Professor Ibrahim Ayagi, an economist and former banker airs his views on plans by the Governor of the Central Bank of Nigeria (CBN), Malam Sanusi Lamido Sanusi, to introduce N5,000 note into the Nigerian economy. Excerpts:

What is your opinion on the recent announcement by the Central Bank of Nigeria, Governor Sanusi Lamido Sanusi, to introduce N5,000 note and converting some notes into coins?

I thank you for the opportunity to comment on the new policy of the CBN. Actually, I watched the CBN governor on television talking about the policy. He gave his intention to introduce the N5,000 note and convert the N5, N10 and N20 to coins. The only justification he mentioned for the policy was that it was normal for countries to review their currencies after every five years. That is the only reason he gave in that appearance, though I don’t know what he said elsewhere.

Countries do review their currencies after a period of five years, I agree. When you say it’s normal to review, it is ok. But reviewing does not necessarily mean changing. I can review all our currencies from N5 to N1,000 and then ask are these adequate for what we are facing now? Do we need any more notes now? At the end of the day you can say ‘I think these notes are alright.’ As far as I’m concerned if you do this you have reviewed your currency, but not changed it.

We are not the only economy in the world; there are many economies that are even more superior than our own. Are they changing their currency policies after every five years? I believe not. Look at the United States, which is the strongest economy in the world. The highest denomination it has is $100. They don’t have any note higher than $100 bill. I remember when I went to the US to study more than 30 years ago, that was what they had. I believe up to now, the US has not increased its currency denomination.

Another country, the United Kingdom has also not changed its currency. I was there more than 35 years ago and the highest denomination they had was N50 pounds. Today it is still the same, it hasn’t changed.

Also, Saudi Arabia which is more in our own group than the others has 500 Riyals as its highest denomination. And that has been in existence for more like than 30 years without being changed. Why are we increasing ours now when just about ten years past? We increased our highest denomination 10 from N500 to N1,000. And now you want to introduce N5,000 note: For what? What do you want to tell the rest of the world? What do you want to tell Nigerians? Are you telling them the value of the naira has gone down so much so that you need five times or five hundred times the currency you have to do business? Even theN1,000 note, how many people use it now. Do you go for business and pay with N1,000? You only want it when you want to withdraw large amounts from the banks. What it means is that the naira’s value is becoming weaker more and more, so that you need more of it to do business.

The implication of the N5,000 on the economy is serious. I think it is not unnecessary and it’s not going to serve any purpose. We have more problems to deal with than changing currency at the moment, because the wealth of the country is not increasing. People are becoming poorer. There are more poor Nigerians now than there were last year. So, I think our N1,000 can still serve the purpose.

Again, the coining of the lower denominations is going to be costly, though they say it’s going to reduce the cost of transactions. If N5, N10 and N20 were coined, they will also be rendered unusable just like N1 and 50k coins. Honestly, I personally have forgotten the last time I saw the N1 coin in circulation.

This means the inflation in the country will worsen. By implication, the introduction of new notes would mean their value has become less and the cost of goods and services will rise, though I acknowledge that there are other factors that contribute to inflation apart from currency. I’m even surprised how the government accepted the plans, because without its nod the CBN would not venture into the exercise.

Don’t you think Sanusi is pursuing too many policies at the same time?

Well. Maybe there is an element of that. Maybe the governor is in a hurry to do many things and the hurry may lead to situations that may not be good for the country. It’s good to be careful how you go about things.

Will the inflation that can result be high that the CBN will find it difficult to control?

No. I cannot talk about the extent of the inflation. I can only say that in general, it has a tendency to worsen the inflation. But, of course, there can be other things that can be done to reduce the impact of the inflation.

Should Sanusi have concentrated on one policy at a time?

To me so far the CBN governor has been running his policies, since he started normally – well-thought-out and well-planned, so far. To me the point of introducing the cashless economy, I will score him very high. The problem is, now, he’s going into certain things that will negate what he has been doing. I’m not disagreeing with him a hundred percent, but I’m only criticizing this policy of changing the currency which I see as a contradiction of an earlier policy. But aside that, he has been doing well.

His cashless policy has only begun in Lagos and some other parts, but not in the North. And you have to be realistic. Remember, we have a large number of junior staff, many of whom do not have bank accounts. To ask all these staff to open accounts at the same time will create problems for them. The new system is that of procedure which has to be followed step by step. For now many junior workers would have to be paid their salaries in the traditional way. But maybe by next year, the old system may not be there because many of such workers may have gotten bank accounts for their salaries to be paid in. So, the system has to go on gradually until everyone has gotten into it.

Similarly, the CBN has pursued the right policy to rehabilitate banks. Although they may have some problems, they should find ways to deal with those problems. To me that is okay.

But if you take the issue of the cashless policy and the introduction of the N5,000 note, there is inconsistency between the two. Here you are saying people should substitute cash with other methods of payment. For instance, some workers on salaries just receive alerts about payment being made into their accounts without receiving the payments in cash. That is good, because it is associated with a modern society. But introducing higher denominations will contradict the cashless policy. So, I think the CBN governor risks contradicting his policies in his haste to do so many things at a time.

There are concerns that introduction of the N5,000 note would encourage corruption in government. Do you entertain that fear?

I have personally never seen N1 billion. But now people tell me that somebody has N1 billion stashed in his house or even N2 billion. Nigeria is unfortunately a corrupt country. When I say I don’t believe in my mind that someone can steal N1 billion, people say I’m being naïve. But if you steal that amount, what would you do with it? If that is happening, then I think the N5,000 will help the corrupt people who constitute the top five percent of the country. Anybody dealing with huge sums of money will be happy with this policy. So, for those who are corrupt, considering the magnitude of graft in this country, the policy will aid them because they don’t have to carry huge Ghana-must-go (laughs).

As a veteran economist and a banker, what advice would you offer to the CBN governor on the this issue? Will you ask him to stop it?

Of course, if, for instance, I meet Malam Sanusi today, I would tell him that this policy you are pursuing is wrong. I think it is unnecessary. By converting the lower currencies into coins you are eliminating important names in the system, such as Murtala Muhammed, Alvan Ikoku and Tafawa Balewa. These names are historic. But what is wrong with all these people being maintained on the notes when others like Awolowo and Sardauna are also printed on some of the notes? And more importantly, it is more expensive to produce coins than notes I will tell Sanusi when I see him that this time you are wrong.

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