Experts say CBN powers need to be checked

Economist and public affairs commentators appear to be puncturing the autonomy status of the Central Bank of Nigeria (CBN), and their posture is hinged on the fact that the apex bank is wielding a lot powers in the management of the nation’s currencies.

Speaking on the issue on Saturday on Channels Television’s breakfast programme, Sunrise, economists and financial experts said in order to ensure transparency and accountability there’s need for the National Assembly to curb the seeming excesses of the CBN.

And joining the discussion from Abuja, Senator Olubunmi Adetunbi said the National Assembly is incensed by the decision of President Goodluck Jonathan to give approval for the printing of the N5000 denomination without the backing of the National Assembly.

CBN suspends introduction of N5000 note

Reeling from a barrage of public anger, disagreement and threats, the Central Bank of Nigeria (CBN) has buckled under pressure and suspended the planned introduction of the N5000 note following a directive from the presidency.

Illustartion of the planned N5000 with leading female activists.

This is coming after the presidency through the Special Adviser to the president on Media and Publicity, Reuben Abati, on Thursday declared that President Goodluck Jonathan has ordered that the planned introduction of N5,000 be put on hold.

The Nigeria Bar Association (NBA) had also on Thursday, called for the immediate sack of the governor of the CBN, Mallam Sanusi Lamido Sanusi over the planned introduction.

Announcing the change in policy, a statement by the director of corporate communications of the apex bank, Mr Ugochukwu Okoroafor however explained that “it is indeed within the powers of the bank to print new currencies as provided in Section 19(1) of the CBN Act 2007.”

The statement further explained that “It also provides that such introduction of the Naira denominations shall be approved by the president upon recommendation of the board.”

“In line with this provision, the CBN had  proposed and obtained the approval of the President, Dr. Goodluck Jonathan to embark on the currency restructuring exercise, codenamed ‘Project Cure’ on December 19, 2011”

“The CBN hereby informs the general public that the president, on Thursday, September 20, 2012, directed that further action on the approved restructuring exercise be stopped.”

“In full compliance with the provisions of the law, the CBN hereby announces that further action on the said restructuring exercise has been stopped, until such a time Mr. President may direct otherwise” the statement read.

It also emphasized that no contract has been awarded by the CBN in connection with the printing and minting of the new currency notes and coins.

“Consequently, no currency note or coin has been printed or minted under the proposed exercise”, the statement added.

And confirming this directive, the president’s spokesman Dr. Reuben Abati stated that the decision to suspend the exercise is to enable the central bank to embark on more enlightenment campaigns.

N5000 note: NBA calls for the dismissal of CBN governor

The Nigeria Bar Association (NBA) has called for the immediate sack of the governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi over the planned introduction of the N5,000 note.

NBA’s president, Mr Okey Wali at a meeting with some legal luminaries in Abuja on Thursday, said the introduction of the N5,000 note should not be imposed on Nigerians.

According to Mr Wali, for every criticism of the CBN’s policy, what Nigerians get are insults and name-calling, he therefore demanded that if Mr Sansui can not listen to the wishes and demands of Nigeria, the CBN boss should be fired.

He also threatened that the lawyers association will go to court if the federal government goes ahead with the plan.

The lawyers’ meeting was called to deliberate on how to develop the bar association while appraising its performance with a view to identify lapses and suggest ways of reforming the legal profession.

The leadership of the NBA kicked against the plan  to introduce N5,000 note and other national issues which it identified as been clogs in the wheel of the nations development.

While some of the legal practitioners argued that the introduction of the currency will increase inflation in the country, others called on the government not to embark on policies that will harm the nation’s economy.

The summit for the senior lawyers which is the first to be organized by the NBA is aimed at bringing members of bar together to brainstorm on ways of addressing issues of professional ethics, strategic planning and development of the legal profession.

ICAN urges CBN to shelve introduction of N5, 000 note

The Institute of chartered Accountant of Nigeria (ICAN) has appealed to the Central Bank of Nigeria (CBN) to have a second look at the proposed introduction of N5, 000.00 note as it would lead to inflation and hinder the cashless policy being currently pursued by the Federal Government.

