The Nation Newspaper

Tag: coins

  • ‘Let’s prioritise agric, industries’

    ‘Let’s prioritise agric, industries’

    Imo State Governor Rochas Okorocha has appealed for the rejuvenation of agriculture, local industries and commerce as a way of ending the nation’s over-reliance on crude oil as its main source of revenue. The governor pointed out the danger of shunning agriculture, indigenous industries and commerce in preference for exhaustible oil.

    The governor called on the federal government and other state governments in the country to think about the next generation by diversifying the economy away from the oil sector.

    Okorocha made the call while addressing some traditional rulers who paid him a solidarity visit at the government house, owerri.

    He was not happy that many people have abandoned agriculture which according to him had accounted for more than 80% of the country’s foreign earnings and attributed this to the discovery of oil in commercial quantity in the country.

    Governor Okorocha said that the country had depended on the revenue from the oil sector for a long time saying that if nothing was done to improve the industrial, commercial and agricultural sectors with the oil money, there will be no hope for future generation of the country.

    The state chief executive announced that part of the programme of his administration is to provide an enabling environment for private individuals who want to establish industry and is determined to establish at least ten industries before the expiration of its tenure.

    He further announced plans to revolutionalise agriculture in the state by ensuring that the state becomes self sufficient in food production and also boost the production of palm produce to improve the country’s foreign earnings.

    Governor Okorocha then called for the cooperation of all in the state to enable his administration take the state to the peak of infrastructural and economic development.

     

  • Whither Nigerian coins?

    Whither Nigerian coins?

    Although the country’s currencies are denominated in notes and coins, indications are that coins are fast going out of fashion.

    AMINA Imoitseme Yusuf, 13 years plus, and contemporaries of her own generation born in Nigeria in the early millennium may have seen coins but whether they have spent it at all is another matter.

    Few weeks ago, Amina and her younger siblings while playing in the garden accidentally stumbled on a box containing some foreign as well as Nigerian coins but rather than gloat over what was supposed to be a ‘unique prize,’ the discovery made no remarkable meaning to them as they went about their play as carefree as possible.

    To the older generations, coins are a relic of the past but for kids of Amina’s age and experience, it is one history they can hardly connect with. And the reason for this is not far to seek. Since the turn of the 21st century, coin, though accepted as a legal tender everywhere, began to lose attraction for many not just because they have no intrinsic value of sort, but also because they are cumbersome, and, wait for this: They are in short supply!

    “The last time I saw a coin was in 2007, I was actually issued some in the bank as part of the CBN order to the banks. But I don’t remember spending them. I think I have close to 2, 000 naira worth of coins in the shelve at home that I have no use for,” recalled Mr. Obiechina Nwokolo, a textile merchant in the popular Mushin Upholstery Market, Lagos.

    Low attraction

    According to the CBN, Nigeria’s currency structure comprises three coin denominations and eight note denominations. The coin denominations are 50 kobo, N2 and N1, while the note denominations are N5, N10, N20, N50, N100, N200, N500 and N1000. But notes are more favoured compared to coins.

    As the debate over the planned currency restructuring by the Central Bank of Nigeria (CBN) rages, a major issue that has been highlighted is the sudden disappearance of coins from the economy. That is, the set of legal tender comprising 50 kobo, N1 and N2, which were introduced in 2007, but failed to perform their function as a medium of exchange.

    According to an analyst, “it is only in Nigeria that we don’t make use of coins. We see coins as if they have not been used before. In the early 90’s, coins were in use and considered good money until it now lost their value. “Go to developing countries like Japan, America, China, they make use of coins. According to the Central Bank of Nigeria, we have coins in circulation but the question is where are the coins?”

    Short of accusing the CBN of complicity in the matter, Ade Olumide, a trader at Oshodi, raised a poser: “We have 50k, N1 and N2, but please help me ask the CBN, where and what can we use them to buy? Sweet in the market goes for at least N5. These days you can hardly see things in the market that go for less than N5.”

    Mrs. Stella Edmund, a journalist, also shares the same sentiments with Olumide. “It’s because Nigeria no longer uses coins, that is why we have this brazen level of corruption everywhere. Imagine I was forced to buy a pack of needles the other day because the trader, who would normally sell at a unit cost of N2, couldn’t provide the requisite change. So, I was forced to take the whole pack for N50. So, it’s really not good at all that coins are no more in use in the country.”

    Points to ponder

    In his submission, the Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said the present rate of inflation has overtaken the value of coins. He said coins currently had little or no significance in the Nigerian economy.

