The storm in Sanusi’s cup

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By Shola Oshunkeye
sholaoshunkeye@yahoo.co.uk (0805 – 618 – 0011)
Few Nigerians would be surprised at the current noisy excitement generated by the decision of the Central Bank of Nigeria, CBN, to introduce a new regime of currencies by the first quarter of next year. The announcement, penultimate Thursday, by the Central Bank governor, Sanusi Lamido Sanusi, has, understandably, triggered a national uproar that swells by the hour. Several professional bodies, the civil society, many voices of reason across the country, and the masses in general have been unambiguous about their opposition to the proposed policy. They firmly believe it would trigger inflation and worsen the people’s economic adversities.
Consequently, they have vowed to resist the matter with every fibre of their being. As usual, the Central Bank seems to have plugged its ears with piston on the matter. Sanusi and his colleagues are sitting pretty on their resolve that nothing would make the apex bank reverse the decision because it can never result in inflation, the people’s worst fear, nor increase money supply. “Instead,” Ugochukwu Okoroafor, the bank’s director, corporate communications, argues in a newspaper advert, last Thursday, “currency restructuring will make payments easier and indeed check unnecessary rise in prices that come(s) through the practice of rounding up.” He reels out some statistics to prove the point that, contrary to widespread fears, “currency restructuring may actually help in tackling inflation.
For instance, when CBN introduced the N500 banknote in 2002, inflation dropped from 16.5 % to 12.1% in 2003. Similarly, when the N1, 000 banknote was introduced in 2005, the inflation rate actually dropped from 11.6% to 8.6% (single digit) in 2006 and dropped further to 6.6% in 2007.” For effect, Okoroafor maintained that “currency review is done by all countries and the recommended interval is every 5 to 8 years. In Nigeria’s case, this will be the first comprehensive review in 13 years and it will be used to take advantage of latest technology. From all indications, this seems to be another policy baked and churned out of the oven in a hurry. I will prove this by pinpointing obvious contradictions in the policy pronouncements by CBN, notably its governor, Sanusi, and spokesman, Okoroafor, since they dropped the bomb.
For instance, in an August 23, 2012 press briefing on the restructuring exercise, tagged Project Cure, Sanusi, on page 2 of his offering, informed that “In Nigeria, the last comprehensive review of the currency was carried out in 2005” resulting “in the introduction of the N20 polymer banknote followed by the vanishing of the N5, N10, and N50 paper banknotes in 2007.” But Okoroafor, in his newspaper advert of Thursday, September 6, 2012, put the lie to his boss’ assertion, declaring “this will be the first comprehensive review in 13 years.” I’m sure Sanusi vetted and approved the advert copy before it went to press.
If he did, and there is no cause for me to doubt he did, then, this question becomes inevitable: Whom do we believe? Sanusi or Okoroafor? On the surface, the lapse may look insignificant, but it tells a lot about the lack of synergy in vital government institutions in this country, even the CBN. It shows how important institutions of government insult the people’s intelligence. Another contradiction can be found in the CBN’s position that “the recommended interval (for currency review) is every five to eight years.” While I agree with the statement that “Currency review is done by all countries”, I disagree with “the recommended interval” cited by the apex bank. Let’s consider Britain and America that we try to ape in most things.
According to Wikipedia, the online free encyclopaedia, the highest denomination of the Pound ever printed for circulation was the 1000-Pound note. It was issued between 1725 and 1745. The largest denomination, currently in circulation, is the Fifty Pound note. It first came into circulation in 1994, but was substituted with a new series last November 1. Although a 100-Pound note was issued from 1725 to 1943, it was withdrawn in 1945. And The Bank of England, Wikipedia further informs, does not broach any plans to introduce a 100-Pound note in the foreseeable future. In America, the highest denomination in circulation is $100 bill which “has been printed after July 13, 1969 when the denominations of $500, $1,000, $5,000, and $10,000 were retired,” enlightens Wikipedia.
