Governor of Central bank of Nigeria (CBN) Sanusi Lamido Sanusi has said that any individual or organisation who refuses to accept the naira as a legal tender in Nigeria commits an offence and could be sent to jail.
This is even as Sanusi insisted that the monthly Federation Allocation and Accounts Committee (FAAC) distribution would continue to be distributed in naira as there is no nation in the world that distributes its resources in foreign currency.
He however said that some maritime agencies can receive payment for services in foreign currencies as they are covered by the law.
Speaking during a briefing in Washington DC, the CBN Governor said anyone that is sent funds through Western Union into the country would also receive the naira equivalent of such funds.
He said: “The interesting thing about our country is that we try to be different from others in the world. If you are in the UK and somebody transfers money to you from the United States, in what currency do you get paid in London? Obviously you get paid in pounds. There is nowhere in the world where you go to a bank and because you got a transfer, you insist on being paid in that currency.
If you are Japan you get paid in the Japanese Yen; if you are in China, you get paid in Yuan.”
He explained that the CBN introduced the policy of asking the banks to pay people in dollars because there was a time when the banks used to cheat people by basically giving the people an exchange rate far less than the market rate.
“Now we have said that the exchange rate must be exactly the exchange rate of the inter-bank of the particular date of exchange and the banks are required to display the exchange rate in the banking hall. I don’t see how the bank can continue with a policy that is not consistent with global practices and continue importing dollar and basically saying that we don’t have confidence in our currency.
“Why should Nigeria be the only one that will be paying people dollar because they were sent dollar transfer. Why should we pay your uncle or aunty who is going to spend Naira in Nigeria, dollars because he or she got dollar transfers? They should explain to us why they should be paid in dollars and not Naira. Why should Nigeria be the only one doing such a thing?”
On the debt ceiling crisis in the United States, the Apex Bank chief said that crisis may have some implications on the global economy if the legislature and the executive do not reach some kind of conclusion soon.
“They may be forced into what could become a massive austerity programme and the possibility of a default on its obligations. Not necessarily on the default in their treasury bills because I expect that there will be some form of prioritisation. I don’t see the United states defaulting on its treasury bills as a first line of defence. But they will default in some of their obligations and no one knows exactly how the market is going to react to this.
“The real challenge is for us in emerging and frontier markets and we expect that they will reach some sort of truce within a short while. The government shutdown is more of a domestic issue but the debt ceiling is the one that affects all of us- we hold our reserves in the US dollars, we have invested it in U.S. Treasury Bills and bonds and if there is a slit in those instruments we will suffer loss in the assets that we hold. And so we expect the U.S. to resolve this impasse in the interest of the global economy,” he said.
Meanwhile, Sanusi has said that the CBN has no intentions of revisiting the N5,000 notes issue despite the economic importance of having the notes.
The CBN had last year decided on a currency restructuring that would have resulted, among others, in the introduction of N5,000 notes, but was suspended by the government due to public outcry.
But Sanusi explained that the bank decided to introduce the notes at the time because the nation had inflation in double digits for a very long time, which weakened the purchasing power of the national currency and therefore means people had to carry much more currency than they need to carry out transaction.
He said: “You go to an ATM, you want N100,000, you have to take 100 notes, those notes have a cost and printing those notes you are paying for the paper, paying for the security features, paying for transportation and paying for security while transporting them.
“And then the CBN is going to spend money for destruction of those notes. Banks are paying for them .If you had a N5,000 note, five of you are going to take that N100,000 each, with the same number of notes and at the same cost to the economy. So the economic fundamentals are clear to me, if your currency looses value, printing higher denomination makes economic sense.”
The CBN boss stated that some of the dollarisation in Nigeria’s economy today is as a result of the fact that people do not want to carry so much notes about.
“Why do people need to have $10,000 in their pockets, which is N1.5m. If you had the N5,000 notes, it is three bundles. I have heard people say all these will encourage corruption, well you are having corruption in dollars but you do not want to have it in naira. I have heard all sorts of silly arguments; it will cause inflation, which I have never seen any kind of economic basis for that kind of argument, people got up and made statements, professional institutions, accountants said it is inflationary.
“I don’t know when accountants became economists, I don’t know when changing denomination became the same as increasing money supply. If Nigerians would rather carry Ghana must go bags on their backs, that is fine. If they would rather we continue spending the money printing these notes, that is fine.
“Look if you take a bullion van of N5,000 notes from Abuja to Lagos or from Abuja to Kaduna, you would have to do that trip five times to transport the same value in N1,000 notes. Think of the bullion van, the fuel, the security, the printing, it was very clear to me and very clear that the people who were arguing had no argument, but we had a National Assembly resolution, we had Nigerians threatening to march and the decision is not a CBN one, but a government decision.”
Sanusi asserted that if the government in its wisdom decided to suspend it, then there was nothing the CBN could do about it, adding that if however it rests with the bank to take the final decision, then Nigerians would be using the notes by now.