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 Sanusi’s 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.
Sanusi’s CBN have for a while been worried about the increasing inflationary trend in the economy. To that effect the country’s reserve bank has gone about it by raising the interest rate 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.
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 nation’s economy.
one hundred trillion Zimbabwean dollar bill sits atop a pile of other old Zimbabwean notes of various denominations.Photo: TSVANGIRAYI MUKWAZHI / Associated Press
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 fool’s decision demolished their agricultural based economy with massive inflation. And restored 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 Nigeria’s standard. Most of country‘s problems from their quick and unsound decisions that comes from their political and policy makers come from the country’s 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.