Nigerians worry over scarce lower denomination naira notes

•Experts blame scarcity on high cost of printing new notes

AS Nigerians groan over the shortage of lower denomination naira notes mostly used for economic transactions among the masses, experts have attributed the shortage to high cost of printing  the notes and the currency’s loss of value.

The Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Muda Yussuf, said it was inflation that had caused shortage of lower denomination naira notes and not the other way round.

Yussuf said: “It is inflation that is causing those lower denominations to disappear. A currency is a currency only if it has value. If it doesn’t have value, it is no longer money.

“If you give a beggar one naira, do you think the beggar will take it from you happily? What is he going to use it for? What can you buy with fifty naira? Inflation has battered the lower currencies. The lower currencies are casualties of high inflation. It has made them almost irrelevant in the economy.”

Yusuf said one of the reasons banks are not dispensing lower denominations is because they are not useful and most customers will even reject them.

“Why would you dispense something that is not useful,” he asked.

He expressed concern that the naira might be heading the way of past Ghanaian Cedi. He recalled that there was a time the Cedi was so worthless that Ghana had to re-denominate it. He said the Ghanaian Cedi was converted to smaller units that have value.

But Professor Ken Ife, Chief Economic Strategist in ECOWAS Commission, who spoke to Saturday Tribune, toed a different line.

He agreed that there was an extra cost added to original prices but he stressed that it was due to the high cost of printing.

According to him, because people cannot get their balances (change), the cost is higher, and the cost element is marginal.

Professor Ife said: “You know that Nigeria is losing money printing the lower denomination. For example, if it costs N500 to print N50 note, you find out that you don’t have any mileage printing the lower denominations. That is one of the challenges that eNaira will address if Nigerians embrace it fully.

“They spend $200 million printing money every year. Convert this to local currency and you will be able to appreciate what the country is spending on this. This is not to talk about the cost of minting coins.”

The eNaira, according to him, will help reduce the volume of money needed in circulation and by its wider usage, when lower denominations are printed, the money saved from eNaira adoption and electronic payments can compensate for the cost of printing.

According to Ife, the use of eNaira will help solve the problem of balance (change) in transactions because there are applications like ‘Loose Change’ that have been developed to enable people to pick up small ‘change’ in transactions. However, some other analysts like Ife, have concluded that the high cost of printing banknotes forced the Central Bank of Nigeria (CBN) to refrain from giving contracts for their production.

“The cost of printing N50 is almost the same as N1,000. Printing small denominations costs more than the value and with the present economic situation, it makes sense to print higher notes which can be done locally by the Nigerian Security Printing and Minting (NSPM),” banking sources told Saturday Tribune.

According to them, throughout the festive season, there were hardly any smaller currency notes in circulation.

In response to a similar situation in 2018, the CBN had said it observed the inadequate circulation of the lower denomination banknotes and difficulties encountered by economic agents despite the huge volume of banknotes injected into circulation on an annual basis.

As a result, the apex bank undertook direct distribution of lower denomination banknotes to marketers, merchants, shopping malls, supermarkets, tollgates, among others. Its staff visited the ultra-modern Tejuosho market in Lagos and other places.

However, on the current situation, a public sector analyst, Mr Josiah Okon, expressed concern that inflation was being actively promoted by the CBN through its monetary policies, specifically the lack of lower denomination currencies in circulation.

Okon said: “This is very evident with the failure to load lower denomination notes such as N100, N200 and of recent N500 notes onto the ATMs.

“As it is now, we are getting to a point in our society where the N1,000 note is the most common paper note in circulation.

“For a product that ordinarily should sell and for which the sellers are prepared to sell for, say N70, but because there are no lower denominations of N10 and N20 for change, the seller would put a price of N100 on the product.

“The extra N30 paid by the buyer was not as a result of the market forces of demand and supply but a constraint foisted by inadequate volume of lower denomination notes in circulation.”

Okon gave a second example where one intends to give somebody money, say N200, but because there is shortage of N200 in circulation, one either gives out N500 or nothing.

“Neither of the two alternatives gives optimum value. Then, let’s take another look at it from the angle of nationalism. How many countries do dispense their highest denomination notes via the ATM machines? I have my very strongest doubt if any ATM machine in the UK dispenses £50 pounds note. Similarly, I have doubts if the ATM machines in the US do dispense $1,000 notes routinely.”

He also said that in Ibadan under Iwo Road bridge and other places, there are boys hawking mint N100 notes.

“If you want a bundle worth N10,000 of it, you have to part with N14,000. The same ratio goes with the N200 notes.  I know that it is profligacy that leads people into such a buying, but the point is, why are currency notes that are not available in our banks are available for sales on the streets? “When will bankers stop this unpatriotic practice?” Okon added.

Jude Ndukwe, a political economist, said the implication of the situation was that prices of goods were likely to increase since there were no smaller currencies in circulation.

“A bread seller is likely to increase the cost of bread from N350 to N400 simply because he does not want to deal with the difficult task of getting change,” he said.

“The same goes to a bus conductor and so forth. This act alone is enough to add to the hardship of the average Nigerians.

“N10, N50 may not mean anything to some, but it means a whole lot to millions of Nigerians living in poverty. So the government should do something about this.”

It will be recalled that the Senate, on February 13, 2016, expressed worry over the scarcity of lower denomination naira notes in the country.

The lawmakers noted that the scarcity posed a serious threat to the economy, which was just recovering from recession, as it was worsening inflationary trends.

At the time, the Senate mandated its committee on banking, insurance and other financial institutions and the committee on finance to investigate the scarcity and report back in two weeks.

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