    He said, “It doesn’t have any impact on the economy currently because what has happened is that inflation has caught up with the value of the coins. So, the coins have no value again. And as it is now, they cannot buy anything again as a currency.

    “Inflation has overtaken the value of our coins, so they are no longer of any value in the current inflationary situation that we have. But the only benefit is that coins last longer than currency notes. So, if we have coins that still have value then it will have economic impact.”

    Muda added, “You know there was a time that the CBN wanted to convert N5 to coins so that our coins would have value, but this wasn’t done. And since then our coins have lost value due to the rising inflationary rate. But if we can re-denominate the lower currency notes likeN5 and N10 to coins, then that means that we will spend less in the printing of currency notes.”

    As regards fears that re-denominating the N5 and N10 notes to coins may lead to the demise of the denominations, Yusuf noted that the value of the currency was what should be considered.

    He said, “What I am talking about is the value of our currency denominations that are in coins. Since our coins no longer have value, even if you give a beggar some coins, he will give you a surprise look, asking, what is he going to do with coins.

    “The second is that the rate at which inflation is rising is another serious factor that makes these coins to lose their value completely in this current economic condition. But if we convert our lower currency notes to coins and they have value, then people will still use them. However, permit me to state it again that the advantage of coins over notes is that coins last longer than currency notes.”

    However, despite the huge budget by the CBN on sensitising Nigerians on the need to accept coins, the transaction chains were broken as banks and customers reject the currency.

    Investigations by The Nation revealed that coins are not in circulation because of their rejection by the market people and banks.

    For instance, it is a common practice to see customers, whom banks have imposed the coins on, going to another transaction officer to deposit them in their accounts. Local retailers keep rejecting the coins because the banks won’t accept them as deposits.

    Experts believe that the fear about inflation surpasses the figures released by the National Bureau of Statistics (NBS) on the country’s inflation rate. According to them, inflation would essentially mean nothing to the average consumer if it had no bearing on the economy. It is in the economy that inflation can either hinder a person’s ability to purchase or cause a lack of growth for businesses. The role inflation plays in the economy is substantial.

    Global best practice

    One of the reasons the United States’ one-cent coin has never been phased out is due to the inflationary ramifications of such a move. Experts believe that low denomination coins are important economically.

    Even in the United States, Vice President Joe Biden recently noted that the government has concluded plans to curb waste by reducing the number of coins being produced.

    He said: “They make hundreds of millions of these coins every year; 40 per cent of them end up being returned to the Federal Reserve because nobody wants them. And here is the worst part: They are still making coins of presidents from the 1800s, meaning the United States Mint is about halfway through its planned production.”

    Way out

    A Lagos based lawyer Uche Ogochukwu said the regulatory bank should intensify effort at bringing back the coins.

    He argued that many children in this generation might not know that the coin was part of the nation’s currency, and noted that it was important for Nigerians to start using the currency.

    He said, “Until the CBN says that the coin is no more our currency, I think people should be encouraged to continue using it. Many children of this age may grow up not knowing that the coin is part of Nigeria’s currency. So, they should work on this if they really want us to believe that the coin remains a legal tender.”

    Echoing similar sentiments, Austin Ifeloju, a public analyst, stressed, “The CBN must work out ways to boost the impact of coin denominations in transactions; otherwise it should tell Nigerians that the denominations only exist for calculations and business computations. If the CBN wishes to bring back coins, it should jettison whatever idea to change any of our lower notes to coins rather, it should work out ways to check inflation and make the coins, which we have now valuable.”

    The Chief Executive Officer, Economic Associates, Dr. Ayodele Teriba, brought a new dimension to the currency restructuring debate when he suggested that the existing banknotes – from N1 up to N1,000 should be converted to coins.

    Teriba argued that “a robust coinage must be adequate for the retail payment needs of all children and adults. Naira coins that would make sense today will fall in the range of N1, N2, N5, N10, N20, N50, N100, N200, N500, and N1,000. Just before anyone screams, remember that the two pound coin is more than N500 in face value, and the coining of the five pound note is imminent in the United Kingdom.”

    Teriba, who stressed that the move by the CBN to convert some banknotes into coins will facilitate retail transactions in the country, however, pointed out that while the proposal to coin N5, N10, and N20 is in the right direction, “it is equally arbitrary, as it lacks correspondence with current values of retail items, and is also bound to fail.”

    The economist queried: “How many pieces of the Sanusi Lamido Sanusi’s coins will a school child need to hold just for school run and refreshment at break time? It will require too many pieces to make sense for school children, much less adults.”

