Where Lamido Sanusi failed

By J. A.Omotayo

Who can fault Mr. Sanusi Lamido Sanusi, the Governor of the Central Bank of Nigeria (CBN) who has informed the world publicly on Thursday, August 23, 2012 that a new set of currency denominations are desirable and thus will be introduced into the country early next year? (For further details, see: Central Bank of Nigeria to redesign Naira notes & introduce a N5,000 note, www.ngex.com, August 24, 2012). He has stated among others that:

(i) N5, N10 and N20 currency notes will be replaced with coins;

(ii) N50, N100, N200, N500 and N1000 currency notes will be redesigned to accommodate new features; and

(iii) N5000 currency note will be introduced that will feature three outstanding Nigerian women on one side and the national assembly building on the other side.

Mr. Sanusi went ahead to justify his proposed policy thrust by telling us Nigerians that:

(i) The introduction of the new currency and the withdrawal of the old ones will be gradual perhaps to mitigate fear of inability to dispose the old currency available at hand;

(ii) The CBN will encourage transporters and all retail outlets to make provision for the use of coins;

(iii) Big economies like Singapore, Germany and by extension European Union, and Japan all have S$10000, ?500 and ¥10000 respectively;

(iv) The rate of inflation has been low in these countries with the highest being 2% for Singapore while that of Japan was negative or below zero. Thus in the case of Japan, there is deflation but not inflation; and

(v) It is the norm to redesign the features of a nation’s currency every eight years.

As an answer to the leading question in the beginning of this article, we can allow realities to fault Mr. Sanusi. What are these realities? They are those things that have both theoretical and practical correlations to monetary issues in Nigeria and other parts of the world.

First, let me deal with the issue of coins comprehensively even if not exhaustively. Mr. Sanusi will not be the first CBN Governor to introduce coins into the Nigerian currency system. When Nigeria was spending the British pound, shilling and pence, we had 1/2p, 1p, 3p, 6p, $1 and $2 (where p = pence and s = shilling) in coins. When Nigeria changed from the British currency to the Nigeria’s Naira and Kobo monetary units in 1973, we had 1/2k, 1k, 21/2k, 5k, 10k and 25k in coins. Gradually by 1980, the first three units had been rejected in most parts of Yoruba western Nigeria. Even when 5k became the least denomination with 50k and N1 as coins the gradual rejection of the coins did not stop. While Mr. Soludo was in office, he introduced the use of coins on February 28, 2007. Old 50k and N1 notes were changed into coins. A N2 coin was also added. At the same time all 1/2k to 25k coins were withdrawn from circulation (For further details, see: Nigerian Naira, Wikipedia, www.en.wikipedia.org/wiki/Nigerian_naira). But soon after, the coins disappeared from circulation. What caused their disappearance from circulation? I know that Mr. Sanusi is not a magician but he has not informed us of the reasons behind the rejection of coins by Nigerians even though in Europe and America, they still use them.

Mr. Sanusi also did not tell Nigerians where the coins disappeared to. But in my opinion, the old coins would still be in the various banks vaults now. To test the adequacy of Mr. Sanusi’s policy trust on the acceptability of coins, I strongly believe that he should have pushed out those old coins into circulation again and encourage all Nigerians to accept them for their daily transactions. After all, they still remain valid legal tender. Does he need to roll out new coins then? The answer is no. But the truth is that Nigerians have shown their dislike for the use of coins in the past and will still do likewise in the proposed situation. The rejection is Nigeria’s peculiarity and Mr. Sanusi has been unable to understand this aspect of our lives. This peculiarity has to do with our culture, religious belief and social behaviours.

