Senate Orders CBN To Suspend N5000 Note Introduction

 

The Senate yesterday asked the Central Bank of Nigeria (CBN) to pull the brakes on its plan to restructure and introduce N5,000 banknote. 

Banking, Currency and other Financial Institutions, Committee chair Bassey Otu handed down the order at a news conference in Abuja. Senator Otu, who described the proposed introduction of N5,000 currency denomination as a “burning issue”, said the measure the apex bank planned to take could only be necessary in a country undergoing a major financial crisis.  

The CBN, he warned, must be careful in order not to send wrong signal to households, domestic sector and foreigners that the Nigerian currency is valueless.  CBN Governor Mallam Sanusi Lamido Sanusi, last week unfolded plans to restructure the naira and introduce N5,000 currency denomination next year.     But Otu said a memo would immediately be dispatched to CBN to halt all further actions on the banknote, until the Senate is properly briefed.

He wondered why the Senate would be kept in the dark over such an important financial restructuring that is bound to affect the economy. Otu who represents Cross River South, noted that the interest of the lawmakers was the ripple effect of the new currency on Nigerians. He said a project like the introduction of N5,000 note and wholesale overhaul of the currency required parliamentary approval because of the expected fiscal implications on the economy. Said Otu:  “I believe that a project of this nature requires parliamentary approval because there are numerous and fiscal implications on the entire economy. 

 “This type of action is only taken where there is a major crisis and the CBN must be very careful in order not to send a wrong signal or message to households, domestic sector and even the external ones that the Nigerian currency is valueless, which I believe is definitely not, 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 take off the zeroes. “This was just 2008 and 2009 and here we are in 2012 we are seeing a kind of policy somersault even though we understand the dynamics of the sector very well.   “I believe that we have to be well briefed on this. Also in 2005, the CBN undertook a major currency restructuring which ran into billions of naira.   

“Till date, a proper value has not been done to know its cost to the Nigerian taxpayers and the extent of the benefits in that 2005 coinage.   “I think it did not work at all because goldsmiths and blacksmiths converted the coins to molding bangles, earrings and so on.  “So, we believe that the coinage works very well where there is infrastructure to take it like a half, probably like parking where you go and put it. “We have not developed that real basic infrastructure and those coins, most of them are nowhere to be found.

 “So, the CBN will have to prove that the policy is not a clear contradiction or at variance with its cashless society, which they are even yet to justify and whether this is the popular economic way to go.”

Asked if the N5,000 currency is a sign of a regime of increased deficit and inability of government to control inflation, Otu replied: “We have not been properly briefed yet so I would not know. 

On whether there has been any meeting between the Senate and CBN on the matter, he said: “There has not been any meeting with the CBN yet.”

On the law the Senate will rely on to stop the apex bank’s plan to introduce the N5,000 note, Otu said: “Actually, we are not really going to rely on laws perse. What we are trying to do here is what is best for the Nigerian people. 

“The Senate is not really against the independence of the CBN, but what we want in place is proper check and that there should be checks and balances in all these things that we do. 

“So, I believe that at some point, we will be able to sit down together and look at the merits and demerits, but till now we do not know anything about it and we do not know what the people stand to gain and until that is properly put through, we say everything about it must stop.” 

But CBN Director of Corporate Communications Ugochukwu Okoroafor  said yesterday  that the N5, 000 notes would strengthen the cash-less policy. He said the apex bank’s decision to introduce the N5, 000 notes would improve the gains from a cash-less system.

“Our proposal is in line with global best practices in reviewing our legal tender on a regular basis, “ he said. Some Nigerians have advised the CBN to reconsider its decision to introduce new N5,00 note and coin some naira denominations. The Nigerians gave the advice in interviews with the News Agency of Nigeria (NAN) yesterday in Lagos.

They all agreed that the introduction of the new note and coins would portend grave implications for the economy. Mr Nnamemeka Obiaraeri, the Managing Director, Taurus Capital Advisory Service Ltd., said the apex bank should revisit its “redenomination policy”rather than introduce the new note.

Obiaraeri said the redenomination policy, which was proposed by Prof. Charles Soludo, a former Governor of CBN in 2007, would strengthen the nation’s currency. “Our economy is not robust; there is high rate of unemployment and the rate of inflation will increase with N5, 000 note and those new coins in the system,“ he said.

Mr Bade Oludahun, a currency analyst at Forex Time Trading West Africa,  said the proposed new naira note would “weaken” the middle class. He said that the proposal would lead to devaluation of the naira, stressing that it would be better to encourage the use of existing coins.

Mr Bonieface Okezie, President, Progressive Shareholders Association of Nigeria, said that the policy would contradict the cash-less policy. “The CBN should work more on strengthening the naira, instead of introducing a big denomination like N5, 000. “Again, you wonder why the CBN wants to introduce coins and a high naira denomination now that it is talking about a cashless monetary system.

“I think this proposed policy will defeat the latest policies of the CBN,” he said.

Okezie said that it would be difficult for Nigerians to begin to carry coins and large amounts of cash about.

Source:  The Nation