N5,000 note: Another burden for the poor

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NIYI ODEBODE examines the arguements for and against the Central Bank of Nigeria’s currency restructuring.

 Although he has  royal blood flowing in his veins, the Governor of the Central Bank of Nigeria, Mallam Lamido Sanusi, has never hidden his love for the masses. When in 2010, he attacked the jumbo pay of the National Assembly members; he had the average Nigerian at the back of his mind.  In his argument for the removal of the fuel subsidy, he said that the talakawas (the masses), who were supposed to enjoy the subsidy, were not benefitting from it. Besides his love for the masses, the Kano prince, since his assumption of office in June 2009,  has always been in the news, not necessarily because of his job at the apex bank, but his nature: he does not shy away from controversies.

In January this year, Sanusi stirred up a hornets’ nest when in an interview with the Financial Times of London, he  linked  activities of the militant Islamic sect,  Boko Haram, to the 13 per cent oil derivation fund. Sanusi said,  “I have long held the view that ethnic and religious violence in Nigeria has its root in poverty and deprivation and perceived marginalisation.  I always said this about militancy in Niger Delta, while fully condemning it, the truth remains that militants tapped into a groundswell of frustration. In addressing that problem, we have gone to an extra, now where the levels of poverty in the North are receiving the same conditions and results we saw in the Delta.” The people  of the  oil-producing states, who saw Sanusi’s statement as an attempt to stop them from enjoying their God-given wealth, hauled insults  at him.

Before his postulation on poverty in the North, the  Dan Majen of Kano  had  incurred the wrath of Christians  over Islamic banking.  But rather than backing down, Sanusi pressed ahead with the plan. Islamic banking has since  become part of our financial system. It has even been listed on the Nigerian Stock Exchange. CAN and other groups that are opposed to the policy have been forced to live with it.

Two weeks ago, Sanusi again  started another debate with the planned restructuring of the naira. Like what happened when he unfolded  the Islamic banking agenda,  the CBN governor is unperturbed by criticisms that have greeted  the currency restructuring.

At a press conference in Abuja on August 23, Sanusi had told journalists that the apex bank would, as from 2013 introduce N5,000 note, while N5, N10 and N20 notes would be converted to coins. According to Sanusi, the redesigned N50 and N5,000 notes will be introduced in early 2013. He explained that the naira was being restructured to encourage the use of coins, curb inflation, enhance the quality of bank notes and promote cashless economy. The nationalist in the CBN governor came into play in the design of the N5,000 note. The note will bear the  portraits of three women, (Mrs. Margaret Ekpo, Mrs. Funmilayo Ransome-Kuti and Hajia Gambo Sawaba) who fought for the country’s independence.  Probably to woo federal lawmakers, the reverse side of the note will bear the picture of the National Assembly.

Hardly had Sanusi announced the policy when condemnations started greeting it. A research professor and consultant economist,  Kayode Familoni, punctured the CBN governor’s argument that the restructuring of the naira would curb inflation. Although the expert agreed that the policy would reduce the cost of transitions, he said, “The danger is that it could have a tendency to gradually create and add to inflationary pressures in the economy.” The Chief Executive Officer, Financial Derivations Company Limited, Bismarck Rewane, is of the opinion that the plan to introduce N5,000 has overtaken the cash-less policy being pursued by the CBN.  Another expert and Registrar of the Institute of Chartered Economist of Nigeria, Mr. Peter Ikpamejo, argued that the N5,000 bill would lead to an increase in the prices of goods and services. “Somebody should caution the CBN governor because the N5,000 note will lead to inflation. We feel that he should have redominated the naira by removing zero and making N100 the highest currency,” he said.