The National President of ICAN, Mr. Adedoyin Owolabi made appeal in an interview shortly after paying a courtesy call on the Ogun State governor, Ibikunle Amosun in Abeokuta.

Mr. Owolabi advised the apex bank to shelve the idea as it would further encourage people moving around with large sum of money and would also result to inflation.

He also said that the Institute is planning to sponsor Whistleblower’s Protection Bill at the National Assembly as part of its contributions to promote best practices in corporate governance and rid the society of corrupt and sharp practices which had accounted for the unacceptable rising misery index of the citizenry.

Mr. Owolabi lauded Governor Amosun’s administration for its accomplishments in governance and commitment to the common goal of the people of the State.

Responding, the State governor,  Ibikunle Amosun said that the nation public service now requires more professionals to institutionalize various policies and programmes of government to meet the yearnings of the populace.

Saying that ICAN members serving in the state public service had distinguished themselves by being thorough professionals who imbibed the institute’s ethics of dedication, diligence and transparency.

He seized the opportunity to canvass for support of all and sundry for the passage of the Whistleblower’s Protection Bill, saying it would help to attest to the transparent leadership style of his administration.

Introduction of N5000 note will devalue the Naira – ICAN

The Institute of Chartered Accountants of Nigeria (ICAN) on Wednesday said the introduction of the proposed N5000 note by the Central Bank of Nigeria (CBN) will alter the pricing structure of products in the market leading ultimately to the permanent disappearance of the 5, 10, 20 and 50 naira notes (and even the proposed new coins) from circulation.

In a press statement, the institute said it commend the initiative of the CBN “to redesign the security features of the nation’s currencies with a view to reducing the huge annual royalties paid to foreign interests and also make the currencies extra secure. Such measure in our view will reduce currency counterfeiting and enhance the confidence of Nigerians in this medium of exchange.

“There is nothing fundamentally wrong with the idea to introduce the N5,000 as there are some benefits to be derived. Beside having the potential to reduce royalty payments on existing security features as well as the cost of printing and maintenance of the currencies, the initiative will enhance the profitability of the CBN and its ability to generate funds for the government. It is common knowledge that the CBN orders, prints, mints, handles and sells currencies to money deposit banks with which they carry out their intermediation functions. The margin between cost of printing and selling of currencies is one of CBN’s sources of fund. Although the cost of printing each denomination is the same, higher denominations are sold to banks at a premium and therefore, earn more for the CBN. Section 5(3) of the CBN Act 2007 requires that at year end, 75% of its net surplus must be paid to the Federal Government. Here lies an incentive to earn more money. In addition to this, the cost of cash management by banks will further reduce with positive impact on wealth creation.

“In spite of the above benefits, we are not persuaded that the N5,000 denomination should be introduced. At a time when the size of government deficit is about 2.8% of GDP (although within acceptable limit), the intention to spend N40 billion for this exercise appears to be both a waste of scarce public resource and misplacement of priority. Set against the benefits, the proposed expenditure of N40 billion will add little or no value to wealth creation. The subsisting budget deficit, financed largely with domestic borrowing at an unsustainable rate, and therefore crowding out available credits to the economy, can further be reduced by this huge expenditure of N40 billion, if redirected to the funding of infrastructural development.

“In our view, the introduction of N5000 note will eventually alter the pricing structure of products in the market leading ultimately to the permanent disappearance of the 5, 10, 20 & 50 naira notes (and even the proposed new coins) from circulation. The extinction of these smaller denominations will negatively impact the buying capacity and habits of low-income earners and the poor as goods and services will be priced above their levels. Sustained increases in prices may the unintended consequence.

