Market News

BY  Oreoluwa Akinwande

Background

In recent years, Nigeria has faced significant economic challenges, with inflation becoming a persistent issue. As prices soar, the smaller denominations of the local currency, N5, N10, N20 and even N50 are gradually disappearing from circulation.

This phenomenon raises important questions about the implications for everyday transactions, the economy, and the lives of ordinary citizens.

Historically, smaller denominations held substantial purchasing power in the economy, especially in ease of transaction in smaller units of purchases and currencies and when it came to having to balance payment for purchases and exchanges.

In years past, one could still buy a sachet of pure water for N5, while a N10 note could buy a small snack, some sweets and even a loaf of bread. However, as inflation has risen sharply, the value of these notes has diminished significantly forcing their disappearance from circulation.

The National Bureau of Statistics (NBS) reports that the inflation rate eased to 33.4 per cent in July 2024, down from 34.19 per cent in June, which was the highest rate since March 1996.

This inflation has been driven by rising food prices, fuel costs, and foreign exchange fluctuations, impacting the purchasing power of citizens. Inflation has made smaller units of the domestic currency worthless.

Observations

Mr. Ayodeji Fatokun, a grocery seller in Lagos State shares his observations concerning the disappearance of lower denomination notes: “Honestly, the way things are going, I rarely see N20 in my shop anymore. When I do, I often have to explain to customers that it’s still a legal tender. Inflation has made these notes virtually worthless.”

He recalls a time when N10 could buy a small snack or some piece of candy, but now, even a single piece of fruit costs more than N50. “People just don’t want to bother about them. It’s easier for them to pay with larger notes, even when they get change.

I can’t remember the last time I saw a N20 note come back from a sale; they’ve practically disappeared from circulation,” he disclosed. Mrs. Fatima Abdulsalam, a vendor in Oshodi, Lagos State echoes this sentiment: “Just a few years ago, N10 was a common note for small purchases. It could purchase sachet water or a seasoning cube.

Now, it’s almost laughable. Customers look at me like I’m joking when I mention N10. ‘‘They would rather give me N100 or even more. Prices generally have skyrocketed, and with inflation, the little money people have doesn’t stretch as far.

I find myself having to adjust my pricing all the time, but even then, I can’t compete with the increasing costs. It’s frustrating because these small notes used to be a part of our daily transactions.” The causes of inflation are multifaceted.

Supply chain disruptions, global commodity price increases, and agricultural challenges have all contributed to rising prices. Additionally, Nigeria’s economic policies, including the removal of fuel subsidies, and floating of the foreign exchange rate have exacerbated inflationary pressures.

Inflationary trends

Local businesses are adapting to this new reality. Mr. Okafor Chinedu, a tailor in Yaba, laments: “Inflation has completely changed the way I do business. Just a few years ago, I could charge someone N50 for a simple stitch; now, that barely covers the cost of the thread I use!

The value of smaller notes seems to have diminished so much that people don’t even consider them anymore. It’s like they are not even worth carrying around. I have to constantly adjust my prices.” Mrs Zainab Salau, who sells groceries, has noticed a significant decline in the use of smaller denominations, revealing; “As a seller of products such as biscuits and lollipops, I’ve noticed a significant drop in the usage of smaller denominations like N10 and N20.

“Children used to come in with their pocket money, excited to buy sweets, but now I rarely see them with those notes. A packet of biscuits that used to cost N20 is now N50 and some even N100. Parents don’t want to give their children small amounts, knowing it won’t buy anything meaningful anymore.”

Mrs Adebola Martins, a food seller in Ayobo Market in the outskirts of Iyana-Ipaja, Lagos State, elaborates on the impact of inflation on her business: “As a food seller in the local market, I’ve been serving fried potatoes, yams and akara for years. Just a few years ago, I would see customers coming in with N20 and N50 notes to buy small treats.

‘‘Now, it’s becoming increasingly rare. In flation has hit hard, and what used to be a simple treat for just N50 is now at least N100 or even more. Many of my regulars no longer bother with the smaller notes; they prefer to pay with larger denominations because they feel it’s not worth the hassle.

“I feel like I’m losing a part of my customer base who can no longer afford even the modest treats. It’s not just about selling food; it’s about providing happiness, and inflation is robbing us of that.” On his part, Mr Isaac Adebanjo, a stationery seller, expressed concern over the impact of inflation on education.

According to him: “N20 used to be a common amount for a simple pencil or eraser, but now I hardly see anyone using that note because a single pencil is now N70 while an eraser is N50. Parents used to give their children pocket money in smaller denominations, allowing them to buy school supplies easily.

“Now, it’s almost as if those smaller notes have become obsolete. Inflation has pushed prices up so much that a basic 40- leaf notebook, which might have cost N50 is now N250 or more. It’s disheartening because I’m trying to keep my prices reasonable, but with rising costs, I have no choice but to increase them.

This change means that many students can’t afford to buy what they need.” Furthermore Mrs. Olubunmi Fatai, a fruit seller in Ogun State, said: “I used to see many customers paying between N20 and N50 for small pieces of fruit, like a single banana or a few oranges. Now, those transactions are almost non-existent.

Inflation has dramatically increased the prices of even the most basic items. “A small bunch of bananas that used to cost N200 is now at least N400. It’s heartbreaking to see my regular customers struggling to buy the fruits they used to enjoy. They often come to my stall looking disappointed because they can only afford a few items instead of what they would typically buy.”

Worries

Parents of school age children are equally lamenting because rising inflation means they have to find extra money to give their children, especially the younger ones who are in primary school.

“Before I could give my daughter N20 or N50 and know that it will be enough for her to at least buy some decent snacks, now even N100 will only buy her a packet of biscuits, which have still been reduced!” lamented Mrs Doris Bello, a single mother of two.

“When I was growing up my mother would give me N5 and it was enough for me to buy sweets like goody-goody and biscuits. But now it has become worthless because you can’t buy anything with it.

“Even pure water which for a very long time was sold for N5 is now two for N50, this is so because there is no change to give,” explained the petty trader who lives in the Ilasamaja, area of Lagos.

The disappearance of smaller denominations is not merely an economic issue; it reflects a broader societal challenge. With inflation eroding the value of money, the purchasing power of consumers diminishes, and small transactions become impractical.

Kobo coins

This change affects how businesses operate and how families budget for daily needs. As inflation continues to rise, the once-familiar N5, N10, N20 and N50 notes are at risk of becoming relics and joining the ½k, 1k, 5k, 10k, 20k and 50k coins which have long been consigned to the dustbin of history.

Sadly perhaps only people in their late 40s may even recall that there was a time in this country that such coins not only existed but had value. The naira was introduced in 1973, when Nigeria decided to decimalise its monetary system and substituted the naira for the Nigerian pound (the country used the British pound sterling when it was a British colony), which was divided into shillings. Back then £1 was equal to N2; while 100 kobo made up one naira.

However, as prices of goods and services began to rise, on February 28, 2007, the Central Bank of Nigeria (CBN) officially withdrew the ½ to 25 kobo coins from circulation.