Nigerians worried about scarcity of lower-value naira banknotes
While Nigerians complain about the shortage of low-value naira banknotes, which are mainly used for economic transactions between the masses, experts have attributed this shortage to the high cost of printing the banknotes and the depreciation of the currency. .
Center for the Promotion of Private Enterprise (CPPE) general manager Muda Yussuf said it was inflation that caused the shortage of lower-value naira banknotes, not the other way around.
Yussuf said, âIt’s inflation that makes these lower denominations go away. A currency is only a currency if it has value. If it has no value, it is no longer money.
“If you give a beggar a naira, do you think the beggar will gladly take it from you?” What is he going to use it for? What can you buy with fifty naira? Inflation hit weaker currencies. The weaker currencies are the victims of high inflation. This made them almost unimportant in the economy.
Yusuf said that one of the reasons banks don’t hand out lower denominations is that they aren’t useful and most customers will even reject them.
âWhy would you want to distribute something that isn’t useful,â he asked.
He expressed concern that the naira may be at the forefront of Ghana’s cedi past. He recalled that there was a time when the Cedi was so worthless that Ghana had to rename it. He said the Ghanaian Cedi has been converted into smaller units which have value.
But Professor Ken Ife, chief economic strategist at the ECOWAS Commission, who spoke to the Saturday Tribune, took a different line.
He acknowledged that there was an additional cost added to the original prices, but pointed out that this 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: âYou know Nigeria is losing money by printing the lower denomination. For example, if it costs N 500 to print an N50 ticket, you find out that you have zero mileage by printing the lower denominations. This is one of the challenges that eNaira will tackle if Nigerians embrace it fully.
âThey spend $ 200 million to print money every year. Convert it to local currency and you can appreciate what the country is spending on it. This is not to talk about the cost of minting coins.
The eNaira, he says, will help reduce the amount of money needed in circulation and by its wider use, when lower denominations are printed, the money saved through the adoption of eNaira and electronic payments can offset the cost of printing.
According to Ife, using eNaira will help solve the problem of the balance (change) of transactions, as there are applications such as “Loose Change” which have been developed to allow people to recover small “changes” in transactions. However, other analysts like Ife have concluded that the high cost of printing banknotes has forced the Central Bank of Nigeria (CBN) to refrain from awarding contracts for their production.
âThe cost of printing the N50 is almost the same as that of the N1000. Printing small denominations costs more than value and with the current economic situation it makes sense to print higher banknotes which may be done locally by Nigerian Security Printing and Minting (NSPM), âbanking sources told Saturday Tribune.
According to them, during the entire holiday season, there were hardly any small notes in circulation.
In response to a similar situation in 2018, the CBN declared that it had observed an insufficient circulation of low value banknotes and the difficulties encountered by economic agents despite the huge volume of injected banknotes in circulation on an annual basis.
As a result, the umbrella bank undertook the direct distribution of low value tickets to traders, traders, shopping malls, supermarkets, toll booths, among others. Its staff have visited the state-of-the-art Tejuosho Market in Lagos and elsewhere.
However, on the current situation, a public sector analyst, Mr. Josiah Okon, expressed concern that inflation was actively encouraged by the CBN through its monetary policies, in particular the lack of more currencies. weak denomination in circulation.
Okon said, âThis is very evident with the failure to load lower denomination banknotes such as N100, N200 and recent N500 banknotes on ATMs.
âAs it stands, we are reaching a point in our society where the N 1000 note is the most common paper note in circulation.
“For a product that would normally sell and for which the sellers are willing to sell for, say N70, but because there are no lower denominations of N10 and N20 for the change, the seller would put a price of N100 on the product.
“The additional N30 paid by the buyer was not the result of market forces of demand and supply, but a constraint imposed by an insufficient volume of lower value banknotes in circulation.”
Okon gave a second example where one intends to give money to someone, say 200 N, but because there is a shortage of 200 N in circulation, one gives 500 N or nothing.
âNeither of the two alternatives gives optimal value. Next, let’s take another look at nationalism. How many countries distribute their highest denomination banknotes through ATMs? I have the greatest doubts if an ATM in the UK dispenses a Â£ 50 note. Likewise, I doubt that ATMs in the United States regularly distribute $ 1,000 bills. “
He also said that in Ibadan, under the Iwo Road Bridge and other places, boys peddled N100 mint tickets.
“If you want a lot worth 10,000 N, you have to part with 14,000 N. The same relation goes with the N200 notes. I know it is lavishness that leads people to such a purchase, but the point is, why are banknotes that are not available in our banks available for sale on the street? âWhen will the bankers stop this unpatriotic practice?â Okon added.
Jude Ndukwe, a political economist, said the implication of the situation was that commodity prices were likely to rise as there were no smaller currencies in circulation.
“A bread seller is likely to increase the cost of bread from N 350 to N 400 simply because he does not want to face the difficult task of obtaining change,” he said.
âThe same goes for a bus driver and so on. This act alone is enough to make the hardship of average Nigerians worse.
âN10, N50 may mean nothing to some, but it means a lot to millions of Nigerians living in poverty. So the government should do something about it.
It will be recalled that the Senate, on February 13, 2016, was concerned about the scarcity of smaller denomination naira banknotes in the country.
Lawmakers noted that the shortage posed a serious threat to the economy, which was barely recovering from the recession, as it worsened inflationary trends.
At the time, the Senate tasked its Banking, Insurance and Other Financial Institutions Committee and the Finance Committee to investigate the shortage and report back in two weeks.
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