Two prominent economists have differed on the planned redenomination of Nigeria’s currency by the Central Bank of Nigeria.
The CBN had reportedly announced plans to introduce new currency denominations of N2, 000 and N5,000, while also converting N5, N10, N20 and N50 into coins.
While former Vice-Chancellor, Crescent University, Prof. Sherrifdeen Tella, said the redenomination would be “a waste of money,” the Chief Executive Officer, Economic Associates, Dr. Ayo Teriba, argued that the plan was appropriate in order to emulate developed economies.
Tella, a professor of economics told SUNDAY PUNCH that the plan would contradict the cashless economic policy of the Federal Government.
He said, “People don’t spend coins anymore in Nigeria. If the CBN should introduce more coins, producers and retailers will increase the price of commodities to be at par with the notes. The CBN has to consider the financial culture to predetermine if the people will accept them.”
Tella argued that the redenomination would work against the cashless economic policy.
“The redenomination is not necessary. It will only allow people to go about with more cash. If the government is talking of having a cashless economy, there is no basis for having notes of higher values, except we want to continue with a ‘cashful’ economy,” he said.
Tella also said, having naira notes of higher value would aide corruption because it would be easier to transfer huge amounts of cash from one point to the other.
He said, “Since the N1000 note was introduced, people have talked less about ‘Ghana-must-go’ at the National Assembly. If notes of higher value are introduced, it means someone can easily put millions of naira in his pocket without anybody noticing. The higher the denomination, the higher the tendency to siphon the currency will be.”
Though the professor said the cost of minting coins was cheaper, compared to note, he argued that it would be a wasted effort if the coin did not gain acceptability among the people who were meant to spend it.
He, however, advised that the printing and minting should be done within the country to reduce the cost of production drastically, compared to doing them overseas.
Conversely, Teriba argued that redenomination and the cashless economic plan will play different roles in the economy.
He said, “You cannot say because there are aeroplanes, walking and cycling should be suspended or barred.
“Coins are needed in high velocity or highly repetitive transactions, while the notes of higher denomination are needed in low velocity transactions. The current denominational values of naira make no sense.
“If you have to buy a meat pie with 200 pieces of N1 coin, why don’t you have a coin that could buy same product? Most of the transactions at the retail level are supposed to be made with coins. I don’t think having N50 as the highest denomination of coin is enough; we should have a N200 coin, which is not up to a British Pound.”
Teriba, who is also a Member of the National Economic Intelligence Committee, argued that having higher denomination would not encourage money laundering, since naira could be exchanged for hard currencies, which could make the quantity much smaller to carry.