“Also, we strongly advocate that the CBN should work towards strengthening the purchasing power of the naira through policy consistency. The steady slide in the value of the naira in relation to other currencies like the USA dollar, British pound sterling, etc, as an import-dependent country should be a major source for concern. As an import-dependent nation, when Nigeria converted to naira and kobo in 1973, the exchange rate was GBP£1=N2 and USA$0.30=N1. Today, the exchange rate is now GBP£1=N246.31, USA$1=N157.50. From the literature and empirical experience, devaluation benefits export-oriented economies. As a mono-product and import-dependent economy, we are most unlikely to benefit from the resultant devaluation that this initiative may unwittingly cause. Since the naira is not convertible, increasing the denomination will not check the perceived trend towards dollarisation.

“The CBN’s repeated change in its monetary policy rate is an indication of severity of inflation which it has been targeting for some time. If unemployment was lower, it would not have been a cause for worry given the established inverse relation between unemployment and inflation. To print more currency as envisaged without earning foreign revenue to support its value will put more inflationary pressure on the naira and lead to a diminution in its value. Indeed, one of the indices of a growing inflation, from economic history, is the creation of higher denominations as exemplified by Argentina, Peru, Poland, Russia, Democratic Republic of Congo, Angola, Zimbabwe, etc.

“The aforementioned press statement of the Governor did not indicate whether the introduction of the N5,000 notes will involve the printing of more currency notes to complement the existing quantity of money in circulation or it intends to substitute some smaller denominations with the proposed new note. It merely said that some currencies will be converted to coins. Whatever the intention, we shudder to think that the CBN plans to increase the quantity (volume) of money in circulation by introducing N5000 notes when the possible inflationary impact of this is common knowledge! Or does the CBN want to substitute higher denomination for smaller, more convenient, ones when Nigerians are yearning for enhanced value of the naira that will lead to the return of Kobo coins? Who is the beneficiary of a denomination that will stall transactions in rural Nigeria inhabited by 70% of the populace? Only the convenience of the elite and urban dweller will be assuaged. Following the CBN statistics that 90% of Nigerians’ cash transaction is less than N150,000, why substitute their preference for higher denomination? Is it not obvious that small transactions will be made more difficult if a proportion of each smaller denomination is eliminated?

“We are persuaded that the initiative will impair the modest gains recorded with the Anti-Money Laundering Act and the pilot cashless policy in Lagos which the institute expects to spread to the entire country by first quarter of 2013. The convenience of carriage of N5,000 notes will indeed, be an incentive, not disincentive, to carry cash. Such an incentive will defeat the acclaimed drive towards a cashless economy. If the international community perceives that we are lax in anti-money laundering agenda which higher denomination and convenience of carriage connote, we stand the risk of being the target of FATF initiatives including blacklisting with its attendant problems for the attraction of Foreign Direct Investment. This is an untoward route that we have taken before. It should be avoided.

“The heroines or amazons to be honoured- Mrs Funmilayo Ransome Kuti, Mrs Margaret Ekpo and Hajia Gambo Sawaba (of blessed memory) – deserve all the possible posthumous recognitions available because of the profound contributions and enduring legacy they made to humanity particularly, the less privileged. They represented the finest women of their era and even today, set against all best practice parameters, their achievements tower. Indeed, they were rich in ideas, principles and strong in character. As dogged fighters for the rights of the downtrodden, honouring them with the highest currency denomination belies their pro-proletariat stance. They never made any pretensions to pro-elitism and should not be painted in that light.

“Finally, the national economy is confronted with a lot of challenges requiring ingenious strategies to overcome. The cost of doing business is among the highest in the world; the very high unemployment of youths is creating a lot of social dislocations and security challenges (graduates of tertiary institutions are now hired as drivers and security guards!); double digit inflation, etc, have continued to impair the human development indices of Nigerians. These, in our view, are more critical issues for the CBN and managers of the Nigerian economy. This indirect devaluation of the national currency is unacceptable. Let’s work towards making the N1000 note the country’s highest denomination in the true spirit of a cashless economy,” the statement reads

N5000 note: Obasanjo is a good farmer but a bad economist – Sanusi

The governor of the Central Bank of Nigeria (CBN), Sanusi Lamido on Tuesday reacted to a statement credited to a former President, Olusegun Obasanjo, who said that the planned introduction of the N5000 note will increase inflation in the country.

