Nigeria 5,000 Naira note: What is CBN thinking? – By Emeka Chiakwelu

Posted by admin Africa & World Politics, CBN (Central Bank of Nigeria), Columnists, Emeka Chiakwelu, NNP Columnists Saturday, September 15th, 2012

By Emeka Chiakwelu | NNP | Sept. 15, 2012 – How long will it take Nigerian policy makers to come out from their self
imposed bubble and comprehend that policy decision they made can have
adverse consequences.

We all wake up one bright morning; the next thing we heard was that
Sanusis Central bank of Nigeria (CBN) will introduce a 5,000 naira
banknote in the circulation in nearest future. The most perplexing
question that begs for an answer is when and why CBN arrive to this
decision to print such a large denomination without adequate consultation
and research analysis. Although CBN is an autonomous institution, it
still own certain explanation to Nigerians on the strategic importance
and impacts of its decision and on how the country can benefit from it.

Sanusis CBN have for a while been worried about the increasing
inflationary trend in the economy. To that effect the countrys reserve
bank has gone about it by raising the interest to more 12 percent to
combat rising inflation. Now in a split of second they chose to rubbish
their good work with this incoherent policy decision. By printing a large
denomination of naira notes, the value of the naira will nosedive while
inflation will gain momentum and that can be disastrous to the economy.

Sometimes, our policy makers especially those of them that are making
important financial decisions act like those that do not grasp the
fundamentals of monetary and macro economic theories. One cannot quench
a burning fire by throwing kerosene into it. How can you tame inflation
by application of tools that will make it worse than before? I am totally
disappointed with Central Bank of Nigeria.

Zimbabwe Effect
Does Nigeria desire to make naira become worthless akin to Zimbabwe
currency that is miserably worthless? Is Nigeria policymakers ever chill
out and think critically on how their decisions may destroy the house
they are trying to build. These impulsive financial and monetary decisions
were what wrecked the economy of Zimbabwe. Nigeria is tilting to the path
of Zimbabwe economic gulag where hyperinflation and incoherent economic
decision will doom the nations economy.

It may be incredulous to believe but it was in a record that Zimbabwe
printed the largest banknote denomination of 1oo trillion dollar bill.
Zimbabwe with its fools decision demolished their agricultural based
economy with massive inflation. And restore to printing large banknotes to
control inflation which made worst of the situation.

Nigeria has everything going for it in terms of steady influx of foreign
exchange it derived from the continuous sale of oil. Even with that
phenomena naira is still soft and malleable when compared to other similar
economies of Nigerias standard. Most of countrys problems from their
quick and unsound decisions that comes from their political and policy
makers come from the countrys supposedly best and brightest who should
have known better.

Nigeria has produced capable men and women that can affirmatively
transform their countries. Yet Nigeria is obsessed from getting counsel
from international bodies that are not working on the interest of the
country. No one is implying or accusing any international body of making
Nigeria to print large bank notes, but one thing for sure, self doubt and
self negation made Nigeria to sort advice from outsiders whom they
believed that are more intellectually superior to them.

There are perilous cultural and economic ramifications that may likely
come from the printing and introduction of 5,000 naira note into the
circulation. First and foremost it will be an inducement for Nigeria to
progressively print larger banknotes, today it is 5,000 and next time it
will be 10,000 naira note until naira become worthless.

The cultural implication is quite enormous; already Nigeria has a problem
with corruption, money laundering and bribery. The large banknotes will
be a powerful facilitator for bribery and corruption and that is not the
intended purpose of CBN. It will not make it easier for the fight against
corruption to see the light of the day.

Finally, the so-called cashless society that CBN is gearing up to
implement may not materialise by printing more currency with large
denominations. It is illogical to be printing such a large note, while
simultaneously setting up a cashless system, for that is an apex of
irrationality.

Emeka Chiakwelu, Analyst and Principal Policy Strategist at Afripol
Organization.Africa Political and Economic Strategic Center (Afripol) is
foremost a public policy center whose fundamental objective is to broaden
the parameters of public policy debates in Africa. To advocate, promote
and encourage free enterprise, democracy, sustainable green environment,
human rights, conflict resolutions, transparency and probity in Africa.
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