Jonathan suspends introduction of N5000 note

President Goodluck Jonathan has agreed to reverse his administration’s plan to introduce the N5000 note.

This was disclosed on Wednesday by the Special Adviser to the president on Media and Publicity, Reuben Abati.

The currency restructuring recently announced by the Central Bank of Nigeria (CBN) would have seen the unveiling of the N5000 note as the highest naira denomination while lower currencies – N5, N10 and N20 – were to be converted to coins.

Weeks of public outrage criticizing the policy culminated in the Senate and the House of Representatives, approving separate resolutions on Tuesday, demanding that the plan be suspended.

Mr Abati, responding to inquiries, said “the introduction is being suspended for now to enable the CBN do more enlightenment on the issue.”

He said President Jonathan has directed that the implementation of the new N5000 note be suspended for now.

“This is to enable the apex bank to do more in terms of enabling Nigerians understand why it proposed it in the first place,” he said.

“For now, the full implementation is on hold,” he added

CBN plans coin-dispensing ATMs

The Central Bank of Nigeria (CBN) says it will facilitate the introduction of Automated Teller Machines (ATMs) that can dispense coins to encourage Nigerians imbibe the culture of spending them.

Chidi Umeano, Head of Shared Services at the CBN, on Monday in Lagos said that this plan was in tune with the currency restructuring exercise.

He said that the coins dispensing ATMs would hasten the acceptance of coins by Nigerians and change misconception about their use.

“To achieve this plan, what is needed is to facilitate the inclusion of a process called “add-on” to the ATMs.

“Good enough, the existing ATMs have the ‘add-on’ feature that will easily make them adapt to coins dispensing,” he said.

Mr Umeano said that the apex bank would ensure that newly deployed ATMs had the ‘add-on’ feature among others.

“It is very possible to achieve Automated Teller Machines that will dispense coins.

“This “add-on” feature can be activated on the ATMs at any time by the CBN and this is not new because it is being practiced in advanced countries.

“This proposal is in consonance with our cash-less policy and also in line with the CBN’s effort to encourage Nigerians to appreciate coins,” he said.

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.

Economic management team endorses proposed N5000 note

The move by the governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi to introduce N5, 000 notes as legal tender in Nigeria may have received the endorsement of the Economic Management Team.

A Cross section of the members of the Economic Management Team during their meeting in Abuja on Tuesday.

After its weekly sitting presided over by President Goodluck Jonathan some of the members of the team who spoke to state house correspondents said that the move was in the right direction and remains the prerogative of the CBN.

The Minister of National Planning, Shamsudeen Usman, who was the first to speak after the meeting, said that the CBN merely proposed the introduction of the N5000; the president approved it while the economic management bteam endorsed.

“Obviously, the discussion today was basically to endorse. Mr. President had already approved; that is the only requirement by law. The CBN is to propose and Mr. President is to approve. And since Mr. President has approved, really what is important is to just explain. I personally had some concerns about the coins but since some discussion with the CBN governor, he has actually clarified that even the media didn’t get it”, Mr Usman said.

Arguing that the N5000 note, unlike some people were misrepresenting it, was not going to lead to higher inflation, Mr Usman also hinted that CBN was going to communicate to Nigerians that the coins will run concurrently with the naira notes they are replacing as a form of test-run for Nigerians to accept them first.

He said, “There is absolutely no link. I am an economist. I have been deputy governor operations of the Central Bank. In the last review of the introduction of N1000 note and the various coins I was deeply involved; it was my responsibility at the central bank. There is absolutely no link between inflation and the currency denomination.

“The coins are being introduced on an introductory basis so that if people accept them and are using them, then gradually they will withdraw the other notes but they will run concurrently with the notes. Those were my concerns initially because you remember during my time in the CBN; we introduced the one naira and two naira coins. Unfortunately, they were not utilized at all. Part of that is really the value of one naira and two naira today. What can you buy?”

On the contention that there is a link between the N5000 note and corruption, he said, “It is an area that I obviously know nothing about. I think people alleged that part of that corruption is being done in dollars. A $100 bill is N16, 000 and N5000 note will be $30. So, which one is bigger to carry if you are doing corruption?

“So, I don’t think it is necessarily going to increase the level of corruption. Those doing corruption will probably find that too small. $100 bill is still bigger than the N5,000 note”, the minister added.

Also speaking, some members of the team from the private sector including Peterside Atedo, business mogul Aliko Dangote and Aigboje Aig-Imoukhuede said the introduction of the N5,000 notes has nothing to do with inflation.

