I am not an expert on central banking or currency restructuring but I have a little understanding of what the Central Bank of Nigeria is trying to do right now and I will share it with you.
Firstly, the CBN has responsibility for the overall control and administration of monetary and financial policies of the country. Its issuance of the country’s legal tender flows from this; every country, within a space of 5 to 8 years restructures its currency; part of the reason for doing this is to stay ahead of counterfeiting, i.e. the negative attitude of faking a country’s currency.
To restructure a currency, a country’s central bank submits a proposal to the president who tables this before his cabinet and based on their recommendations, approval is made.
The current attempt by the CBN to restructure the Naira by issuing a N5,000 note and coining N5, N10 and N20 as well as 50K, N1, and N2, has been misunderstood by many of our compatriots.
The purpose of this restructuring is to ensure balance in our currency structure and ease our day to day transactions. It will also enhance the security of the Naira, the redesigned currencies are going to be more durable and beautiful.
The restructuring means the Naira will have six banknotes of N50, N100, N200, N500, N1000 and N5000, and the redesigned banknotes when issued in 2013 will circulate side by side with the existing five banknotes, which are going to be phased out gradually.
The coins will be made in nickel plated steel with different edges and weights to make them people friendly. The restructuring provides us an opportunity to bring back the coins, which have remained part of every country’s currency needed to pay for lowest-priced goods.
Nigeria is not the first or only country to introduce high denomination banknotes as the Japanese have 10,000 Yen, the Singaporeans have 10,000 Dollar bill, among others.
I also have heard experts say that the introduction of the N5,000 note does not contradict the cashless economy policy of the CBN, because it will help reduce the volume of banknotes in circulation and also enable CBN cut down on the amount of money needed to print the Naira notes.
Unfortunately, many Nigerians have misunderstood this routine exercise of mandate by the CBN by believing that the whole restructuring is aimed at further devaluing the currency. Equally there is no evidence that the introduction of the N5000 note can engender inflation. The CBN on its own cannot just introduce or withdraw any denomination of our currency without approval from the President. Rather than this hysteria, I advise Nigerians to accept this restructuring exercise in good faith and make effort to change our negative attitude of rejecting coins. Also, we need to rethink our attitude of waiving off small change.