Mr Obasanjo had on Thursday said the introduction of the N5000 note would kill production and affect small businesses negatively.

The former president, who disclosed this at a roundtable advocacy forum organised by the Institute of Directors, in Lagos, said the way, Mr Sanusi, was fighting inflation by removing money from circulation was improper.

However, speaking at the sixth annual conference of the Chartered Institute of Bankers of Nigeria, Mr Sanusi said Mr Obasanjo had introduced more high denomination in Nigeria than any other Head of State.

“General Obasanjo did N20; he did N100, N200, N500 and N1000. He has introduced more higher denomination than any Head of States,” Mr Sanusi said.

The CBN governor said that during the period Mr Obasanjo was introducing high denomination inflation in Nigeria was actually low.

“General Obasanjo did N100 in 1999; then he did N200 in 2000; he did N500 I think two years later; and did N1000. In that period, inflation was coming down because it was accompanied by very tight monetary and fiscal policies during his reforms.

“For somebody who have gone through that to come and stand up and say ‘introducing a higher denomination causes inflation’ I don’t know if somebody wrote his speech. I’m trying to see him or if he was misquoted.

“If he actually said that then he must be the single most important determinant of inflation in our history given the number of notes that he introduced,” he said

Mr Sanusi said printing higher denomination without increasing the money supply in the economy will not increase inflation. “This is simple economics,” he said.

He said that the cost of printing and minting all denomination of currency in 2009 was N47 billion and that by 2011 the CBN brought this cost down to N32 billion.

He said that by 2014 the cost would further be reduced to N25 billion thereby saving about 50 percent of the total cost of printing and minting all denomination of currency.

Mr Sanusi said the N5000 note would not cost more than N3 billion to print.

Bankers Committee endorses N5000 note

The bankers committee on Tuesday endorsed the plan by the central bank to introduce N5000 note and the coining of lower denominations.

Addressing journalists after the committees meeting in Abuja, the Managing Director of the United Bank for Africa, Philip Oduoza said that the move by the Central Bank of Nigeria (CBN) will not in any way affect the nation’s economy as currently speculated.

“If it will take you 100 pieces to fit into an ATM for a N100, it will take far lesser than that if you are feeding the N5000 notes into the machine. If you are moving cash as banks normally do between various locations, you’ll find out that you’ll do less number of runs,” Mr Oduoza said.

The bank boss said that all the cost saved from handling more cash will be passed on to the end users, who are the customers of the banks.

Mr Oduoza assured Nigerians that lending rate will drop as charges for the printing of higher denominations reduces.

“One of the things that leads to high interest rate is the cost of operations, so as that goes down, you’ll find out that the benefit will also goes to the customers of the bank,” he said.

On her part, the Managing Director of the Standard Chartered Bank, Bola Adesola said that the N5, 000 note will not be imposed on any customer who wants to be paid in lower denominations.

“It is important for the banking public to also know that the Central Bank or any bank is not going to impose the N5000 note on its customers. It will be based on demand,” she said.

She said the customers will have the choice as to what denomination they would like to receive their cash.

Doctors ask for review of gun ownership policy; reject proposed N5000 note

Doctors in Nigeria under the aegis of Nigerian Medical Association (NMA) on Wednesday advised the federal government to liberalize the policy of gun ownership as part of efforts to effectively curb all forms of insecurity in the country.

The National President of the Nigeria Medical Association, Osahon Enabulele

Addressing a news conference in Abuja, the National President of the association, Osahon Enabulele called on the government to be alive to their constitutional responsibility of guaranteeing the security and welfare of the citizens until when the concept of state police is accepted by the federal government.

“Nigeria is fast descending into a hobbesian state as insecurity remains highly prevalent in Nigeria, with the possibility of violent death lurking at every corner and at every time,” he said.