On his part, the governor of Anambra State, Peter Obi said that what Nigerians should concern themselves with is how to increase improvement in manufacturing and agriculture.

N5000 note: Protesters storm CBN headquarters

Members of the Anti-Corruption Network, a non-governmental organisation, on Tuesday in Abuja, marched to the headquarters of the Central Bank of Nigeria (CBN) to protest the planned introduction of N5000 banknote by the bank.

At the CBN headquarters in the Central District of Abuja, the group chanted anti government’s songs amidst heavy rain and accused the bank of trying to further impoverish the poor with the introduction of the N5000 denomination.

The leader of the group and a former member of the House of Representative, Dino Melaye, said the policy will only increase the sufferings of the Nigerian people contrary to the views of the CBN governor, Sanusi Lamido.

“We have received and heard of the corporate policy of the CBN; we have analysed it and I want to believe that laws are meant for men and not men for man,” he said.

“Democracy will continue and must continue to be government of the people, for the people; and by the people and not government of the greedy, for the greedy and by the greedy.

“We are here today as Nigerians to show our displeasure for this very hash policy that the CBN is about to introduce. How will the introduction of the N5000 note bring food or leverage on the table for the common Nigerian? We believe that many failed policies of the CBN, under Sanusi Lamido, have brought more pain and sufferings to us. With this N5000 note, is the CBN approbating and reprobating?”

Tunde Lemo, a Deputy Governor of CBN, who received the protesters on behalf of the bank, said it is not true that the apex bank will use N40 billion to print the new currency as recently reported in the media. He also said even if the CBN is not introducing the new notes, it will still spend money to print currency.

Mr Lemo also said the CBN will not do anything that will not be in the interest of the masses, while arguing that contrary to popular opinion, the introduction of the new N5000 note will not lead to higher inflation.

“Without the masses, there is no CBN; and CBN is doing a lot to help the masses,” he said.

“The most important objective of the CBN is to fight inflation as it hurts the masses more than anything else. The leadership of the CBN is ensuring that its policies will fight inflation to the advantage of the masses,” Mr Lemo added.

He however promised that the apex bank will listen to the opinion of the people on the issue. The protest was peaceful as the Police, led by Ade Shinababa, FCT Commissioner of Police ensured there was order.

Senate Committee directs CBN to suspend introduction of N5, 000 notes

The Senate Committee on Banking, Insurance and other Financial Institutions on Monday directed the Central Bank of Nigeria to suspend the introduction of N5, 000 notes until the Senate was properly briefed.

Illustartion of the planned N5000 with leading female activists. Photo: Courtesy Vanguard newspaper.

The Chairman of the committee, Senator Bassey Otu (PDP- Cross River) issued the directive while speaking to journalists in Abuja.

Mr Out said that the re-denomination of the currency required the approval of the National Assembly, warning that the CBN must avoid sending the wrong signals to stakeholders in the economy.

He said it was vital for the CBN to discuss the implications of the currency re-denomination with the Senate before it was implemented.

“I believe that a project of this nature requires parliamentary approval because there are numerous fiscal implications on the entire economy.

“The CBN must be very careful in order not to send the wrong signal to the domestic sector and external partners that the Nigerian currency is valueless.

“So, we are sending a letter to them (CBN) to stop all further actions on this until the Senate of the Federal Republic is properly briefed,” he said.

He warned that the conversion of some denominations into coins would lead to a waste of public funds as the previous exercise did not yield the desired result.

“In 2005, the CBN undertook a major currency restructuring to re-coin some denominations which ran into billions of Naira.

“It did not work at all because both the goldsmiths and the blacksmiths converted the coins to moulding bangles, earrings and so on,” he added.

The committee chairman said there were other mechanisms available to the apex bank to tackle the problem of inflation other than the re-nomination of the nation’s currency.

Hangout with Seun Kuti on Google Plus

How does it feel to have your grandmother’s face on the highest currency note in Nigeria?

Join Seun Kuti, grandson of late Funmilayo Ransome Kuti-one of the women whose image has been approved to appear on the proposed N5000 notes-as he answers this question and many more on our Google Hangout today at 2pm.

Seun Kuti would talk about his grandmother, Mrs Funmilayo Ransome –Kuti, his legendary father Fela Anikulapo Kuti, his own music with Egypt 80 band and life.

You can ask questions using the hashtag #askseunkuti on either platform.

You can also watch the Hangout live on YouTube by going to Channels YouTube channel.