IN February 2007, the Central Bank of Nigeria (CBN) began issuing new coins in denominations of 50 kobo, N1 and N2. The main rationale for this was to facilitate highly repetitive small value transactions (urban transportation and suchlike) for which higher denominations are generally unsuited or unrequired. However, the new coins failed to gain traction and, after some initial excitement, started fading from circulation. Today, not only are they generally spurned by retailers and the average consumer, even banks and other financial institutions refuse to accept them.
In the past, the CBN has engaged in media campaigns aimed at nudging Nigerians towards acceptance of the coins, but the dividends accruing from such efforts have been meagre. Hence, the Senate is right to be concerned about this untoward situation, the real effect of which is an unwritten tax on all financial transactions, and a not particularly subtle incentive for corruption. In fact, Nigeria is in an unusual situation in this matter as, in the majority of countries (whether developed or otherwise), the use of coins for quotidian financial transactions is widely embraced.
While we share the upper legislative chamber’s worry, and firmly believe that something needs to be done to bring coins back into circulation, we are dubious about the Senate’s proposal for same. In his address to the Senate, Senator Mustapha Bukar (APC, Katsina North) who led the motion entitled “Non-usage of coin currencies in Nigeria and its negative effects on the economy” urged the CBN to convert lower currency notes (presumably the N5, N10, N20, and N50 notes) into coins, arguing that, “Since the three coin denominations have lost their values to inflation, the conversion of lower currency notes will facilitate retail transactions in the economy, like we have in developed countries.” In its resolution, the Senate adopted this proposal wholesale.
On the face of it, the proposal seems reasonable. After all, it might be contended, coins are more durable and cost less to maintain. But that is to elide the real problem, which is that the reasons Nigerians generally keep coins at arm’s length have little or nothing to do with durability. There is, for one thing, the cultural problem, which is that most Nigerians tend to see coins as beggars’ money. But the cultural problem itself is underpinned by something else, to wit: the value of the coins at issue. For instance, whenever the same Nigerians who thumb their noses at Nigerian coins travel to the United Kingdom and the United States, no one tells them before they develop a healthy respect for the pence and cent respectively. This has nothing to do with any official regulation, but the cold fact that in the United States, say, one cent is worth something, not to mention a nickel (five cents) or the relatively almighty quarter (25 cents).
Here then is the point: if the value of the naira as a currency were to suddenly go up, the commensurate effect will be felt in increased respect for the coins. Senator Bukar was on to something when he mentioned the relatively low value of 50 kobo, N1 and N2 coins. The question is this: what is to prevent the same fate (of a calamitous drop in value) befalling N5, N10, N20, N50, or even N500 and N1, 000 if they are converted to coins? If that were to happen, simple logic suggests that consumers would simply jettison them for higher denominations.
The Senate is well meaning, but it appears grossly misled. At the very least, it appears not to understand that currency is not just a monetary matter, but also, as we have pointed out, sociocultural. It is going to take more than a gruff of frustration, and an order to the CBN, to make Nigerians embrace coins.
and then