    He argued that there are two types of retail payments: highly repetitive small value transactions such as urban transportation, sweets, cigarettes, kola nuts, fruits, vegetables, snacks, cooked food, sachet water, soft drinks, juices, beer, newspapers, haircuts, phone cards, as well as less frequent but relatively high value transactions such as clothing, footwear, watches, raw foodstuff, poultry, livestock, fuel, spares parts and local airfares.

    He stated further: “Coins must be designed by the central bank with the first category of retail transactions in focus because their repetitive nature and the conditions under which they must happen, such as in crowded markets, stadia, streets, bus stations, airports, congested traffic, and varying weather conditions, including rainy, sunny, and humid conditions, mean that notes are ill-suited for them.

    “Coins will fare better under these conditions, which is why countries regularly upgrade their coinage to keep pace with the prices of this category of retail items.”

    According to Teriba, “Nobody holds the naira coins today because the N2 coin at maximum face value makes absolutely no sense. It is a waste of the country’s resources and time to mint such. N1 and N2 should be the minimum, and small enough, like the farthing of old, and they would make sense.

    “N20 naira maximum coin still will not make sense because it still does not buy a soft drink or an apple, and no one will hold them. If you stamp N500 or N1,000 as the maximum value on the same coins today, everyone will hold them, as in other countries where the coinage relates to retail prices.

    “To be sensible today, naira notes should take face values of N500, N1,000, N2,000, N5,000, N10,000, and N20,000 (current value of the lowest airfare), where N500 and N1,000 could circulate as both notes and coins until further notice. I have arrived at these suggestions by trying to connect the face value of naira notes with the realities of retail prices.”

    However, a former director of the CBN faulted Teriba’s argument, saying that minting coins is the most expensive form of currency. According to the ex-CBN official, who pleaded to remain anonymous, “There is always little acceptability of coins, especially if the quality metal used is low. We had this instance in Nigeria whereby the old kobo was bulky and people were not willing to accept it. One of the characteristics of money is portability and coins hardly meet that.

    “Coins disappear in Nigeria because the face value of the metal used in producing it is lower than the intrinsic value. Thus, people will always take it to the goldsmith and it will be used for jewelry, gold and other ornaments.” He insisted that banknotes are cheaper to print because “all you need is paper, mercury and ink.”

    Just like any other legal tender, the coins have become acceptable in many societies and have failed in some, including Nigeria. The re-introduction of coins into the Nigerian economy in 2007 was welcomed by most. However, the ovation was short-lived as the coins lost public appeal and were consequently phased out.

    A lot of reasons have been adduced to the failure of the coins in the past with very little effort to address it. With the planned introductions of higher denomination of the Naira note and conversion of some smaller denominations into coins, there have been fears on the potential effect of the action, when the new notes are eventually circulated.

    But the CBN spokesman, Ugochukwu Okoroafor, argued that despite the arguments against coins, coins still have their value still.

    “Most Nigerians don’t carry coins and don’t like to collect coins as change either and because of this attitude they readily forfeit their change. But we still have some places in Nigeria that we make use of coins like supermarket, eateries, etc. So, we encourage Nigerians to be using coins,” Okoroafor said.

  • The other side of Sanusi’s coins

    The other side of Sanusi’s coins

    The planned conversion of some paper denominations of the naira into coins continues to generate mixed reactions. Bukola Afolabi reports on enduring attitudes towards coins, and how the Central Bank’s action will impact the nation’s economy.

