The introduction of Five Thousand Naira as a single currency note will exacerbate already existing pressures on Nigeria’s long beleaguered national currency.
It is sadly the case that Ghana, Haiti, and Jamaica national currencies have better strength and international respect compared to the Naira. And this is not because Ghana, Haiti and Jamaica are more productive nor do they possess a more robust export base in comparison with Nigeria. Ghana, Haiti and Jamaica do have comparative disadvantage in terms of market size or population, Gross Domestic Product and export base in comparison to Nigeria.
The value of Nigeria’s national currency has been close to the value of fecal matter since September 1986, and it has worsened since the onset of the so-called Structural Adjustment Program (SAP).
National currencies of the three mentioned countries have better parity with the American Dollar in comparison with Naira parity with the US Dollar and other major international currencies. Nigeria sorely needs better monetary and fiscal policies.
If stimulating the Nigerian economy through growth in the export sector to enhance national growth was the predicate or foundational rationale for devaluation of the Naira, then, this has yet to occur even after over 26 years of devaluations since 1986.
Devaluations of the Naira for whatever purpose have been an abysmal, dismal, and a woeful failure. Nigeria’s monetary and fiscal policies contributed to our foreign debt overhang which lingered for so long. Devaluations of the Naira led to its downward spiral and have kept the Nigerian economy on its knees, then comatose and now in supine fetal position.
China and some other nations possess huge and enormous export base. Nations with large export base may as such manipulate or devalue their national currencies to facilitate export upsurge and to encourage imports from such nations by other nations. And as such, currency manipulations or devaluations serve to reduce cost of imports by consumers abroad.
This phenomenon has created trade arguments, trade wars, etc, as nations with export base may attain balance of payments and trade surplus on the one hand while on the other hand importing nations may endure deficits and trade imbalance similar to current trade relations.
Trade relations between America and China have been fractious and fraught with bickering in which America complains about China’s a series of policy of incentives which have created very robust export base and lowly valued Yuan or Renminbi. Such have put America at trade imbalance; advantage China, particularly given America’s appetite for cheap imports from China, which have skewed trade relations in favor of China. China is America’s creditor as she helps or supports America’s deficit financing or public debt.
Nigeria on the other hand does not have an export base outside crude petroleum oil in barrels, and its net export is made miniscule through the importation of refine fuel oil and pretty much everything else, including matches, toothpicks and paper napkins or other big and small things. There are indices which measure the poor state of Nigerian economy since the onset of the devaluation of the Naira.
The stress on the Naira which was brought about by the devaluations regimens include the disappearance coins and the fact that coins, and lower denominations. Naira currency buys nothing these days in Nigeria. Five Naira, Ten Naira and Twenty Naira notes are almost useless. I have not found any Nigerian newspaper selling for less than 150 Naira.
I have been in Nigeria since January 24, 2012, and I have not seen and I am yet to see a Nigerian coin. Besides, I have not found anything sold for 1 Kobo, 5 Kobo, 10 Kobo, 25 kobo 50 Kobo and One Naira. Devaluation of the Naira has killed 1 Kobo, 5 Kobo, 10 Kobo, 25 kobo 50 Kobo and One Naira denominations. The introduction of Five Thousand Naira Notes will also kill Five Naira and Ten Naira notes.
The introduction of Five Thousand Naira currency note will be another badger and burdening of the Naira. Such high denomination in single unit currency will ensure the early grave and financial irrelevance of lower denominations of the Naira.
The proposed introduction of Five Thousand Naira note is particularly irksome, and it’s an egregious financial or fiscal policy in the face of an existing campaign which was mounted by the Central Bank of Nigeria to promote a so-called “Cashless-Society” in Nigeria.
The introduction of the proposed Five Thousand Naira notes will make it easier and more convenient to carry wads of Naira around in cash. Five Thousand Naira notes will actually fuel a “Cash-Only” society.
It will be easier to hoard billions of Naira, and it will be easier to bribe in the billions. Additionally, it will be easier to smuggle Naira in the billions, launder money, and to engage in transferring physical cash for every sundry illicit transactions imaginable.
Furthermore, the introduction of the proposed Five Thousand Naira note will exacerbate multiple variables of pressures on the already over-devalued Nigerian national currency. The introduction of this new note, will add accelerants to inflationary pressures onto the Naira.
It is the case that devaluations of the Naira have decimated the Nigerian economy for decades. And this is particularly so because everything imported into Nigeria is measured in foreign currency, mostly the American Dollar and the British Pounds.
Those in charge of Nigeria’s monetary and fiscal policies ought to be sleepless as a result of the parlous state of the Naira. Naira’s miserable exchange rate has negative impact on the lives of every Nigeria and dire consequences on growth of the Nigerian economy.
At the very barest minimum, those in charge of Nigerian monetary and fiscal policies should do all they can to effectively manage the Nigerian economy. Failing that, they should at least observe or follow the medical axiom, which says, “First, Do No Harm.”
Finally, it’s a widely held view that the proposed introduction of the Five Thousand Naira note will do harm, calculable harm. And every Nigerian who loves Nigeria ought to act to prevent avoidable harm to our way of life which is measured by the value of our national currency, the Naira, every nanosecond.