The Central Bank of Nigeria on Thursday announced a comprehensive review of the structure of the nation’s currency that would lead to the introduction of a N5,000 bill as the highest naira denomination next year.
The N5, N10 and N20 notes will also be converted to coins as part of the review.
The CBN Governor, Mallam Lamido Sanusi, who made the announcement while briefing journalists in Abuja, said the bank would, early next year, introduce the N5,000 note.
Sanusi said the new N5,000 note would have the portraits of three women who fought for the country’s independence.
They are Mrs. Margaret Ekpo, Mrs. Funmilayo Ransome-Kuti and Hajiya Gambo Sawaba. In addition, Sanusi said the back of the N5,000 note would have the picture of the National Assembly complex.
Born in Creek Town, Cross River State in 1914, Ekpo was a women’s rights activist, social mobiliser and pioneering female politician in the country’s First Republic. She led the women’s wing of the National Council of Nigeria and the Cameroons in the move toward decolonisation. Ekpo died in 2006 and the Calabar airport is named after her.
Ransome-Kuti, born in Abeokuta in 1900, was the mother of the late Afro beat legend, Fela. Fela’s mother was an educator and activist. In 1949, she led a protest against the Native Authorities leading to the abdication of the throne by the then Alake of Egbaland. And joined by Ekpo, she led the protest against the killings of Enugu miners in the 1950s. She died in 1978 from injuries she sustained when soldiers who stormed Fela’s Kalakuta Republic threw her out from a second floor window of her son’s house.
Born in 1933, Sawaba was a woman of modest education but a very active personality. She was a politician and activist who had sympathy for the Northern Elements Progressive Union in the First Republic. NEPU was a party identified with the working class and the poor. Sawaba gave the colonial authorities a tough time with her agitations consequent upon which she was detained several times.
The CBN governor said the currency review, which he called, “Project Cure,” would allow the bank to convert lower denominations of N5, N10 and N20 into coins.
This, according to him, will increase the naira structure from 11 to 12, divided into six coin and six banknote denominations.
Sanusi said 50k, N1, N2, N5, N10 and N20 would now be in coins, while the banknotes would be N50, N100, N200, N500, N1,000 and N5,000.
He said the introduction of the new currency notes would be a gradual process, as they would circulate simultaneously with the old series until they were fully withdrawn from circulation.
“There will be no urgent need for exchange of the old for the new banknotes by the public for as long as the old banknotes are in circulation; they will remain legal tenders,” he said.
The exercise, he explained, was aimed at upgrading the design of the entire range of currency denominations in order to enhance their quality and integrity, incorporate more effective features for the visually challenged, and introducing new security features on the redesigned banknotes.
Others are to achieve an optimal currency structure that will ensure cost effectiveness and balanced mix and utilisation of all the currency denominations; introduce new series of coins that will be generally acceptable for the purpose of transactions; and reducing the cost of production, distribution and disposal of banknotes by introducing higher bills that will reduce the volume and cost of banknotes in circulation
The governor said the savings made from the reduction in production cost would be used to provide incentives for the usage and acceptance of coins.
He said, “We are about to embark on another comprehensive review of our national currency structure. As a means of realising these objectives, several entities have collaborated to redesign the new currency series.
“These include the Currency Operations Department, the Nigerian Security Printing and Minting Company and competent international consultants.
“On November 28, 2011, the CBN board considered and approved the new currency series. It subsequently sought and on December 19, 2011, obtained the approval of President Goodluck Jonathan. Under the new structure, the existing denominations notes of N50, N100, N200, N500 and N1,000 will be redesigned with added new security features.”
“It is our pleasure to inform you that a new high currency denomination will also be introduced. It is the N5,000 note. In the same vein, the lower banknote denominations of N5, N10 and N20 will be coined. Consequently, the naira currency structure will now be 12 and efforts are being put in place to ensure that the redesigned N50 and the new N5,000 banknotes should be launched early 2013.”
