Nigeria’s penchant for doing what is not necessary with possessive passion while leaving what ought to be done with carefree abandon is legendary. As a result, capacity for sustainable development is whittled away which in turn undermines growth. Individuals can be excused for fitting into the damning description in Eric Hoffer’s words that “man’s top priority” is often the “passionate pursuit of the nonessential”. But that an institution like the Central Bank of Nigeria (CBN) plans to spend N40billion scarce resource on new N5, 000 notes and coins, without any empirical studies other than the argument being advanced by its officers, takes the hard fact home that for Nigeria, even in officialdom, priority for the vain and the inconsequential rules.
After a claim that it did not need parliamentary consent, a CBN director, Mr. Ugochukwu Okoroafor said Project CURE “would ease transactions, minimise cost of currency management in terms of printing” and “enhance the security features to beat counterfeiters as well as make them user-friendly, especially the physically impaired” (Leadership, 31 August 2012). By this, the CBN has raised certain points that should be of interest to development scientists, namely; (1)it is within its power to do so (in response to the National Assembly), (2)it is cost effective (the argument is that what it would cost Nigeria to print a single N5,000 is what would be required to print five N1,000 notes or more units of lower denominations), (3)it will ease financial transactions, (4)it will enhance Naira security, (5)its proposed design will be more user friendly, and (6)the action is in conformity with the cashless policy of the CBN in apparent reaction to citizens who identified the contradiction in the promotion of a less or no-cash policy and the determination to enhance people’s capacity to hoard large amount of money in smaller amount of space.
Is it within the CBN’s power to print money or restructure the Naira? Yes. But the constitution imposes a duty on all organs of government to “conduct their affairs” in manners that “shall command national loyalty” as a fundamental requirement (Chapter 2). That is why the constitution effectively places a mandatory obligation upon the legislature to serve as a check to the executive and it is thus within its power to query or act by way of resolutions (Section 88) to put on hold the CBN’s intention as part of its oversight function if it is convinced that the latter’s action, no matter how legitimate, is not in the public interest or consistent with the spirit of the Nigerian constitution. This is a sacred provision of which Earl Warren said “it is the spirit and not the form of law that keeps justice alive”.
Enormous power was appropriately assigned to the CBN within the context of its role as a conservative institution that would function primarily as a force of stability and in the expectation that those to wield such vast powers would be guided by the enormity of their responsibility and would exhibit depth, wisdom and stoical reservation and not the type to spring avant-garde policies on the nation.
It is difficult not to conclude that even the claim of cost efficiency is an attempt to provide cheap economic justification for the exercise. High school economics exposes such argument as mediocre approach to fiscal issues as the opportunity cost is much higher. The opportunity cost of the entire exercise at a time of global economic meltdown is the alternative forgone which encompasses but not limited to; (i)the N40billion from the nation’s treasury that could have been deployed towards alternative and tangible economic stimulating activities like investing in schemes that can create jobs and improve the nation’s infrastructure net worth and (ii) the massive but likely never to be quantified economic loss that would be traceable to the avoidable devaluation of the Naira when Nigerians as usual start exchanging the lowest commodity at the value of the new smallest note (N50) once the old N5, N10 and N20 have been changed to coins. It is a historic psychological reaction motivated by the prevailing economic reality. If the nation were to suddenly return the old one Naira (N1) note, there is a huge possibility that one naira products would resurface in the markets as traders, transporters etc generally benchmark their products’ prices to the lowest note or its nearest multiples.
The defense that it would curb inflation is debatable because monetary inflation is about the money supply and not the number of notes. Moreover, was it an accident of fate that the success recorded by managing Nigeria’s inflation to an all time low of 3.0 percent in July 2006 was terminated following the CBN redesignating some notes as coins that year? So the reality is that Nigeria is a consumer economy. She produces little and consumes large products from more stable economies. The desire to satisfy consumption promotes dollarization and it will not end by merely tinkering with currencies. Those that can immediately benefit from the printing of higher notes are the very elites that the same government has accused of looting. For these people, N5, 000 notes are blessings because what would require a ‘Ghana-must-go’ in the past or risking exposure when booking US Dollars from banks during loot sharing would now comfortably fit into a simple cap.
On security, it would take more than changing currencies to beat those who are sophisticated enough to forge existing notes. Common folks do not forge notes. Syndicates do. Likewise, the claim of user-friendliness is laughable. Have Nigerians, including our disabled compatriots, complained about existing notes?
Nigeria will develop when government’s decisions are based on empirical studies rather than ego and wishful hypotheses. A real ‘Project Cure’ aiming to strengthen Naira requires real economic growth which would be primarily stimulated by production, social-political stability and not mere superficial note restructuring. Spending N40billion during recession on printing N5, 000 notes and the introduction of some fancy coins is senseless, a strong testament that our priority is warped and directly negates the cashless policy of the CBN. Less cash (cashless) policy is to encourage people to bank their money so that movement of money in circulation can be traced and accounted for. Many crimes and criminal gangs have been busted in the UK and USA simply by following the money. Imagine that Nigeria is able to track flow of money to criminals or insurgent and terrorist groups. Hence, any action that would further enhance people’s capacity to hoard large amount of money in smaller amount of space, as is the case with the proposed N5, 000 notes, would directly contradict the central theme of the cashless policy and frontally erodes its potential benefits.
Tunji is a Policy Chair of the National Development Initiative NDi (a non-partisan independent think-tank). NDi Project can be accessed at www.nd-i.org
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