Currency Restructuring 2: What if all are coins?

The lingering tussle between the public and the Central Bank of Nigeria, does not look like one that will last. The body language of the CBN suggested that the decision to restructure the Naira is irrevocably sealed. And except the masses decide to take a drastic action like the one that stagnated the country in January 2012 over the removal of oil subsidy by the Federal Government, this is a battle lost ab initio. Although the Nigerian Bar Association (NBA) had threatened to institute a suit against the apex bank if the policy proceeded, I do not see how that will deter Sanusi's team; especially with the firm backing of the President. All is set it seems. We hope all will be well afterwards.

However, we should continue to play with different scenarios and offer options to the government in high hopes that they will find useful one (, just one, )of our many supposedly "lame" positions. As a seasoned Risk Manager, I am convinced that, although, Mallam Sanusi Lamido Sanusi, might not come out to admit that we make some sense in our problems identifications, he is taking note of the potential dangers that should be mitigated before, during and after the implementation.

Looking at the issues presented in my earlier post on this issue again (with a non-economist mind), I opine that all (I mean ALL) the concerns raised by both the CBN and the public can be extenuate by one deed - THE CONVERSION OF ALL NAIRA AND KOBO CURRRENCIES TO COINS. Weird? Yes, weird but "kindda" makes sense.

THE ROUND-FIGURE EFFECT ON PRICES
We already explained the earlier post that the re-introduction of coins, which include the meagre denominations will resolve this. Yes, it will. So we need not dwell on this.

WILL NIGERIANS SPEND COINS?
Well, what alternatives will be available? Two: Coins and eChannels.

We will all have to bear the weight and the annoying tingling sound of coins in our pockets and pouches or go cashless (the policy the CBN is so willing to promote);

HOW ABOUT CORRUPTION AND COMPACTED MONEY LAUNDERING IN BRIEFCASES?
Although corruption rate in Nigeria is no more perpetrated in local currencies. Dishonourable  "Far-crooks" have shown us that Naira isn't a good medium to take bribes. However, in the event that they are gluttonously compelled to still collect (in naira), then have to do so in heavy metals.  A ten million naira cash will mean 2,000 pieces of N5, 000 coins.

WILL THIS NOT KILL THE CASHLESS POLICY?
We know better now. This singular approach will spin up the cashless policy since, hypothetically, Nigerians do not like to hold or spend coins. Cashless booms!

HOW ABOUT THE 40BILLION NAIRA?
Hehehe! Coins are more durable and cheaper to mint. Therefore, the cost of minting these almost everlasting money will not only come cheaper, it would have been put to better use. We won't have to to bother about cripsy notes in the economy. We will save cost significantly.

This position might sound humorous, but if our leaders are truly sincere about the claims they itemized and which this approach perfectly fulfills, we should all go coins. No notes. Only coins. Both naira and kobo. Afterall, everything they wanted would have still been achieved.

Currency Restructuring: The bitter Honey

I will sit on the fence. Although I will be risking being heavily stoned from both sides, it is important that I express (for criticism) the mind-throbbing ideas that has filled me up since the Central Bank of Nigeria (CBN) announced her plans to restructure our currency in the first quarter of next (2013). My postulationsrds the proposed policy is neither for nor against. I sit on the fence. And I hope that after running through my analysis, you might have compassion on my non-economist soul.
 

The CBN, largely represented by the Governor, Mallam Sanusi Lamido Sanusi, have presented a number of reasons the restructuring of the Naira must be essentially now. Major amongst these reasons are the round-figure effect on pricing and the annual cost of minting. The public on the other hand, seems to have many more reasons to deflate the credibility of CBN’s points. The loudest amongst the repercussions of the policy, as expressed by Nigerians and supported by a few experts, is inflation. Other arguments include the conflict against the budding cashless policy, money laundering, and the potential disappearance of lower denominations of the naira (being 5, 10, 20 and possibly, 50 naira) because of the natural unreceptive disposition of Nigerians to coin money.
 

I was involved in many vibrant discussions on this matter; speaking for and against at different occasions. This, I did to have the perspectives of the divides. And so, the following are the arguments.

The Round-figure effect and the justification for coins

Presently, if the price of a commodity is N500.01k, a buyer must either pay N505 (at the minimum) or the seller forgoes the N0.01k for the transaction to settle. Either way, a party must lose. Unfortunately and usually the consumer, more often, loses. In this case, an excess of N4.99 is lost by the consumer. Invariably, the consumer paid more than what the commodity is worth. Also the seller, haphazardly or/and helplessly, overcharged the customer. This is Inflation.
 

This effect also accounts for the reason a sachet of pure water has remained at N5 for more than 20years in the face of political and economic vagaries; in spite of the numerous entrants into the sector. A pure water sachet could have sold for 50k in 1998, then N1 in 2002, and steadily in that progression to whatever it costs today, if we had not abandoned the meagre coin denominations. Everyone had paid more for less. This, too, is inflation.
 

This reason alone cuts the bias for me to support the re-introduction of coins and not necessarily by converting meagre notes to coins, but by reissuing the 1k, 5k, 10k, 50k and N1 denominations. After all, all statements of account are expressed in these units today.

Will Nigerians spend coins?

Yes, we will.
 