It is  not only Ikpamejo, who believes that the N5,000 note  will cause inflation. Opposition parties have condemned the new structure of the naira. The All Nigeria Peoples Party, in a statement by its National Publicity Secretary, Chief Emma Eneukwu, stated, “It is an established fact that the Nigerian populace is averse to the use of coins, and therefore, the decision of the  Federal Government to convert some lower denomination notes to coins smells a premeditated agenda to further mop up cash from the nation’s space and whip the Nigerian people in the process, just as  it had done through the increase in the pump price of fuel and the hike in the electricity tariff.”  The Congress for Progressive Change  National Publicity Secretary, Mr. Rotimi Fashakin, said  the introduction of N5,000 note would lead to more corruption in the polity. He added that it would widen the gap between the rich and the poor. Another opposition party, the Action Congress for Progressive Change, in a very analytical statement, picked holes in Sanusi’s restructuring of the naira. Citing Zimbabwe, Mexico, and Cameroun, it warned that Nigeria would join a league of nations, whose currencies do not worth more than the paper used in printing them.

Although it is on break, the National Assembly has  moved to stop Sanusi from going ahead with the currency restructuring.  The Chairman of the Senate  Committee on Banking,  Bassey Otu, said the apex bank must seek the approval of the National Assembly before implementing the policy. On August 29, the House of Representatives summoned Sanusi to explain the new structure of the naira.

But the CBN and its governor have faulted experts, who claimed that the N5,000 would lead to inflation. Challenging the experts,  the Director of the  apex bank’s Corporate Affairs Department, Mr. Ugochukwu Okoroafor, said, “I have heard that the introduction of the N5,000 will bring inflation. I challenge anybody, who is an economist to tell me an economic theory that says when you have a higher denomination in your pocket, it will change how you spend money.” He stated that the CBN  would not engage in any confrontation with the National Assembly. “We have entered discussion with the Senate carefully because we want their approval,” he added.

But in spite of its soft stand on the invitations by the two arms of the National Assembly,  it seems the CBN  is not ready to surrender the autonomy, which empowers it to print currency. Okoroafor, at a press conference on August  30, said, “We are aware of the message from the Senate and we have also heard about very conciliatory stance of the House. But it is important to note that the law is very clear on what our responsibilities are; it is very clear on the process as far as this matter is concerned and we are completely within our mandate and we have made that point clear and there is no problem because the law is clear on who does what.”

The CBN’s insistence on the new naira structure brings to the fore the disagreement between the apex bank and the National Assembly on the autonomy of the latter. The Senate Leader, Victor Ndoma Egba, while responding to the CBN’s stand on its mandate said, “The independence of the CBN is not large. There are limitations to that independence. On its part, the House said although the CBN had autonomy, it was its duty to protect Nigerians, if any policy would adversely affect them.”

Opposition to the new currency has been growing by the day. Just on September 4, a group, the Anti-Corruption Network protested at the headquarters of the CBN. The leader of the group and former member of the House of Representatives, Mr. Dino Melaye, said the  apex bank’s policy would increase sufferings of Nigerians. Also, a member of the National Economic Council and Benue State Governor, Mr. Gabriel Suswam, said the council was not informed about the plan.

 Former President Olusegun Obasanjo and Sanusi have also disagreed on  the currency restructuring. The former president, at the roundtable of the Institute of Directors of Nigeria in Lagos,   argued that the N5,000 note would kill production.  “I understand that he (Sanusi) is now focused on fighting inflation, which is a good idea. But this (N5,000 note inclusive) and all that he is focused on is fighting inflation, it will kill production,” he said. In response, the CBN governor, during the sixth annual  conference of the Institute of Bankers’  described Obasanjo as a bad economist.

But amid  criticisms , the CBN and its governor have found an ally in the National Economic Management Team, comprising President Goodluck Jonathan, Minister of Finance, Dr. Ngozi Okonjo-Iweala and leading private sector leaders, such as Aliko Dangote, Femi Otedola, Atedo Peterside, who was reported to have said that if he were the CBN governor, he would introduce N10,000 note.

As it was with some of his previous policies,  it is doubtful if Sanusi would be moved by the gale of condemnations that his currency restructuring has attracted. At least, he has got the support of the rich in the NEMT.

The pill will be forced down the throats of the ordinary Nigerians, who are already bearing the pain of the fuel price increase. With the latest policy at the CBN,  ordinary Nigerians will wonder if Sanusi is protecting their interests or those of the rich.