The Central Bank of Nigeria (CBN), the country’s apex bank, has stirred another controversy with its proposed scrapping of polymer notes in favour of paper for some of the nation’s local currency, reports Bukola Afolabi
Moneymoon, no matter the exhilarating benefits, hardly lasts forever. This has been proved in the case of polymer notes, which was hitherto favoured by the Central Bank of Nigeria (CBN), the apex regulatory body, but now considered a bad choice.
Bombshell
Barely six years after the polymer notes were introduced with billions of naira committed to the project, the apex bank through one of its Deputy Governors, Mr. Tunde Lemo, announced that the bank will, by the middle of this year, begin the production of lower denomination notes in paper.
Lemo, made the disclosure at the recently held World Bank/International Monetary Fund (IMF) forum in Washington, United States.
“My plea is that Nigerians should exercise patience with us; it wasn’t the fault of the CBN; it was just because we had to go back to the drawing board to rethink ‘Project Cure’ in the light of the wish of the public that we should not go ahead with the N5000 notes and lower denomination,” Lemo began.
“We will correct that in the course of the year. Polymer certainly will be phased out. In fact, we are phasing out polymer. No new note is being printed in polymer now.
“So, part of ‘Project cure’ actually was to move away from polymer substrate to paper. Unfortunately, we had a push-back because of the issues around N5000 note and coins. The entire programme was put in abeyance, otherwise by now we should have stopped producing polymer.”
Expatiating, Lemo said that as a result of the monopoly of Securency in the production of polymer notes, the bank was always forced to pay whatever amount the firm charges; adding that there are also a lot of “environmental issues” surrounding the polymer notes.
“Securency is the only producer of polymer currency in the world and so the CBN has been resorting to single sorting for bank note, adding, “This, we think, is not good for the country. Even though the plan is to coin N5, N10 and N20, the N50 note will be converted to paper currency. However, if Nigerians show preference for retaining the N5, N10 and N20 in banknotes instead of coins, it shall no longer be in polymer,” he noted.
The destruction of banknotes made of polymer, Lemo stressed, “Has proved to be a challenge in Nigeria from an environmental perspective. Findings revealed that briquetting (destruction of unfit banknotes) of polymer is not always easy because it is made of polythene and emits substances that are not environmentally-friendly.”
Lemo also stated that another reason to do away with polymer notes was as a result of the scandal that involved Securency. This, according to him, casts doubt on the integrity of the Australian firm.
In the beginning…
The CBN then, under Professor Chukwuma Soludo, on February 28, 2007, launched the first polymer note, the N20, on a trial basis. In October 2008, the CBN obtained presidential approval to convert the other lower naira denominations, N5, N10, and N50, from paper to polymer notes.
In launching the new currencies, the Bank said in a statement that “printing the N20 note on polymer was a test case. The essence of the experiment was to determine the advantages and demerits of the polymer substrate and its acceptance by Nigerians.
Justifying the introduction of polymer, Mr. Abdullahi Mohammed, former spokesman of the apex bank, said then that the polymer note proved to be more economical than the paper notes, hence the change. “Research in the last two years has shown that polymer notes are more durable than the paper notes. In the long run, there is a 50% cut in costs when we use the polymer notes,” he said.
But about three years later in far away Australia, crack detectives began investigations on how some top Nigerian officials allegedly shared about N750 million bribe from an Australian polymer company, Securency, to secure the contract to supply the polymer notes to the Nigerian government.
Investigations had revealed that Securency paid out bribes to some Nigerian officials in order to win the contract which enabled the company to supply at least 1.9 billion pieces of polymer notes so far.
A report about possible misdemeanour by Securency, a joint venture company between the Reserve Bank of Australia (RBA) and Innovia Films, indicated that the money was paid between 2006 and 2008 to some CBN officials and other influential Nigerians using two UK-based businessmen, Benoy Berry and Michael Harvey as fronts.
The currency restructuring programme
Securency’s interests in the country started around the year 2006. Before the end of that year, the company had clinched a deal to print the polymer note as a result of the decision of CBN to carry out a Currency Restructuring Programme.
From the start
Securency produces the press ready polymer substrate, Guardian®, on which bank notes are printed. This breakthrough patent was first used in Australia in 1988. Since then, the Australian company has penetrated other countries, selling to them its patented product and urging a shift from the traditional paper money. The polymer note’s selling point is in its advertised toughness, security features, and resistance to soiling, thus, its durability.
In 20 years, Securency has succeeded in spreading to over 20 countries. According to the Reserve Bank of Australia, the company thrives on foreign contracts and claims that ‘90% of Securency’s revenue comes from exports’.
Curiously, almost all these countries have been classified by the Australian Foreign Ministry as developing countries. Securency’s Guardian may be selling in developing countries but more than this, a report published by an Australian newspaper, The Age, deduced that these countries are also some of the most corruption-prone.
