₦airaland Forum

The argument that the N5, 000 bill should not be introduced because it would spur corruption does not hold here because those that are using our currency for corruption have already migrated to the dollar because the naira has lost its value. The dollar has now become the store of value. That is why we are introducing a higher bill of value because we don’t want to dollarise our economy. We need to be in charge of the money that comes in and goes out”.

The above passage is an excerpt from the CBN Media Director’s presentation at the commencement of a sensitisation campaign on the planned currency-restructuring program. We may deduce from the above that CBN recognises that corruption is facilitated by currencies with high denomination/values!

We note, for example, that the adoption of dollars for the facilitation of the $620,000 allegedly collected as bribe by Farouk Lawan from Femi Otedola is in consonance with Okoroafor’s observation. Consequently, the N5, 000 note will be introduced by the CBN to compete as the instrument of choice against the dollar for such corrupt transaction!

The CBN Media Director also willfully provided us with the reason why the naira fell out of favour with the public; according to him, ‘the naira has lost value’. Regrettably, however, the reasons for the loss in the purchasing power of the naira were not provided.

Indeed, loss in a currency purchasing values is primarily caused by high inflation rate. In this manner, one can understand why the N1, 000 note can presently only buy about 40% of its original value when it was first introduced in 2005. The loss in value is due to annual inflation rate of over 10%. Consequently, the N5, 000 denomination will hopefully command the purchasing value, which the N1, 000 note enjoyed at birth.

What, of course, Mr. Okoroafor did not say is that unless inflationary spiral is contained, the N5, 000 naira will also lose value over time such that a N10, 000 note will become expedient to facilitate transactions.

CBN also indicated that naira’s loss of value has led to dollarization of the economy. From the foregoing, however, it is evident that the loss in the purchasing value of the naira is the product of inflation; in other words, if we can contain inflation, it will not be necessary to produce higher naira denominations. The question, therefore, is how do we restrain inflation?

Given that inflation is the product of too much money chasing too few goods, we can control money supply in the economy, to curtain inflation and simultaneously improve naira value without the recourse to higher denominations in our currency profile.