THE Senate Committee on Banking, Insurance and other Financial Institutions has opposed the proposed introduction of N5, 000 notes by the Central Bank of Nigeria (CBN) without the approval of the National Assembly.
Reacting to the CBN proposal yesterday, Chairman of the Senate Committee on Banking, Senator Bassey Otu, said the Senate is unaware of the new policy by the CBN, adding that senators like other Nigerians read about the currency restructuring by the apex bank in the media.
Otu said it is mandatory for the CBN to have confided in and briefed the National Assembly before announcing such a policy shift with its attendant implications for the Nigerian economy.
Describing the proposed introduction of N5, 000 note as a policy somersault following the jettisoning of the re-denomination of the naira in 2008/2009, he advised the apex bank to be careful in initiating monetary and fiscal policies so as not to send the wrong signals about the nation’s economy to the international community.
‘I believe that a projection of this nature requires parliamentary approval because there are numerous monetary and fiscal implications on the nation’s economy.
This type of action is only taken where there is a major currency crisis.
‘And the CBN must be careful in order not to send the wrong signal or message to households or the domestic sector or even the external economies that the Nigerian currency is valueless which I believe is definitely not so, and that for every unit of value, they need to carry a large quantity of cash.
‘The CBN in 2008 and 2009 came up with a proposal to re-denominate the currency; that was even to remove the zeros.
This was just in 2008/2009. Here we are in 2012, and we are seeing a kind of policy summersault even though we understand the dynamics of the sector very well. I believe we have to be well briefed on this,’ he said.
The senator added that in 2005, the CBN undertook a major currency restructuring which gulped billions of naira, asserting that ‘till date, the proper value assessment has not been done to know its cost to the Nigerian taxpayer and the extent of the benefits.
‘In that 2005 coinage, I think it did not work at all because local goldsmiths and the blacksmiths converted the coins to mold bangles and earrings, and so on, and so forth.
‘So, we believe that the coinage works very well where there is infrastructure, and we’ve not developed that basic infrastructure, and even now, the coins are nowhere to be found.
‘So, the CBN would have to prove that the policy is not a clear contradiction or at variance with the cashless economy policy which they are even yet to justify, and whether this is the popular economic way to go.’
According to him, the Senate committee will write the CBN to stop all further action on the new policy until the Senate is properly briefed.
‘Well, we’ve not been properly briefed and we don’t know the reason for it; even though at the moment, we do know that inflation is really a problem. But, I don’t think we’ve used all the mechanisms we have to tackle it and it’s not really out of hand,’ Senator Otu added.
It will be recalled that after weeks of speculation, the CBN finally confirmed last week that it has concluded arrangements to restructure the Naira, which would see all denominations of the currency redesigned with new features and the introduction of a high denomination of N5, 000.
Under the new structure, the existing denominations of N50, N100, N200, N500 and N1, 000 will be redesigned with added new security features while the lower banknote denominations of N5, N10 and N20 will be coined.
Thus by early 2013, the notes are expected to be launched, naira currency structure will now be twelve, six coins and six banknotes.
While the coins will now be 50k, N1, N2, N5, N10 and N20, the banknotes will be N50, N100, N200, N500, N1, 000 and N5,000.
According to the CBN governor, though the banking watchdog routinely restructures the currency, this particular exercise was planned at this time to overcome several challenges, which have arisen from the currency restructuring carried out by his predecessor, Professor Chukwuma Soludo, few years back.
The announcement has triggered widespread protests with most commentators calling for a rejection of the whole idea saying it would worsen the nation’s economic problems.
According to the Institute of Chartered Accountants of Nigeria (ICAN), the move will not only increase corruption and inflation but it will also negate the cashless economy policy.
In a chat with The Moment, a forensic accountant, Dr Richard Mayungbe, speaking on behalf of the Nigerian office of the Institute of Certified Forensic Accountants (ICFA), also strongly faulted the plan.
He said, ‘It is a bundle of contradictions; you are asking people to embrace the cashless policy so what is the point of introducing N5, 000 note?
The whole essence of the cashless policy was to discourage Nigerians from carrying large amounts of cash but with the coming of the new higher denomination, this objective will not be achieved.’
Mayungbe also stated that he agreed with analysts who argue that the plan will cause inflation. As he put it, ‘the cashless policy will create inflation beyond what the CBN can handle. The government should stop the plan. ‘
He argued that redesigning some lower denominations into coins was also a wrong move because according to him, ‘Nigerians no longer like using coins.
Can you imagine going about with a lot of coins in your pocket?’ he asked.
- The Moment