      Reactions keep pouring in on the planned conversion of lower naira denominations into coins. Recently, Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, sparked controversy with the announcement that effective from 2013, the current paper notes for N5, N10 and N20 denominations will be converted to coins.
    He hinged the move on reasons such as high cost of producing polymer notes, as well as the need to reduce inflation. “We need to spend less on the production of our currency; much money is being spent on the current notes. That is why we came up with this initiative to curb inflation. Producing the new note and the coins would save the country about N7billion,” Sanusi said.
    The CBN is not alone in this line of thought. Gboyega Sanni, a banker with a first generation bank, is confident that the introduction of the new coins will not only help to stabilise the economy, but will also reduce the cost of producing paper notes.
    As a banker, he says coins are an important part of business transactions. On many occasions, he explained, customers make deposits that require coins to balance transactions for the day. The reintroduction of coins would therefore make work easier for bankers.
    For him, there is no reason why Nigerians should be disgruntled over the usage of coins, since there are some items that should be sold in coins. He cites the example of sachet water, which price was increased by 100 per cent following the fuel price hike last January. “The price of sachet water was increased from N5 to N10, but if we use coins in our economy, perhaps it would have been N6.50k,” he said.
    Sanni also expects that the reform would help reduce cases of dirty notes in circulation. “You know we don’t handle our notes well, but with coins we will have fewer dirty notes in circulation. Things like sugar, groundnuts and sweets should be paid for in coins. It is because there is no coin that is why things are expensive. When you buy something, you should be able to collect your change to the last kobo,” he said.
    But many are unhappy with the stand of the apex bank, warning that the new policy would spell doom for the nation’s already comatose economy. Economists and policy analysts are quick to recall that a similar attempt few years ago by the immediate past CBN Governor, Prof. Chukwuma Soludo, ended as a failed policy because coins, though still legal tender, are hardly ever accepted for any form of transaction in Nigeria.
    Equally worrisome is the fact that while banks pay out coins to the public in some instances, deposits of same are not accepted by them. A top management staff of one bank told The Nation on Sunday that at the introduction of coins during the Soludo era, the public would enthusiastically pay in the coins in the banking hall.
    But the same CBN which rolled out the metallic denominations soon issued a directive that banks should not receive coins as deposit from customers, but could pay them with it. “It did not produce any meaningful result as Nigerians adamantly refused to accept coins,” the banker said.
    Another banker source, who pleaded for anonymity, however, disputes the CBN governor’s position that the introduction of coins is a way of checkmating inflation. For him, Sanusi has not done his calculations well. Rather than changing to coins again, he feels more should first be done to address the other factors affecting inflation. Unless this is done, the N40billion expected to be spent on the exercise could end up as a waste of the limited public funds.
    But backing the apex bank is Dr. Ayo Teriba, a renowned economist, who believes that the conversion is long overdue. He takes an even more radical position – arguing that even the N100 note should be converted to coins.
    “As a matter of fact, I am of the view that even N100 should be in coins. Coins should be used to purchase goods and other things like newspapers. This move is long overdue and should be welcomed by Nigerians. I am sure as time goes on, Nigerians will get used to it and prices of commodities will start coming down,” he says.
    For his part, Nuru Abdulahi, who is self-employed, fears that the introduction of coins would lead to inflation. He particularly expects transport fares to rise. He argues that unlike three decades ago when coins had appreciable value, the same cannot be said of present times. “Nigerians are no longer used to going about with coins. How do you expect traders, most especially market women who sell foodstuff everyday to carry coins? It would be too heavy for them,” he said.
    Though Sanusi has insisted that the CBN would press ahead with its plans, Abdullahi, like many other Nigerians, has vowed that he would never accept the new coins when they are pushed into the market. “Even if the National Assembly approves the introduction, I’m never ever going to use it, nor touch it. I cannot imagine coins jingling in my pockets,” he said.
    Indeed, the resistance to coins by many is a sign of the times and a reflection of the parlous state of the economy. Risikat Bello, a septuagenarian living in Itire, a suburb of Lagos State, recounts that in her days as a timber trader, business was conducted even in coins, and they had great value. Such coins denomination came in 1/2, 1, 3 and 6pence, 1 and 2 shillings. The 1 and 2 penny coins were bronze and had hole, and they all had big purchasing power.
    Solomon Osakwe, an economist, blames devaluation for the rejection of coins. Though he reckons with the efforts of the CBN in trying to mop up excess liquidity, price stability has become a challenge for the economy which is affecting the acceptance of coins.
    He disclosed that in 1982, $1 exchanged for 79 kobo, thus making the use of coins valuable. Osakwe reasons that since the nation’s monetary policy is driven by debt and a volatile foreign exchange market, and its fiscal policy shaped by budget deficit and high recurrent expenditure, the place of coins in this dispensation may have been eroded.
    Sola Oni, managing director and chief executive, Sofunix Investment Communications, sides with those who think the key issue in the coins saga is purchasing power. He says that at a time one kobo could buy a useful commodity, but the reverse was now the case.
    He counsels government to focus on developing the productive sector of the economy rather than playing to the gallery with the introduction of coins, which he fears could lead to further devaluation of the naira in the long run. This is because, based on the Nigerian factor, prices of goods and services respond to the highest denomination. “It is not the quantum of naira that matters, but what it can purchase,” Oni says.
    In an interesting dimension to debate, even clergymen are wary of the effect of a new currency regime. They fear that coins would have a negative impact on the level of contributions made by members of their churches.
    “What it means is that pastors will now be counting more coins. If one hundred members contribute N20 coins each during church service that means you will have N2, 000 in coins. How long are you going to count that?  You can imagine how heavy it will be. Some pastors will no longer want to collect N20 or N50 from their members. What will happen is that members will be forced to contribute nothing less than N100 and above because pastors will no longer value N50,” a pastor of a pentecostal church, who wants his identity protected told The Nation on Sunday.
    Yet, another pastor reasoned that the trend could discourage some worshippers who may not be keen on coming to church except they have up to N100 to contribute as offering, because when coins are dropped in the offering basket, the sound would be heard and it may be embarrassing to them.
    “The smaller notes would eventually become useless because people would no longer value them. Some people would start thinking that if they don’t have up to N100, they cannot go to church because others would look down on them. You cannot give somebody N50 and the person would appreciate it. What CBN is trying to do is to make N100 note the lowest denomination which is not good,” he said.
    Osakwe says the solution is for government to focus on monetary policy that is discretionary. The solution to the problem of coin rejection lies in government’s will – if the executive and legislative arm of the government can be discretionary, then the past feelings over coin usage can be assuaged, he assured. He adds that if the nominal devaluation of naira is driving up prices, the real devaluation will stabilise the excess liquidity. Such thinking may be right considering that in the 80s, Israel and Argentina were faced with similar problems, but their focus was in stabilising price through infrastructural development, reduction of real interest rate and cutting the boisterous recurrent expenditure as well as creating a well structured tax system.
    President and Chairman of Council, National Institute of Marketing of Nigeria (NIMN), Chief Lugard Aimiuwu, urges the CBN to sensitise Nigerians on the need for them to accept the new coins. “Maybe Nigerians should be encouraged to support a culture of having coin boxes all over the place where people can pay for things in coins. For instance, the dual carriage rail system they say they are doing from Lagos to Ibadan; if they ask the passengers to pay with coins, this will support the culture of coin usage,” he suggests.
    For now, all bets are off as to whether the CBN under Sanusi can get Nigerians to return to an age when the use of coins was a normal part of everyday business transactions – and not the subject of a full-blown national controversy.

