AN OPEN LETTER TO MALAM SANUSI LAMIDO SANUSI ON HIS BUSINESS DECISION TO INTRODUCE N5,000 NAIRA SINGEL CURRENCY NOTE BY SEPTEMBER 01-2012!!!!!

Dear Mallam Sanusi Lamido Sanusi,

As noted, the Central Bank of Nigeria (CBN) will very likely
release into the market on September 1, 2012, a N5,000 currency, The Sun Newspaper, August 9, 2012. Mallam, this may be the worst business decision to be taken by Central Bank of Nigeria since independency because of its mix implications. The Nigerian economy is not strong enough to handle this type of harsh economic policy since the economy depends solely on the stability of oil price. Also, the timing of this policy is wrong due to the worrisome economic developments of the nation. Mallam, you should put into consideration the high inflation rate this decision may cause. Above all, when combined with concerns about counterfeiting, it becomes more scaring why you should take such a “radical” economic decision at this point in time.

Mallam, for your note, a short history about high-denomination notes: courtesy of Wikipedia, the free encyclopedia: high-denomination currency was prevalent from the very beginning of U.S. Government. Interest-bearing notes of $500, $1,000, $5,000, and $10,000 were issued at different time. However, the U.S. Federal Reserve began taking high-denomination bills out of circulation in 1969. As of May 30, 2009, there were only 336 known $10,000 bills known to exist; 342 remaining $5,000 bills; and 165,372 remaining $1,000 bills. For the most part, these bills were used by banks and the Federal Government for large financial transactions. However, the introduction of the electronic money system has made large-scale cash transactions obsolete.

Mallam, I hope that you reconsider your decision in line with the trends of 21st century technology so that Nigeria doesn’t end up like Zimbabwe. I wish you all the luck in your business decisions.

Sincerely,

Elder (Dr.) Chukwuma O. Nwaonicha.

There is no justifacation whatsoever for the introduction of N5000.00 bill into the economy. Not even when every transactions and services can be consumated electronically without physical cash. Then what is the essence of this cashlite policy?

The introduction of N5,000 notes looks incongruous with the so-called cashless policy. Why introduce a new currency note while you're trying to discourage the use of cash altogether?

I'm waiting for Mallam to come defend this.

Atimes I wonder what inhabits d mallam to make some of these uninformed decisions.

Widespread consultation is alien in the country - Nigeria.

Lips sealed for now!

Cashless economy and higher denomination; word and opposite! Same way sanusi's brain and our economy are word and opposite.

even if there is any meaningful reason behind his, he his suppose to make this known before the introduction to avoid any kind of heating up

When the clueless is in power, the people suffer...

If the man withdrew ALL large notes, N200 and up, this will reduce cash movement because of the quantities people have to move around, now his cashless policy might come into "yellow" light but given this policy, I laugh in Swahili. This is what you get when you place someone who read Islamic Studies as Masters in Yemen + Risk Management, rather than a seasoned, well grounded economist to take the helm of Nigeria's largest bank.

LMAO! The suffering has just started. Una never see anything. This government will actually force Nigerians to react badly towards them. This mallam no get sense. I been think sey na person wey nderstand economics before.lmao. They will soon be exchanging 1million naira for bread.

N5000 ~ $30.

Is that really too large a bill?

Btw, is it really true that larger bills causes inflation? It is a symptom of inflation but not the cause, yes?

manny4life: When the clueless is in power, the people suffer...

If the man withdrew ALL large notes, N200 and up

That doesn't seem advisable. N200 is only a bit more than a $1.

ekt_bear: N5000 ~ $30.

Is that really too large a bill?

Btw, is it really true that larger bills causes inflation? It is a symptom of inflation but not the cause, yes?

There is a very good reason why coins are seen as a viable means of controlling inflation. Money after all is made up of units of currency. Pre reintroduction of coins, how many times did you ever go into a Nigerian market and see, say, something selling for N37? (I am not even sure those sort of prices even exist now). The reason for this is because the only ammount people could really increase prices before was a minimum of five naira. And five naira is not as common as say N20. This is all pyschological behaviour. If the only way possibly naturally occuring inflation could occur was in larger units, then surely that only exacerbates it when it happens, no?