What is our culture on the use of coins? Coins are considered as a set of gifts associated to beggars. Most often those who are a little above average dispose their unwanted coins by giving them out to beggars who demand for arms. Coins are also associated with rituals. Those whose priests have informed to appease the gods for spiritual upliftment are often required to make monetary provisions for three, seven, etc number of beggars sometimes in addition to food and clothing. At various road junctions, such provisions not directly given to beggars but for the spirits (witches and wizards) containing coins, eggs, palp, chicken, etc could be found in various towns in Yoruba south-west Nigeria even up till date. The majority who are not involved in these unbecoming cultural behaviours by a few do not find the use of coins acceptable. This may explain why culturally, the people of the Yoruba south-west were always the first group to reject the use of coins.

I can now illustrate with the set of my mother. During festivities in the 1960s and early 1970s, women in my home town often gather themselves into groups singing and dancing before the elderly men in the community. One of the songs related to money. “Me mo gbe’o oluwo, ikoresi ni ma gba” translated to mean “I shall not accept money with hole (i.e. coins) but currency note instead”. The money with hole concept for the description of coins arose from the shape of 1p then. It was circular and had a central hole. Though illiterate, they all wanted currency notes. My mother who was in the league of singers then is now over 80 years old.

In ceremonies where standing bands are at play, especially birthdays, marriages and burials, celebrants are often required to dance and be “sprayed” with currency notes. The higher the denomination used, the higher the regard given to the person “spraying” the money. Some even go a length further. They seek new notes, called “mint”. Those having old notes will have to exchange them for new ones with interest. For instance, N1200 old notes will exchange for N1000 of N50 new notes and N1100 for N1000 of N100 new notes. The sellers and buyers are available at major parks all over the Yoruba south-west. How do you change the mindset of a people who are ashamed to spray old notes at parties to accept coins instead?

Our religiosity has not helped either. Even today, the use of low denominations as offerings or thanksgiving in the churches and mosques in Yoruba south-west is undesirable. Both Pastors and Imams preach against it as if the creator God spends Naira and Kobo. This is the truth.

As a child, I grew up with the ½ p, 1p, 3p, 6p, s1 and s2 together with the ½ k, 1k, 2½ k, 5k, 10k and 25k equivalent. It became a heavy load to carry N1.00 in coins in my pockets. Some would pierce my pocket and would be lost while running. Much as I tried to avoid losing money, the situation kept on repeating itself. Like myself, the playful youths of today who trek to and from school cannot but find themselves crying or going hungry when they lose their pocket money that have been packaged in coins.

The Nigerian business environment does not support the use of coins. Petty traders are often the first set of people to reject payment in coins. If Mr. Sanusi’s commercial retailers accept and make provisions for coins, will the petty traders do likewise in their millions? I think not. Then Mr. Sanusi will have to recruit more police officers to enforce the acceptability of coins by traders. And of course, Nigeria will become a police state. God forbids!

Therefore, the theory backing the re-introduction of coins into the Nigerian economy is not rooted in our culture, religion and business practices.

Second, the reference to Singapore, Germany and by extension European Union, and Japan was misleading. What do we know about these countries compared to that of Nigeria? Let us briefly examine them:

Singapore is an Asian tiger, first in ease of doing business in the world and 23rd largest economy in the world. Government has over 50% stake in major industries. The citizens are well educated while corruption is almost non-existent. The economy is stable and less liable to drastic swings that pushed even the developed countries into recession in recent times. For instance, since 1960 the economy has recorded steady growth averaging 8% up till 1999 and at least 1.1% in 2003 when both SARS and economic slowdown in the United States, Japan and Europe affected her.

This has now returned to about 7%. Her GDP is $251.5 billions (2010), inflation is 4.6%, unemployment is about 2.7%, total value of export is $358.4 billion while that of import is $310.4 billion (2010). Exports include machinery, equipment, electronics, consumer goods, pharmaceuticals, chemicals and mineral fuels. Her sea port is the busiest in the whole world. Although Singapore has no crude oil, she has refineries. She imports crude oil, refines it and sells the refined products to her neighbours.