The CBN boss said the need to encourage the usage of coins, curb inflationary pressures, enhance the quality of banknotes as well as promote the cash-less policy informed the decision to restructure the currency.
Sanusi said in line with international best practices, monetary authorities were required to review their nation’s currencies at intervals of between five and eight years.
This, he added, was usually done to address the weaknesses and challenges identified in circulating banknotes, which usually arose from innovations in technology, aesthetics and security considerations, among others.
However, he said in the case of Nigeria, the N100 note was restructured in December 1999 (13 years ago), N200, November 2000 (12 years ago); N500, April 2001 (11 years ago); and N1,000, October 2005 (seven years ago).
The governor said the last comprehensive review of the currency was carried out in 2005, which resulted in the introduction of the N20 polymer banknote followed by the varnishing of the N5, N10 and N50 banknotes in 2007.
These lower denomination notes were eventually converted into polymer banknotes in 2009.
He explained that a survey carried out by the bank on the existing currency series in 2010 revealed that there was public apathy towards the usage of coins, and the vanished lower denominations failed to adequately meet the expected longevity and tactile feature for the visually impaired.
Asked if the decision would not fuel inflation, he said, “It has been argued that the introduction of a higher denomination banknote could exert inflationary pressures in the economy. Inflation in Nigeria is a monetary phenomenon. Secondly, in some countries such as Singapore, Germany and Japan, the highest denominations are 10,000 SGB, €500 and 10,000 yen, respectively.
“These denominations have relatively high dollar equivalent. The levels of inflation are, however, low at 2.8 per cent, 1.1 per cent and -0.7 per cent, respectively as of 2010. Furthermore, we believe that the introduction of a higher bill will complement the bank’s cash-less policy, as it will substantially reduce the volume of currency in circulation, particularly in the long term.”
Sanusi said the apex bank would liaise with the relevant ministries, departments and agencies of government, Deposit Money Banks, road transport workers, market operators, small businesses and supermarkets to create avenues for the usage of coins.
Experts on Thursday differed on the possibility of rising inflation consequent upon introduction of the N5,000 note.
A Research Professor and Consultant Economist, Prof. Kayode Familoni, told one of our correspondents that a higher denomination would reduce the cost of transactions and would enhance transaction efficiency but noted that there were inflationary tendencies in the Nigerian economy.
Familoni said, “A high denomination currency is to reduce transaction cost. So the higher the denomination, the lower is the volume of currencies used for transactions and therefore the lower will be the cost for that transaction. I think the whole idea is to ensure that the cost of transaction is lessened and minimised.
“However, the danger here is that it could have a tendency to gradually create and add to inflationary pressures in the economy. For example, right now there are more of inflationary pressures in the Nigerian economy and if you now start a higher denominated currency, the cost of transactions might be reduced and efficiency in transactions enhanced, but it may compound inflationary pressures.
“This is because Nigerians seem to be averse to coins and I don’t know how they will actually accept coins.”
The Chief Executive Officer, Economics Associates, Dr. Ayo Teriba, however, said, “This is a welcome development. It would have been implemented five years ago. This country is ripe for this initiative and we must have it right now.
“It would enhance efficiency in transactions and I doubt if it will cause any inflation.”
The Managing Director, Lambeth Trust and Investment Limited, Mr. David Adonri, told one of our correspondents on the phone that the plan by the CBN to change the currency denominations was not likely to have any effect on the economy.
He said, “The change in the denomination of the notes can purely be referred to as a cosmetic change. It is like motion without movement, I think what the regulator is trying to do is to reduce the burden of carrying large amount of notes, especially with the cash-less economy we are now trying to run.
“You would notice that presently a lot of business transactions are being carried out by Nigerians using dollars, because of the fact that they have larger denominations which translates into less cash, and so I believe the CBN is just trying to achieve this in Nigeria.
“The fact remains that even if the CBN decides to come up with N10, 000 notes, it would not affect our economy.”
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