Also, I think such comparisons like N5000 ~ $30 are not really viable on their own. Not really wanting to go into this in detail, but cost of living in America is different from cost of living in Nigeria (obviously). So what that '$30' can get you is different. Surely the perceived need for larger denominations should be based more on actual value of the money in the environment it is being used, and not on value of the money in America.

Iam in no way holding brief for malam lamido..I still remember spending 20 and 50 gh cedis which is roughly 2000 and 5000 naira. If he was gunning for a cashless economy i dont think there is still need for this.

1. I don't think that this hypothesis of yours that larger notes => more inflation is true. At least, I'd have to see research supporting it to believe it.
2. You are correct, the cost of living is different in the US than in Nigeria. The US is actually cheaper to live in. Also, credit cards are accepted almost everywhere here, further reducing the need for cash. Otoh, in Nigeria this is not the case.

ekt_bear: 1. I don't think that this hypothesis of yours that larger notes => more inflation is true. At least, I'd have to see research supporting it to believe it.
2. You are correct, the cost of living is different in the US than in Nigeria. The US is actually cheaper to live in. Also, credit cards are accepted almost everywhere here, further reducing the need for cash. Otoh, in Nigeria this is not the case.

You are free to search for papers if that helps you, it is not really rocket science to be honest.

Also, not everywhere in Nigeria is Lagos. Cost of living is not the same around the country so I think that judgement of Nigeria being more expensive to live in is a bit premature. Things you don't seem to consider: quality of life in Nigeria is different (are we speaking cost to achieve the same quality of life? - because even these vary quite significantly around the country). I don't know about now especially with all the bokoharam crises, but the north used to be quite cheap to live in when compared with the south - with a reasonable quality of life too.

1. Like, my point is, this hypothesis is probably incorrect. The (relative) value of a currency is largely based upon supply and demand for it. Not the notes you use to denominate it.

2. Sure, the north is/was probably quite cheap to live in. But so is rural Texas. Land and housing are both dirt cheap, and economic opportunities more abundant. And one can easily argue that the quality of life in even rural Texas is higher. At a minimum, you have affordable, abundant electricity, excellent roads, and schools available even to the poorest man. Three things that don't exist in Nigeria for your typical person..

Hey ekt_bear, I will reply ur post when I get in, just left the office, I'm not good postinv coherent response by phone.

This mallam wan just devalue our naira the more. make dem kukuma turn the naira to CFAs .
Once you introduce 5,000 naira note, 5naira,10naira and 20naira become valueless

ekt_bear: N5000 ~ $30.

Is that really too large a bill?

Btw, is it really true that larger bills causes inflation? It is a symptom of inflation but not the cause, yes?

IMO, yes it is large given a lot of factors affecting the naira such as depreciation and devaluation; nevertheless, I'll stick to the topic. It's important to ask oneself, what is inflation? In a layman's term, inflation is nothing but the rise in the average price of goods and services in an economy.

Therefore, the units nor the volume of currency is not what causes inflation but affects inflation in general terms. For there to be increased price of related goods and services, there must be some negative macroeconomic shift; so YES, you can say it's a symptom or more so, it's one of the variable to show increased inflation.

ekt_bear:

That doesn't seem advisable. N200 is only a bit more than a $1.

Exactly! More reason why it's advisable given the average purchasing power of an average Nigerian. If statistically, an average Nigerian lives on about $1/day (although I doubt this #), wouldn't you want the value of you naira stronger? Look, if you have less unit of currency, depending on what measure you're examining, it will help increase the value of the naira against the $$$.

Imagine where the least OR minimum ($1) can purchase our maximum (one 5,000 units) of currency, like seriously, think about it? Although my point was necessarily about inflation, I was emphasizing more on his cashless policy.

What happen when one note tore? 5k just go like that? The begining of failed stated. We don't need new note. Let them change 5, 10, 20 and 50 to paper note that lynon curretly sucks and tore so easily that design is a big mistake.

I think the mallam wants to go the way of Ghana, Ghana even had 10,000 note before slashing the zeros

WHY GHANA?