The Singaporean Dollar denominated in coins include: 1c, 10c, 20c, 50c, S$1 and S$5 but the 1c and S$5 are rarely used. Those denominated in notes comprise: S$2, S$5, S$10, S$20, S$25 S$50, S$100, S$1000 and S$10,000. But the S$20, S$25 and S$10,000 notes are rarely used. The fact that the S$10,000 note is rarely used implies that it cannot be a reliable reference as Mr. Sanusi would want us to believe. As at May 2011, Singapore’s foreign reserves stood at US$233.368 billions (For further details, see: Singapore Dollar, Wikipedia, www.en.wikipedia.org/Singapore_dollar, see also: Economy of Singapore, Wikipedia, www.en.wikipedia.org/wiki/Economy_of_Singapore).

This reserve is almost 7 times more than that of the over-bloated Nigeria’s foreign reserves that has been given as about $35 billion (which is not true).

Germany is the leading economy in the whole of Europe (inclusive of Russia that is in the BRICS) and fourth largest in the world. Germany GDP is $3.577 trillions (2011), inflation is 1.3% (2010), unemployment is 5.4% (June 2012) with main industries as: iron, steel, coal, cement, machinery, vehicles, machine tools, electronics, food, beverages, shipbuilding and textiles. Export in 2011 was valued at ?1.288 trillions with imports at ?1.155 trillion She is the third largest exporter in the whole world (See: Economy of Germany, Wikipedia, www.en.wikipedia.org/…/Economy_of_Germany).

As can be observed from the above, the balance of trade favours Germany as there is a net positive balance between exportation and importation.

The German Deutschmark (DM) denominated in coins comprised: 1pf, 2pf, 5pf, 10pf, 50pf, DM1, DM2, DM5 and DM10. But the DM10 was rarely used. Bank notes included DM5, DM10, DM20, DM50, DM100, DM200, DM500 and DM1000. But DM5, DM500 and DM1000 were rarely used (For further details, see: Deutsch Mark, wikipedia, www.en.wikipedia.org/Deutsch_Mark). The highest denomination in the German currency, as can be seen from the above, was DM1000. The Deutschmark ceased to be a legal tender with the entry of Germany into the European Union whose monetary system is the Euro. The Euro, ?, is now the official legal tender in Germany.

The European Currency Unit (ECU) denominated in coins comprise: 1c, 2c, 5c, 10c, 50c, ?1, ?2, ?5, ?10, ?20, ?100 and ?1000. But ?5 in coins and above are rarely used. Those denominated in notes include: ?5, ?10, ?20, ?100 and ?500. The Euro is not just the second largest reserve currency in the world but also the second most traded currency in the world, coming just after the American Dollar. (For further details, see: Euro, wikipedia, www.en.wikipedia.org/wiki/Euro). European Union to which Germany belongs is the second largest economy in the world.

Japan is the third largest economy in world, coming after China and America. Her GDP is $5.869 trillion, inflation is 0.3%, unemployment is 4.7% (2011), with main industries as motor vehicles, industrial and transportation equipment, electronics, chemicals, steel, machine tools and non-ferrous metals. Total export is $800.8 billions (2011) with imports being $794.7 billions (2011). Foreign reserves is $1.154 trillion. “Japan is the world’s largest creditor nation, generally running an annual trade surplus and having a considerable net international investment surplus.

As at 2010, Japan possesses 13.7% of the world’s private financial assets (the second largest in the world) at an estimated $14.6 trillion”. Japan remained the second largest economy in the world for decades until 2010 when China surpassed her (For further details, see: Economy of Japan, Wikipedia, www.en.wikipedia.org./wiki/Economy_of_Japan). The world largest car manufacturer, Toyota, is based in Japan.

The Japanese Yen denominated in coins comprise: ¥1, ¥5, ¥10, ¥50, ¥100 and ¥500 while those denominated in notes comprise: ¥1000, ¥2000, ¥5000 and ¥10,000. The Yen is third most traded currency in the international market, coming after the Euro and the Dollar. It transcends Japan boundaries. The Yen has a very long history having come into effect officially in Japan on May 10, 1871 (For further details, see: Japanese Yen, Wikipedia, www.en.wikipedia.org/Japanese_yen).

