One magic note, irrespective of its utility, will not pull us out of the economic slump
I confess that while it lasted I found the brouhaha over the Central Bank’s plans to introduce the N5, 000 note something of a hurricane in a very tiny tea cup.
But on the positive side, the passion it ignited was such that for the first time since the Super Eagles were thrown out of some tournament, we forgot whether were from South-South or North-West!
Sure, there were all the arguments about how the anticipated currency reforms could set off an inflationary spiral. Many who had these worries were not only critical of the big note, but also pointed to plans to coin the lower end denominations below N100.
Over the years Nigerians have developed a strange resistance to coins. This manifests in the form of traders simply ignoring the metallic money and fixing prices for the cheapest of items beginning with the lowest of notes.
This irrational behavior, like most things in the Nigerian economy, has nothing to do with the basic laws of economics. The artificial and opportunistic price hikes are not triggered by demand and supply factors, but by a mindset that cannot be supported by anything in our history.
From Independence and well into the 80s, our people embraced the coins that were in circulation. It is equally revealing that the same Nigerians, who supposedly have a cultural aversion to coins, gladly use and carry them around when in the UK, US, Italy, South Africa and many other places.
So is the problem the coin, the evaporation of its value, or some strange mentality we have acquired? I believe that even the irrational has triggers that can be traced. Primary blame must go to the CBN which over the last two decades has allowed the bizarre thinking that paints coins as an inferior repository of value, to take hold.
When other factors set off inflationary pressures in the economy, and the existing coins were rendered nearly worthless, the apex bank ought to have released not just a new set of notes, but also coins responding to our new reality.
They should have put in place policies and rules that counter the notion that only paper denominations that count. Traders, business people and public transportation owners should have been encouraged to have coin boxes in place.
The CBN gave the impression it was not really interested in coins because banks were never sanctioned when they discouraged bank hall transactions in coins.
As for the elephantine N5, 000 note, I believe the CBN never made the case why it was such a compelling proposition at this point in time. Countries usually resort to printing such huge bills when hyperinflation has rendered their currencies useless. We’ve seen this happen in the likes of Zimbabwe and Ghana. But surely, inflation in Nigeria is not yet running at 1,000%.
As has been argued by many, the aborted note would most certainly have exacerbated graft, money laundering etc. Rather than help the CBN’s vision of a cashless society, it would have made it even easier for people to hoard millions under their beds or tote it around.
The apex bank’s governor, Sanusi Lamido Sanusi, would have us believe that those who opposed his bright idea were either illiterates or voodoo economists.
He made this point in his now infamous put-down responding to former President Olusegun Obasanjo’s criticism of the controversial note. For suggesting that it will cause inflation and worsen hardship, Sanusi dismissed him as “a very successful farmer, but a very bad economist.”
Obasanjo was not the only VIP who flayed the big bill. Former Head of State, General Yakubu Gowon and several other high profile figures did. The Senate and House of Representatives were set to ask for Sanusi’s head on a platter if he defied them by going ahead.
But OBJ’s comment particularly irritated the CBN governor because according to him Obasanjo introduced more high currency denominations in Nigeria than any other head of state.
Still, for all of Sanusi’s knowledge of economics, I thought his comments were rather impertinent. For one thing, he was dismissing the knowhow of a man who presided over some of Nigeria’s better economic times. Surely, such a person would know a thing or two.
This whole N5, 000 episode is another useful lesson for the CBN governor. He was convinced that having made his economic argument and sold same to the President and cabinet, the whole country would just fall in line.
Sanusi forgets that economics is often not black and white, and economists are just like politicians – each one has a different prescription for the same malady. Some of the most vociferous critics of the N5, 000 note are economists of unimpeachable pedigree.
Now, President Goodluck Jonathan, barely a fortnight after signing off on the proposed note, has executed a 360 degree pirouette by putting Sanusi’s plans on hold – ostensibly to allow more time for public education.
Opponents of the note are already performing its burial rites. Who can blame them? Back in January the government pulled the plug on the policy of total deregulation of the downstream sector of the oil industry, again, to allow more time for people to be better schooled on the joys of living without subsidised petrol.
Eight months after, there’s not a single half-hearted tutorial going on. Rather we are staggering around in the morass of a full-blown fuel subsidy payment scandal. That is why it will be quite a surprise if Sanusi ever gets to print his cherished note before his tenure runs out.
Lesson for the governor: on certain matters economics is not enough. Remember how late President Umaru Yar’Adua stopped Prof. Chukwuma Soludo – another bright economist –from executing his own currency experiment?
What has stopped the N5, 000 are not economic factors but political ones. Jonathan simply checked the Richter scale of political criticism and decided there was no point making himself even more unpopular. Sanusi may sneer at this, but in real life this is how it works.
Once upon a time there was another brilliant economist who used to see what the rest of the less-endowed populace could not see. His name was Dr. Kalu Idika Kalu and he served as Finance Minister in President Ibrahim Babangida’s regime. As Nigeria struggled to overcome her economic woes in the mid-80s he pressed for the nation to take an International Monetary Fund (IMF) loan. In the end he was overruled by Babangida in the face of strident national opposition.
It is good the ghost of the N5, 000 note has been laid to rest: not necessarily because it is bereft of merits. But one magic note, irrespective of its utility, will not pull us out of the economic slump. There are fundamental issues to be addressed if we mean business about turning the economy around. Let’s tackle the basics and put the drama to one side.