“It [Securency] excels at doing business not only in Vietnam but in some of the most corruption-prone countries in the world,” the paper said.
Mr. Berry heads Contec Global, a company with diversified interests in Energy, Security Technologies, hospitality, and construction. The Security Technologies unit of the group is concerned with Biometrics, Smart Cards, e-passports, and currency. There are claims that 40% of Africa’s population, including Nigeria, use passports designed, processed, printed, and delivered by Contec Global.
Continental Transfer Technology Limited is another company which Mr. Berry sits on its board, along with some Nigerians; Hassan Ibeto, Adam Ali Biu, and his brother, Roheen Berry.
Mr. Berry, who has considerable influence in security prints and has previously been investigated in Uganda, allegedly had at least $5 million paid into an offshore account which belongs to him. He is said to have worked with Mr. Harvey to give Securency’s African office access to the Nigerian market.
Mr. Harvey claims he was only called into the deal after the supply contracts had been completed.
“My job was to create demand for Securency to countries; we are a group of marketing companies that seek business and access markets,” he said.
The CBN, however, claimed ignorance of the existence of a bribery scheme in the Securency deal.
The past CBN governor, Professor Chukwuma Soludo, was, however, quizzed in connection with the alleged contract scandal by the operatives of the Economic and Financial Crimes Commission (EFCC) in Abuja early January, even as there were hints that may be charged to court by the commission.
Currency change as a fait accompli
Ugochukwu Okoroafor, the apex bank’s spokesperson, had said last week that unlike in the past where printing firms held the patent and right to produce the naira, the currency restructuring would make the CBN hold the patent of the new set of currencies that would emerge from the process.
“We need to take back all our patents and right,” he said. “Right now, some of the patents and rights do not belong to Nigeria or the CBN. We had a rude shock when that became an issue when we wanted to print a particular set of notes. So we are using this exercise to take back that right. If it belongs to Nigeria, nobody will hold us to ransom.”
Justifying the move, Okoroafor said the proposed introduction of a higher denomination of banknote would enable the apex bank save about N7 billion out of its annual cost of printing currency. “Every currency gets reviewed once in a while,” he explains, adding, “Right now, the United Kingdom is reviewing its currency. So currency review is something that we must do. As a monetary authority, it is our responsibility enshrined in the CBN Act 2007.”
Mixed reactions greet new policy
Commenting on the new policy, some labour leaders in the financial sector urged the CBN to always carry out appropriate research on any issue before making it a public policy.
Leaders of the Association of Banks, Insurance and Financial Institutions (ASSBIFI) and the National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE) argued that proper research would help to forestall adverse implications of any policy.
Sunday Salako, ASSBIFI’s President, argued that the apex bank should have done enough research to ensure that the polymer currency would last longer than ordinary paper notes.
Mr. Salako observed that since the polymer notes were not durable, there was need for them to be changed.
“It is good that the CBN has realised its mistakes and want to change the notes. Let us give them the opportunity to ensure that we have durable money.
“I advice the apex body to do its home work well before the implementation of any of its policies,” he said.
Mohammed Sheikh, NUBIFIE’s General Secretary, also said that the CBN would have achieved its desired result if they had subjected the changes in currency notes to public debate.
“If the CBN had subjected the first change to a public scrutiny, this reverse from polymer to paper notes will not take place and the country would not have spent huge funds in printing polymer.
“Various stakeholders would have debated the polymer issue and there would have been better options, instead of employing international consultant who do not understand how things work in Nigeria to make decisions,” Mr. Sheikh said.
He advised the Central Bank to focus more on improving the macro-economic policies for the development and growth of the country.
Economists have expressed divergent views on the decision to withdraw polymer notes from circulation soon and replace them with paper notes.
While some experts agreed with the decision, others blamed the CBN for performing experiments with the country’s economy.
For instance, Lagos-based economist and monetary analyst, Mr. Henry Boyo, said the monetary authorities were confused.
“There is no doubt that Nigerians are being taken for a ride. Some of us told them then that the coins and polymer notes would not work, because they would have little acceptance due to its value,” he said.
Boyo said the authorities should concentrate on value of the denominations rather than types of currency.
“The N5, N10, N20 and N50 notes are doing the job that coins should do. The N50 is equivalent to 30 cents. Can you imagine 30 cents in notes in any serious minded economy?” he asked.
However, the Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said the move to revert to paper notes would have little or no effect on the economy.
“We are moving to a cashless economy and the denominations are low; so, they are irrelevant. Total money supply in circulation is around N1.5tn and a large percentage of total transactions are done in Lagos and the other states that will be joining the pilot scheme, so, I don’t see any problem with the change,” he said.
