The Central Bank of Nigeria will spend N40.3bn to produce its new coins and naira notes.
Out of the amount, N11.8bn will be spent on the new N20, N10 and N5 coins. “The bank is spending over N40bn on the production of new coins and notes. The N40bn is the total sum for the production of the coins and the new notes,” a member of the board of the CBN confided in one of our correspondents in Abuja at weekend.
The CBN had on Thursday announced a comprehensive review of the country’s currency. It introduced N5,000 note as the highest denomination and converted N5, N10 and N20 notes to coins.
The new coins will join the 50k, N1 and N2 coins already in existence but which Nigerians hardly use.
The PUNCH learnt that the CBN, at its board meeting two months ago decided that most of the new notes and coins would be printed by the Nigerian Security Printing and Minting Company.
Our source added that the meeting agreed that only the N5,000 note would be printed by a foreign firm which had “the technology and the capacity to handle the sensitive features in it.”
Investigation further revealed that some workers of the CBN would be laid off during a forthcoming retrenchment exercise.
The source said that consultants engaged by the bank had commenced a screening process with the heads of the bank’s directorates with a view to compiling the names of those that would be affected in an imminent purge.
The CBN Board member, who spoke to our correspondent on the condition of anonymity said, “Consultants are already meeting with the various departments to select five to 10 percent of members of staff to be laid off.
“They are doing this in the pretext of normalising staff aggregated appraisal graph through the Head of Departments. The HODs are the ones who determine who to go in their directorates. They are doing it under the pretext that it would be used to categorise staff for productivity bonus payment.”
Efforts to get the reactions of the CBN Director, Corporate Communications Department, Mr. Ugochukwu Okoroafor, were abortive. He did not pick calls to his mobile phone nor responded to a text message sent to him.
The CBN governor, Mr.Lamido Sanusi, at the press conference, where he announced the new structure of the naira, had declined to give the cost of printing the currency.
He said that the cost would be seen in the CBN’s balance sheet at the end of the year.
“The cost of printing the currency is publicly available information in the published account of the Central Bank of Nigeria and you will see the cost of printing the naira in our balance sheet at the end of the year,” he said.
Sanusi had said that new coins and notes would be produced by the NSPMC but that if the mint failed to meet the apex bank’s standards, the job would be given to other printers.
He added that unlike in the past whenprinters held the patent of the features of the naira, the CBN would hold the patent of the new currency. This, he noted, was vital for the security of the naira.
Meanwhile, opposition parties on Sunday warned that the unintended consequences of introducing the N5,000 note might outweigh the benefits of the new measure.
The Congress for Progressive Change advised the Federal Government to spend the money earmarked for printing of N5,000 notes on the provision of jobs.
The Action Congress of Nigeria, in a statement on Sunday by its National Publicity Secretary, Alhaji Lai Mohammed, said the country should learn from the bitter experiences of Zimbawe and others that introduced higher denominations.
It said that there was strong historical evidence that the introduction of higher currency notes in an economy often signified a regime of increased and sustained fiscal deficit financing.
According to the opposition party, the issuance of such high value currency notes is likely to be perceived as an indication of government’s failure to effectively control inflation.
“Unfortunately once this perception takes hold, increased inflation expectations can be built up quite rapidly and these have pushed many countries into a situation of hyper-inflation in the past, which has typically culminated in the redenomination or even complete abandonment of the entire currency system,” the ACN said.
It added that the issuance of the N5,000 note countered the recent policy of the CBN to promote a “cashless” economy by encouraging the increased use of non-cash transaction instruments.
The ACN said, “This policy which is aimed at reducing the use of cash had been justified by the need to reduce the burden of the cost of printing and distributing currency notes.
“The introduction of a high face value currency note actually does the opposite because by reducing the unit cost of printing and transportation, it actually would promote the use of cash.”
The party cited countries where introduction of high currency had led to inflation.
These countries, it said, included Argenitina, Bolivia, Nicaragua, Peru, Angola, Zaire/DRC and Zimbabwe.
It said, “Between 1975 and 1991, Argentina experienced a period of inflation during which increasingly higher face value notes were issued. At the beginning of 1975, the highest denomination in Argentina was 1,000 pesos. This rose to 5,000 pesos in late 1976, then to 10,000 pesos in 1979 and rose further to 1,000,000 in 1981.
“As this trend became clearly unsustainable, a series of currency reforms followed. In 1983, the currency was re-named peso argentino, one unit of which was exchanged for 10,000 pesos. This did not curb the inflation. In 1985, another name change occurred, and a unit of the new currency (austral) was exchanged for 1,000 pesos argentinos. Finally one new peso was exchanged for 10,000 australes.”
It said that in Nicaragua, the introduction of higher currencies triggered inflation in 1991.
Citing Zimbabwe, the ACN said, “ On May 5, 2007, Zimbabwe issued currency notes with face values of Z$100m and Z$250m. On May 15, 2007 a new bank note of Z$500m was issued, followed by the issue on 20th May 2007 of currency notes in denominations of Z$5b, Z$25b, and Z$50b. Finally, on July 21, 2007, bank notes with a face value of Z$100b were issued.
“Eventually, Zimbabwe abandoned its own currency and legalised the use of only foreign currencies. Curiously enough, in certain places in Nigeria today the American dollar is the accepted legal tender.”
The ACN said the introduction of the N5,000 note was a step in the wrong direction, warning that it would lead to “a slippery slope towards hyper -inflation and that it is time to abandon failed inflation-control policies and inadequately thought- through experiments.”
The CPC said it was unfortunate that President Goodluck Jonathan could approve the CBN proposal in the midst of economic problems facing Nigerians at this particular time.
In a telephone interview with one of our correspondents, the National Publicity Secretary of the party, Mr. Rotimi Fashakin called on Nigerians to reject the CBN’s plan.
He said, “Why are we going to spend billions of naira to produce N5,000.00 when there is no need for it?
“Is that the priority of President Goodluck Jonathan? Will that bring goodluck to Nigerians when they are crying for food and jobs?
“Why is this President and his government always getting things wrong? Why do we have to also redesign other notes and coins?
“Nigerians must rise and tell Sanusi and members of pseudo-economic team that they are not serving their interest. Sanusi must tell us who and who will get the contract and at what cost.”