Understanding Sanusi Lamido on new currency

Though some of the policies of the Mallam Sanusi as Governor of CBN could be considered aggressive, it is nevertheless necessary to look at them neither from political nor emotional point of views but from economic point of view. MallamSanusi has always claimed that he pursues sound macro-economic policies which include fiscal prudence supported by […]

Though some of the policies of the Mallam Sanusi as Governor of CBN could be considered aggressive, it is nevertheless necessary to look at them neither from political nor emotional point of views but from economic point of view.

MallamSanusi has always claimed that he pursues sound macro-economic policies which include fiscal prudence supported by appropriate monetary policy to contain inflation at single digit. This can be attained through avoidance of wasteful spending in the economy. Consequently, the introduction of N5000 in line with cashless policy of the government will not only help to reduce the expenditure on printing of notes, but also aid portability.

In the analysis of the Chief Executive Officer, Economic Associate and a lecturer with Lagos Business School, Dr. Ayodele Teriba the introduction of N5000 note and conversion of N5, N10, N20 notes to coins was a right step in a right direction; as it would place our currency in the right place to compete with other strong currencies across the globe.

It could be recalled that in 1959, the United Kingdom introduced the first coins to Nigeria with denomination of 1 Shilling, 2 Shillings, half Penny, 1 Penny, 3 Pence, Six Pence which were later withdrawn after the introduction of Naira and Kobo in 1973. The introduction of multiple naira notes into the national monetary system has called for unpleasant inflation and devaluation of coin dominations of Nigerian currency. Meanwhile the UK still holds strongly the value of its coins.

Some economists have argued that the new currency would not trigger inflation, as the CBN has always exercised firm grip on modulation to ensure that the currency is at par with the economic index. They also claimed that the measure according to them can bring the naira at par with the dollar.

Maintaining naira at par with dollar will demand tight monetary policies known as contractionary monetary policy which involves removing money and credit from an economy’s money supply. Also, the higher denomination would not necessary bring about inflationary situation in the economy, as many advanced countries such as Singapore’s, Germany’s and Japan’s, highest denominations are 10,000 SGD, 500Euro and Yen 10,000, respectively. These denominations have relatively high dollar equivalent with inflation rates as low at 2.8, 1.1 and -0.7, respectively in 2010.

Certainly, these policy actions taken by the CBN were within the statutory mandate of the Bank, and in the overall interest of the Nigerian Economy. It is no doubt that the Bank’s monetary policy decisions would stabilize and strengthen financial system and support the growth of the Nigerian economy.

Apart from this, the CBN has demonstrated its readiness to maintain a stable exchange rate and close monitoring of inflation in the country to avoid any future unbearable consequences. This is a strategic measure against the futuristic inflationary trends brothering the minds of Nigerians.

There are many reasons for Nigerians to support the ongoing policies of the CBN on new currency; as the monetary policies so far introduced by MalamSanusi have helped to create a reasonable control over the commercial banks and ensures an elastic currency, which enforces desired predictable behaviour by banks.

The bank under Sanusi has ensured full compliance with the established and approved policies and procedures that allow the banks to create credit in order to allocate it to socially desirable ends. Through this CBN has restored the lost public confidence in the financial institutions; and rid the banking sector of unethical practices.

Abubakar Jimoh is the National Coordinator, Youths Against Disasters Initiative (YADI), Abuja. [email protected]