Mr Enabulele said that the security situation in Nigeria continued to deteriorate “despite the publicized past and current statements of government that they are ‘on top of the situation’ with recurrent reshufflement of the security apparatus of the country.”

He called on the “governments at all levels to truly be ‘on top of the situation’ with respect to effective address of the state of insecurity in the country”

The association attributed the problem of insecurity in Nigeria to the rising unemployment rate in the country.

“We strongly call on governments at all levels to provide, as an interim/stop-gap measure, meaningful unemployment and social security monthly allowance for unemployed Nigerians and elderly Nigerians,” Mr Enabulele said.

Cynthia’s death

The NMA president, who condemned the unfortunate murder of Cynthia Osokogu said there is a need for drugs to be sold only to persons upon the production of a medical/dental practitioners prescription.

He said the association “observed with dismay the events surrounding the tragic and unfortunate murder of a vivacious and up-coming young Nigerian lady, Miss Cynthia Udoka Osokogu, and efforts made to apprehend her killers.”

Mr Enabulele said the events surrounding murder of Miss Osokogu, “underscores the need for drugs to be sold to the citizens of Nigeria only upon the production of a medical/dental practitioner’s prescription.

“The NEC therefore calls on the Federal Government to strictly enforce Prescription Rights in Nigeria, and to duly sanction violators of Prescription Rights. We also call for speedy dispensation of justice in the murder case.”

We reject N5000 note

The doctors condemned the planned introduction of the N5000 note and the conversion of N20, N10 and N5 notes to coins saying it will have a negative implication for the nation’s economy.

Mr Enabulele advised the Central Bank Governor, Sanusi Lamido to “review his planned introduction of the single N5000 note, and N20 and N50 coins, on account of the likely negative implications for the economy.

“The Association notes that despite several similar changes made in the past no significant improvement in the economy was witnessed. Increased inflation rate have more often than not been the lot of similar policies in the past.

“We therefore advise that rather than waste the country’s resources in such an unprofitable venture, such should be channelled into viable poverty reduction schemes to alleviate the sufferings of toiling Nigerians.”

Text of press conference by the National President of the Nigeria Medical Association.

I would print N10, 000 notes if I was in charge – Peterside Atedo

The Chairman of Stanbic IBTC Bank and a member of the Economic Management Team, Peterside Atedo on Tuesday said that he supports the move by the Central Bank of Nigeria (CBN) to introduce the N5000 note in the country.

Speaking to journalists after this week’s Economic Management Team’s meeting presided over by President Goodluck Jonathan in Abuja, Mr Peterside said “Last year Nigeria spent N47 billion printing these small notes.”

The renowned banker said if the country was printing bigger notes “you will print a fewer number of the notes and you will make a phenomenal saving.

“If I was the one in charge, I will print N10, 000 notes,” he declared.

Reacting to questions on the relationship between inflation and printing of higher denominations, Mr Peterside said printing higher currency does not result in inflation.

“There is no inflationary impact,”” he said. He describes as “Voodoo economics” the argument by some critics that the introduction of the proposed N5000 note will result in inflation in the Nigerian economy.

Meanwhile, Business mogul and another member of the Economic Management Team, Aliko Dangote said “the introduction of the N5000 really has nothing to do with inflation as people have been saying.”

He said the CBN has explained and convinced the Federal government on the need to print the N5000 notes.

“Actually it is just to protect the currency. It is not going to cause any inflation. The cost of printing the N5000 is not different from that of printing the other currencies.

Lawyers threaten to sue CBN over N5000 note

Lawyers, under the aegis of the Nigerian Bar Association (NBA) on Friday referred to the Central Bank of Nigeria (CBN) plans to introduce the N5000 currency note as a shallow, poorly thought out, hare – brained initiative which will devalue the Naira, diminish the lives of Nigerians and push corruption and money laundering to new heights.

The lawyers’ position was contained in a communique issued by the NBA at the close of its 52nd annual general conference in Abuja.

The association rejected the argument of the CBN that the introduction of the N5000 note will not promote inflation noting that the realities of the Nigerian economic situation cannot be found in the Western Business Models that the CBN officials are familiar with.