Nigeria lies between the 30th and 38th economy in the world, and 133rd in the ease of doing business in the world. Inflation is 13.7%, unemployment is over 24%, same with illiteracy, GDP is $415 billion (with over 60% based on crude oil), export is $45.43 billion with import at $42.1 billion (For further details, see: Economy of Nigeria, Wikipedia, www.en.wikipedia.org/…/Economy_of_Nigeria). The total volume of export and import is thus a fraction of those to which Mr. Sanusi has compared us. Are the differences not too glaring for Mr. Sanusi to see? What do we produce for export in Nigeria? Virtually nothing! Even our crude oil, we cannot refine and export. What do we import? Virtually everything! We even import tooth picks, used batteries and plugs, clothing, etc. Existing industries in textiles and tyre manufacturing in Nigeria have closed down.

We can ask how many bales of clothes have been produced for export in the resuscitated two textile industries in Kaduna and Kano. We may ask him how many increases in tonnages of cocoa, rubber, groundnut, etc are produced for export in Nigeria compared to vehicles, electronics, etc produced for export by Singapore, Germany, European Union and Japan.

The Naira is not traded beyond the boundaries of Nigeria. It is not even accepted as a reserve currency in West Africa let alone being considered in the international market. Why compare Nigeria’s Naira with the Singaporean Dollar, German Deutschmarks and by extension European Union Euro, and Japanese Yen then? Our foreign reserves is weak and cannot support importation at current trends for just two years. The reverse is true for Singapore, Germany and Japan to which Nigeria is being compared rather unreasonably. The foregoing shows the levels of mediocrity of Mr. Sanusi, the CBN Governor.

Sixth, even if we do not know much about economic theories and mathematrics, we still can recollect the situation with our neighbour, Zimbabwe, which has shown us how damaging oversupply of money can be. There was a time when a loaf of bread sold for over one million of Zimbabwean Dollar. It got worse to a point where prices of items varied in the evening time from what they were in the morning of the same day. One can only imagine that a reasonable Governor of a country’s central bank would learn from the mistakes of others and show some restraints in his pursuit of calamitous monetary policies.

Seventh, Mr. Sanusi recently introduced a cashless e-payment policy into the Nigerian banking industry with pilot schemes taking off in Lagos and two other centres. The e-payment systems, we have been told, will ease banking transactions, monitoring, eliminate cost of printing new notes, etc and the CBN has been mounting campaigns from one State to another to convince Nigerians that the policy is the best for Nigeria.

To corroborate his stand, the Governor once gave Spain as an example of a country that has transformed herself from the coins and notes to the cashless e-payment system (For further details, see: Adetutu Onadeko – As trial cashless policy begins, www.ngex.com, February 27, 2012).

Perhaps Mr. Sanusi has now forgotten that under the e-payment system, there is no place for the design changes and images of people or national monuments (e.g. the national assembly building) that he so much cherishes in the redenominated and redesignated currency he proposes. What a contradiction or loss of bearing, one can write? Else, one is inclined to believe that Mr. Sanusi has now realized the foolishness of his cashless e-payment policy thrust and has proposed the redenomination and redesignation of new notes as a reasonable subterfuge to cover up his mistakes.

I think that Nigerians should ask Mr. Sanusi some serious and soul searching questions on this issue. Is he driven by overzealousness, pecuniary interest and or mediocrity? I would think by all the three!

Eighth, if it is the norm that a nation’s currency ought to wear a new look after every eight years, must Nigerians not ask our Mr. Sanusi the following questions. He assumed the office more than two years ago. Did he forget that the N100 and N200 currency notes were older than eight years in 2010 especially as he remembered to issue out re-designed N50 currency notes to mark the nation’s 50th year independence anniversary?

Why was he silent about the need to change these notes since then? The N1000 note was introduced in December 2006 and yet to reach the magical eight years. Same applied to the N5, N10 and N50 notes that Mr. Sanusi himself changed to polymer forms in 2009 on assumption of office. So why change these four currency notes that are still far less than eight years old?

