Citing high cost of printing and production of currency notes, the Central Bank of Nigeria (CBN) suspended the printing of small denomination notes for much of 2016. The affected denominations are N5, N10, N20 and N50. Rather the apex bank awarded a contract to the Nigeria Security and Minting Company (NSPC) otherwise referred to as the Mint, for the printing of higher denominations of N 100, N200, N500 and N1000 notes. CBN through its Acting Director for Corporate Communications Ugochukwu Okoroafor admitted that it did not issue any fresh lower denominations currency notes but that the embargo was only restricted to the festive period throughout the 2016 end of year festive season, virtually all parts of the country were hit by a debilitating currency crunch as bank customers queued up endlessly at Automatic Teller Machines (ATM) in order to withdraw money for routine purchases. The agony of the frustrated, countless customers was not assuaged by the fact that with cashless transactions still at its infancy in the country, most transactions still depend heavily on the use of cash across the counter. The failure of the apex bank to deliver currency notes to the Nigerian public therefore created significant scarcity and pains for the majority of Nigerians who transact business mostly in the affected lower denominations.
CBN is believed to have based its action on the economics of currency production and management given that it costs about N1,000 to print a single currency note of even the lowest denomination of N5. Hence by the reasoning of the apex bank, it makes better economic sense to invest in higher denominations. But that dispensation is also to the detriment of wider sections of the Nigerian society, especially the low income group who buy and sell in the open market and activity areas within the informal sector.
Hence no matter the consideration that must have guided the CBN embargo, the quantum of distress it imposed on Nigerians renders the action a disservice to the society for which the bank owes an apology. Notionally the issuance of currency notes by CBN is a public service of overriding significance to the country, hence cannot be subjected to the simple calculus of unit costs. By virtue of the statute setting up the bank it enjoys unfettered powers in matters concerning the production, supply, distribution and change of currency in the country. If it had problems with any currency related matter, the bank has at its disposal many options and measures for deployment without disrupting routine economic activities in the country. It is in the exercise of such powers that the bank had been launching various currency reform initiatives including the polymer notes for smaller denominations during the era of Charles Soludo as its governor.
It is significant that the denominations that were skipped are those printed on polymer paper by printers outside the country’s shores, even when there are no marked differences between the polymer paper and the traditional currency paper. In the light of the present reality of runaway cost of printing the polymer notes, CBN may consider a return to the normal currency paper for the lower denominations, if that will be more cost effective. In the same context CBN may need to brace up to the ultimate option of introducing coins for the lower denominations as a more sustainable measure since they have a longer shelf life than currency notes. It is an irony that whereas all developed countries operate with coins, a developing country like Nigeria is not, even when there are glaring disadvantages from the absence of coins for routine transactions in the country.
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