3 trillion. "For now, I believe the idea should give room to other major issues that are paramount to our country's growth, " he said.

"Our points is, instead of the government to attack this key issue and fight, arrest and prosecute those who are stealing our commonwealth, they want to inflict further pains and injury on Nigerians that are already suffering from perilous and times of opprobrium. What I am saying in essence is that the Anti-Corruption Network is mobilising Nigerians to say No to this N5,000 haram. We are still praying to God to conquer Boko Haram but Sanusi Lamido Sanusi is introducing N5,000 haram. We will reject, we will renounce, we will rebuke, we will pray it out of order", Melaye said.

CBN deputy governor Mr Tunde Lemo, who received the protest letter from the group on behalf of CBN management, however reassured Nigerians that the currency restructuring exercise would not worsen the socio-economic hardship of ordinary Nigerians as being speculated by a broad section of the public.

Meanwhile, CIIN boss Adetimehin said yesterday in Lagos that the currency reform would cause huge claim costs to insurance companies.

He said the proposal had the prospects of raising the amount of money in circulation at a given time.

"The N5,000 note will aggravate the quantum of costs to be incurred by the industry on money insurance policy management.

"What this means is that people will indulge in carrying huge amount of money that may run into millions without anyone noticing.

"Meaning that any loss of a bundle of N5,000 notes will amount to huge claim costs and compensation on the insurance company in a given money insurance policy," he said.

The CIIN president advised that the proposal should be suspended by the apex bank for now.

While describing the restructuring agenda as satanic in intents and purposes, he advised Nigerians to join forces with the group in its ongoing war against the measure, querying that "we graduated from N20 to N50, from N50 to N100, from N100 to N200, from N200 to N500 and from N500 to N1,000. What has that done to inflation? What has that done to the economy? What has that done to unemployment? What has that done to the provision of pipe borne water? What has that done to the provision of electricity? Has that one given us good roads or good hospitals?

On the current procedures being adopted by government to recover money in the fuel subsidy payments from indicted marketers, he pointed out that the entire process was too secretive since government had failed to let Nigerians know who is making refunds and of what amount and denominations such refunds are being made, adding that his group is already warming up to lead another national protest to the National Assembly as soon as it reconvened with a view to demanding for publication of recoveries made so far on the fuel subsidy scam.