  • Banknotes, coins ‘ll always be relevant, says Lemo

    Although e-payment is becoming more popular in Africa, banknotes and coins will always be relevant and useful, Central Bank of Nigeria (CBN) Deputy Governor, Tunde Lemo has said.

    Speaking yesterday at the Association of African Banknotes and Security Documents Printers (AABSDP) conference in Lagos, he said the cash-less policy of the apex bank is on course. He said banknotes and coins will always be useful in consummating transactions.

    Lemo said that the proposed N5, 000 note will reduce cost of banking operations, adding that Africa must embrace change and new technologies in printing of bank notes and minting of coins to keep counterfeiters on check.

    “Yes, electronic banking is where to go because of the increase in volume of commercial activities in the last 10 years, but then cash will not go away. While others will be growing, the volume of cash in the system will remain the same. So when they castigate us that we are speaking from both sides of the mouth by talking cash-less and introducing a higher denomination, our response is that we must be more efficient with the use of cash because cash will not go away. So we are attacking efficiency from both ends and the two are not contradictory, rather they are complementary,” he said.

    Lemo disclosed said that the restructuring of Nigeria’s currency is based on CBN’s constitutional roles, which allow it to print new notes from time to time.
    He said that the apex bank has assisted in ensuring that counterfeit-proof notes are printed and circulated within the country.

    According to him, given the apex bank’s record in the market and the things it had done over the past 20 years, there is need for it to be trusted.
    He said the apex bank is ensuring that features it puts in the currency are so expensive that it will be difficult for counterfeiting to thrive.

    “We believe that the coins are very important. There is no society that operates only on banknotes. People say they can’t carry coins, but the moment they go to other countries, they give them coins and they put them in their pocket. The CBN is charged with the responsibility of issuing and managing the legal tender currency in Nigeria,” he said.

    Besides, he said that global best practice demands that countries restructure their currencies every five to eight years to be ahead of counterfeiters.

    He said that the existing policy actually is that if one must carry high volume of cash, then he must pay the associated charges with the carriage of high volume of cash. Besides, he said that the charges of electronic banking will continue to go down. He said that banks are now reducing cost of electronic banking as they continue to have more transactions along that path.

    “Suppose you need to print maybe N1 million N100 notes, you can actually reduce cost by printing them in N5, 000 and of course the differential is very minimal. That is basically what we are saying. At the high end, the volume of N1000 that we are using today, gives a compelling reason why some of it should be denominated in N5, 000 so as to reduce cost,” he said.

    He said the policy will not cause inflation because the apex bank is not increasing volume of money supply. “We are only redistributing the percentages that will be in different denomination, so it will not increase inflation,” he said.

    “We want Nigerians to carry less cash. We cannot say we don’t want Nigerians to carry cash because people carry cash all over the world and they will continue to carry cash,” he said.