The free online encyclopaedia also informs that, “Notes in denominations of $500, $1,000, $5,000, $10,000, and $100,000 were all produced at one time but notes above the $100 denomination were no longer printed after 1945.” It, however, notes that of all “those denominations, $100,000 bills never circulated. They were printed for use internally by government agencies.” If these leading world economies can keep their currencies in circulation for as long as possible, why can’t we? Why the frequent alterations? Why the constant devaluations and re-evaluations? Again, CBN’s argument that the restructuring would not induce inflation does not add up. I will quote a release by the Adedoyin Idowu Owolabi, the 48th president and chairman of council of The Institute of Chartered Accountants of Nigeria, ICAN, to buttress my point. On page 2 of the paper, he says: “ The CBN’s repeated change in its monetary policy rate is an indication of (the) severity of inflation which it has been targeting for sometime. If unemployment were 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.” Now, another pertinent question is this: How does the introduction of N5000 bill into the country’s monetary system impact on the man on the street? According to Sanusi and his colleagues, the common man has nothing to fear. Everything is cool, as the Americans would say. However, the ICAN boss says things may be hot as hell fire for the man on the street if Sanusi and his gang have their ways. To Owolabi, the policy will whittle the common man’s purchasing power and further subject him to the icy clutches of market forces. “In our view,” the ICAN president continues in his release, “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 (be) the unintended consequence.” Apart from these hefty contradictions by CBN, the most laughable defence of the controversial policy came from Atedo Peterside, chairman of Stanbic IBTC Bank and a member of President Goodluck Jonathan’s economic team. He came up during Channels TV’s prime-time news, Wednesday night, arrogantly dismissing soaring public dissent to the proposed new currency bills. “If I were the CBN Governor,” he opined in a chat with State House correspondents after a meeting with the president, “I would prefer to print N10, 000 notes.”
“Last year, Nigeria spent N47 billion to print these small notes. If we were printing bigger denominations, we will print a fewer number and make a phenomenal savings. Second, money is a store of value. All these thieves and vagabonds running around in various states and all over the country, when they steal money, they will want to keep it outside the banking system.” That still doesn’t add up, as far as I’m concerned. I don’t see how the introduction of N5000 notes would deter thieving governors from laundering their states’ hard-earned revenue. Rather, it will make looting as easy as ABC for them. Atedo Peterson can do better. In all of these, and despite the obvious disparities, Sanusi and his colleagues still insist there is no going back. Their hands are firmly on the plough, they seem to be saying, and there is no looking back. Despite the dangers it portends, the confidence of Sanusi and co on this matter is not an empty one because they enjoy the solid support of President Goodluck Jonathan and his economic team.
The CBN’s subtle intransigence has a solid base on the president’s approval. But we need to afflict the comfortable with the truth at this point. Sanusi and his colleagues need be reminded that hell has no fury than a people that are so hungry and angry; a people so impoverished, so depressed and so oppressed. Sanusi and co must not go to bed yet, thinking all is well because whoever stretches the common man’s endurance to its elasticity does so at his own peril. The reality on ground indicates that these are extremely difficult times for the common man. The days are filled with staunch obstacles that stunt the survival of most men on the street and their families. And anything that would aggravate the already bad situation, least of all a policy with the propensity to heighten inflation and spike prevailing pains, would, without doubt, trigger war from the masses. They bear the brunt.
Though majority of them have no shoes, (apologies to President Jonathan), they know where the shoe pinches. It is not too late for the CBN to capitulate. There is still ample time to give in to the argument that the proposed monetary policy is anti-people and may engender unintended consequences. Given the propensity of governments to make idle promises, given their legendary stubbornness to make compromises especially on matters affecting the masses, no one can blame the man on the street for his irrevocable skepticism for the policies and politics of their rulers.
But on this occasion, President Jonathan and his economic team, Sanusi and his CBN, can still do the honourable. They can still reverse the decision and let’s all move on. Sticking to their guns may reinforce the suspicion among many Nigerians that their country is being led by the nose by the International Monetary Fund, IMF; and that the proposed introduction of N5000 is another way of devaluing the already battered Naira. Now is the time for the government to prove the skeptics wrong.