The NBA observed that Nigerians may well see a N10, 000 or N20, 000 notes very soon.

The lawyers argued that such a measure which will affect the lives of Nigerians in many ways is not a mere fiscal measure which the CBN can claim exclusive jurisdiction over saying that the issue is a legislative matter that is within the sole legislative province of the National Assembly.

“Such far reaching fiscal or currency measures are beyond the competence or purview of the CBN,” the communique said.

The NBA also noted that the CBN is not the 4th arm of government for there is no such term in Nigeria and advised the apex bank to submit the measure for legislative approval which the National Assembly is expected to consider in line with the wishes of majority of Nigerians and threatens to drag the bank to court if it persists to negatively alter the face of the Nigerian economy.

While commending the Nigerian Senate for its “stay action” order on introduction of the N5000 note, the NBA called “for the investment of the billions of Naira that will be expended on the unnecessary currency manipulation on the revamping of the security apparatus and on strong and effective anti-corruption battles.”

On the state of insecurity in Nigeria, the NBA said that insecurity remains the bane of national development and resolves that good governance is the antidote to the prevailing climate of insecurity. It further noted that given the helplessness of government and security agencies in curbing escalating crime and criminality, that there is urgent need for state and community police to reflect the realities of our federalism.

The association resolved to rededicate itself to continued fearless advocacy in the cause of the Rule of Law, Due Process and Social Justice, in particular towards the underprivileged and deprived.

It also insisted that “henceforth, judicial vacancies be advertised so that qualified legal practitioners may apply as opposed to the current disgusting situation whereby cronies, relatives and adopted sons and daughters of a select few are appointed to the exclusion of otherwise meritorious candidates and corrosion of an effective justice delivery sectors.”

The new executives of the association led by the President, Okechukwu Wali, were sworn in, thus marking the end of the Joseph Bodunrin Daudu’s era.

PDP yet to take a stand on proposed N5000 note

As the controversy rages over the proposed introduction of the N5000 bank note, the national Secretary of the Peoples Democratic Party (PDP), Olisa Metuh on Friday said that the party is yet to take an official position on the matter.

He however said that the party will listen to the yearnings of the Nigerian people.

Addressing a news conference in Abuja as part of activities marking the 14th anniversary of the party, Mr Metuh said the current security challenge being faced by the nation will soon be a thing of the past as the PDP-led government led by President Goodluck Jonathan is working to ensure a safe and secure Nigeria.

He further said that the party which has provided uninterrupted democracy for fourteen years in nigeria remains committed to the principle of one man, one vote saying that the party is not an army of occupation.

N5000 note: CBN operates a faulty monetary framework-Henry Boyo

Renowned Economist Mr Henry Boyo has argued that the Central bank of Nigeria (CBN) operates a faulty monetary framework, hence the need to launch a new N5000 note.

Mr Boyo made this known on our early morning breakfast show, Sunrise Daily, where he explained that due to inflationary measures, what Nigerians use to buy for N1000 will soon cost N5000, adding that this will give the rise to the need for a new higher denomination of probably N10,000 in the next five years or less due to the official rate and growth of inflation.

According to the Economist, the monetary profile of any country depends on how successful its monetary policy model is “but because ours (CBN Monetary Policy) is a failure, is the reason why we have a N5,000 note and we will have a N10,000 note, in another five years or less because at the rate at which inflation is officially going,….we will need a higher denomination meaning we have a faulty monetary framework.”

Mr Boyo also criticised the apex bank and the federal government for what he termed ‘endangering the nation’s excess liquidity’ by the sales of Treasury Bills at 15 per cent, via the regular mopping of funds by the CBN, thereby making the government compete with the real sector which struggles to borrow funds at single digits.

The CBN’s Director of Media, Dr Ugochukwu Okoroafor however denied the claims, saying CBN’s move to create a new denomination is in-line with global best practices which periodically reviews national currency structure in a bid to support transactions in financial systems and also fight counterfeits.