The truth is that there is no such norm on when to change a nation’s currency. It is a fantasy here in Nigeria to show that a quasi-technocrat in office has performed. The inclusion of so many other features is irrelevant as they add no economic and financial values to the existing units. The American Dollar does not possess too many special features that one would require of a world reserve currency. Why would a local Nigerian Naira currency be jam-packed with necessary and unnecessary features by Mr. Sanusi? Who complained to him that the existing features were inadequate and that all the currency units must be re-designed at all cost?

The truth is that Mr. Sanusi is just searching for an avenue to meet his pecuniary interest just as it has been in the past with other . Contracts would be awarded for various items and in a corrupt ridden country like Nigeria, gratifications will be made to swell his income.

Ninth, Nigerians must ask Mr. Sanusi of the constitutionality of his policy thrust. It was never in Mr. Jonathan’s campaign promises that the Naira would be redenominated and redesignated. As such, Nigerians did not vote for such a change! Neither has the policy thrust been tabled before the national assembly for proper representative deliberation nor presented openly for popular participation by the wider majority of Nigerians. Must we Nigerians not ask Mr. Sanusi if that is the way a policy thrust that affects an entire national economy and over 140 million people should be dreamt, nurtured and laid secretly only to be hatched in public because its application cannot be hidden from the public?

In my opinion, whatever has been done by the so-called motley collected wise men from the Security and Exchange Commission, Nigerian Printing and Minting Company and the Board of the CBN on this policy thrust has been done in secret.

We can borrow a leaf from the US here. When financial crisis rocked the US in 2007 with so many banks and mutual funds managers going bankrupt, the bailout package was discussed extensively in the US congress. Not only that, the details of discussions were open to the wide world through all the media and contributions were received from many quarters on the adequacy or the otherwise of the bailout package. Finally, it was left for the Congress to vote. The same applied when the US wanted to raise her debt ceiling from $12.0 trillion to $14.0 trillion.

The discussions were extensive and exhaustive before the Congress granted permission for the executive to raise it. In conclusion, to the extent that we are not under any autocratic military rule in Nigeria but under democracy to that extent too has Mr. Sanusi’s new monetary policy thrust veered off from normalcy to abnormality.

Tenth, if higher currency denomination portends greatness and boosts economic activities, one would like to know from Mr. Sanusi why the largest economy in the world, America, does not have $10,000 or more denominations actively in circulation. Since America does not have such a high denomination but still leads the global economy, the empirical reality is that higher denomination is not associated with higher productivity. Since it is productivity that drives an economy, Mr. Sanusi’s new monetary proposal fails.

Finally, I know that Mr. Sanusi is a stubborn public officer. Why? His defense of the oil subsidy removal in late 2011, his sale of the distressed banks, donation to Kano State over Boko Haram bombing, etc attest to my assertion. There have been mild protests over some of the actions taken by Mr. Sanusi since assuming office by many Nigerians. While it was true that the January 2012 protest in some parts of the country ended with the government having the upper hand, a repeat may swing the balance in favour of the protesters.

Even if I know very little of history, I still cannot forget that for about 40 years, the late Mr. Gaddaffi was able to suppress those agitating against him. But the last one took him off guard as he eventually vacated his mansion only to find a subterfuge inside a ring culvert designed to drain dirty wastewater and polluted sediment-laden rainfall runoff. What a terrible end!

Of course, no one prays for any violence in this country. But it can happen. Violence did not occur in Tunisia, Egypt, etc merely because the people did not pray. Violence is predicated when unreasonableness, insensitivity and injustice are meted to one or more people with impunity. Some of those supporting Messrs Gaddaffi and Hosni Mubarak died with the riot that engulfed the two countries while those still alive are today being hunted to face trials for their involvements in the mistakes of the past. Nigerians must not be pushed beyond the limit of their tolerances to the extent that destruction and instability is visited on the nation. The oracle has spoken!

God bless Nigeria.

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