“The leadership of Nigeria’s apex bank seems to court and acquire more powers than is relevant to its basic functions”.
There is nothing that mystifies the mind, than the fundamental difference between the office of an economy minister and the governor of the central bank. Economically, it is possible for a governor or chairman of the apex bank in a country, to share a peculiar ideology from a governmental administration to which he or she is answerable to.
A classical example is the highly successful tenure of Alan Greenspan as the Chairman of the Federal Reserve Bank of the United States of America. An individual first appointed into the office by the Reagan Administration, he was confirmed by its Republican successor of the first of the Bush’s eras and most surprisingly the Clinton’s Democratic Party administration, which upturned the power equations in Washington in the fall of 1992. Mr. Greenspan was retained despite being primarily associated with the politics and policies of a defeated predecessor. In fact, due to the level of stability attained during his tenure, he was re-nominated for an unprecedented period of fifth term of office by the George W. Bush Administration in the middle of the year 2004.
Perhaps this situation was possible, because of the fact that the task of monetary policy initiation and execution transcends visionary short term politics of ballot boxes and transience of electoral power. For the primary function of a monetary policy maker, starts with the general control of the level inflation in the country, through aggregating the level of liquidity within the economy. This is a direct determinant of the spending value of the national currency. Thus, it sets the interest rates for accessing a loan in a bank and making savings for the needs of forecasting the future trends in the course which the direction of the economy is likely to be taken, that enables the mopping up of excess cash within the system, through the issuance of promissory note in a situation where the circumstance so requires, to guard against the economy going on a spiral of steep inflation and uncontrolled devaluation.
It is within the context of such scenario that the Central Bank of Nigeria unveiled a new currency policy in the country. It entails the introduction of a single five thousand naira note and turning the five, ten and twenty naira notes into coins.
Basically, the reasons offered for undertaking such a costly venture, by the governor of the apex bank, Sanusi Lamido Sanusi, are the reduction of the amount of funds spent on periodic renewing of spoiled polymer notes, as coins are more durable. The lifespan of a minted coin reaches up to twenty years, a polymer note hardly lasts a period of five years in a harsh on paper money Nigerian environment.
More so, as a single five thousand naira note reduces the volume of raw cash required in the case of movement of such funds, especially in a society that conducts its businesses physically, without much trust on the other party honoring the terms of monetary agreements.
Indeed it is easily assumed that the earlier introduced cashless economy is to inculcate a culture of the electronically business system. This means that conducting commercial transaction does not involve the physical exchange of money. Rather, the formalization of the agreement entails the crediting of the accounts of the seller with the pledged sum of the buyer, in a properly authenticated security set-up that does not lend itself to fraudulent tempering of any of the transacting parties.
Thus for an economy seriously striving to strip itself of the need for involving raw cash in its business ventures, it seems a classic contradiction to introduce more currency notes which will aid easy cash transactions.
More so, a national financial community struggling to imbibe a new habitual trait does not require the discouragement of celebrating the old order of big currency notes.
But the biggest dampener on the new monetary policy initiative is the intricate motives for its introduction. The leadership of the Nigeria’s apex bank seems to court and acquire more powers than is relevant to its basic functions. From venturing into direct commercial banking with the acquisition of three nationalized banks, to seconding its officials to nurture such organization to health. The apex bank has progressively blurred the line between a banking license operator and its regulatory authority. It gives direct loans to farmers rather than merely proclaiming such policy, facilitating loans to small scale entrepreneurs in place of guiding the properly constituted entities to perform their duties and taking so many roles that are not remotely proximate to its legally established responsibilities.
In fact, a monetary policy initiator either props-up a currency in case of loss of value or devalues such commercial notes of exchange in the circumstance where an economy exports more than it imports its gross national production. For you cannot realistically decree value on a newly introduced monetary note, rather it is by setting the right parameters and indicators in the economy, that a policy maker determines the real value of his or her national currencies. More so, in an economy disproportionally populated with very poor people, proclaiming the change of monetary notes into the much unwanted coins, only promulgate a regime of fifty naira as the lowest value money. Fifty naira will become the price of most commodities even if they did not attain such cost, surely a recipe for obviously foreseen inflationary trend, even if it could not be acknowledged for reasons seemingly and purely political.
As with anything in the Nigeria’s intricate trait, the policy reeks of a plot to establish and embellish the persona of the apex bank’s chair as a pioneer achiever who creates new things. It reeks of a plot to make the apex bank’s chair look the eligible candidate for higher duties either monarchical or political. This explains the congratulatory stance of most of the attendees at functions unveiling a mere monetary note of exchange. But, it is important to note that there was once an individual on such a seat in the person of Alan Greenspan. He avoided the gluttonous limelight of the press like a plague, for it is a known historical fact that he never granted an interview, during his long reign in office which lasted for several years, starting from 1987 to the year 2006. Still, his tenure of office was hailed globally as the best in the historical annals of the world economy.