The reasons no one sees a coin in circulation today is because of a counter-policy of the CBN in the early 1990s. In the bid to keep coins permanently in circulation,  the CBN instructed the banks not to accept same from the public. This narration, I got from a CBN staff. He also mentioned that, in fact, at that time, even the apex bank stopped receiving coins because of inadequate storage facilities. If this “fact” exhumed from the cemetery of monetary policy blunders is taken for its face value, it will suggest that since coined money stopped fulfilling its objectives as an acceptable means of payment and store of value in Nigeria, people dumped it.
 

Therefore, to adopt the usage of coins again, the CBN has the responsibility to improve and expand their storage facilities and the banks, and also encourage all banks to accept and never refuse coin deposits.

How about corruption and compacted money laundering in briefcase?

On the last count, Femi Otedola paid a bribe of $620, 000 to (dis)honourable Farouk Lawan in a sting operation allegedly mastered minded by the EFCC.
 

In essence, the point is, even if the highest denomination is N1, corruption in Nigeria is now perpetrated in foreign currencies; the US dollars preferably. With a current exchange rate of N155 to a dollar, the proposed N5000 will be around $32, and will still not be enticing to launder in billions.

Does this not contradict the Cashless Policy of the same CBN?

Well, in simple terms. It does not. Higher denominations reduce cash volume and cashless does not mean “no cash”. It is less cash.

However, there is a need to animate this position. Let us consider two friends, each owning a million naira each. One of these friends holds his "money" in 20naira bills while the other has his in 1000naira bills. Relating with this scenario, who is richer? I guess none. However, if I flip the question and ask "who has more cash?", the I guess the answer would be conspicuous. 

The philosophy as earlier stated is "less cash" and the whole concept of high-value bills is nothing but to reduce cash volume in an economy. Note my words: "cash volume" not "money volume". Therefore, it is wrong to posit nonexistent conflicts between these two harmonious ideas of the CBN except with  superior postulations. Both ideas , I think, meant well for the economy. A sumptuous icing on the cashless policy cake is what the Introduction of higher bills is.

Do we need it now?

Yes, we do. In my opinion, however, a better alternative exists – The Expiring Number Series.

If you are conversant with the terms “Old and new dollars”, you will appreciate how this mechanism helps to discourage the stashing of currencies for long period of time. We necessarily do not have to redesign every 5 to 8 years as stated by the CBN. If introduced, money in their batches will seize to be legally tenable as year passes.

How about the 40billion naira cost?

It is will be nice to note that in efforts to keep clean cash in the economy, the collaboration of the CBN and the Nigeria Security Minting and Printing Company (NSMPC) issues, prints and circulates new currency notes yearly. In empirical terms, that cost N47 billion in 2011 alone. So, if same will be repeated this year, it will cost about another N47 billion, which is N7 billion more than the estimated N40billion cost of these royalty-free new currencies.

My Concerns

In theory, theory and Practical are the same. In practical however, they are hugely not. Nigeria, as we know it today, is a country where faultless policies on paper suddenly & always become “fault-full” because of insincere/ulterior agenda, loose policy ends, hastened delivery without proper planning, and vagaries in our political equilibrium, among numerous unexplainable vices.
 

As a “many-times-fooled” Nigerian, I will vehemently kick against this policy. And as an optimistic patriot, I will ask for this policy yesterday. I have no TRUST in the body of the government and I mean no disrespect. Where are all the crooners of Subsidy removal? They promised heaven and earth. Where are the fulfilments of those promises? I have my fears. I have my hopes. And so, this is bitter honey! L
 

In a lighter mood but with some practical logics, however, would it not be better to have a win-win situation, where ALL DENOMINATIONS OF BOTH THE NAIRA AND KOBO ARE CONVERTED TO COINS?

The Criminality of our Gender Equation

Without mincing words, in my opinion (and since this is my note), we live in a world that is full of conspiracy, deception and blackmail in their most finest states. Rather than tackle the core of any particular issue, we hide behind the weak walls of "emotional therapy" to create unscrupulous policies that are bound to undermine and diminish our statuses as civil beings. We stand on the molten foundations of lies, misinformation, corrupt sentiments and judgemental biases against natural laws.


I know this will generate quite a number of contrary opinions and views. However, I suppose the "conspiracy theory" of freedom of speech holds, which empowers me and everyone else to express (with limits) their opinions.


In a number of ways, people of the world have been shouting endlessly against the "alleged" gender discrimination perpetrated by men against women. In fact, a number of companies, and even countries, have taken a number of steps in building a structure that ensures (in their language) that women are no more endangered and opressed by their male folks. Everytime, I read such article that stresses the need to liberalise women against the threat of domination by men, I always also get the impression of a lazy, myopic and illusionary world of "supposedly" brilliant minds. Before you crucify me, keep your cool till the end of this note.

First off, are there policies anywhere in this country (Nigeria) that insinuate that the women folks are marginalized, oppressed, suppressed and endangered by their male counterparts? I suppose there are none. So, I wonder where these bogus and unfounded arguments enamated from. We are all aware that the biological cosmos of the female greatly differ from the male; and in essence their natural tender disposition. This is not to say that men cannot be tender or that all women are tender. Based on percentages, women are largely renounce for sympathy, care, love (their game), companionship and trustworthiness.

When you say or hear "Gender Equality", what comes to mind? I suppose "Equal opportunities in all facets for everyone irrespective of gender". If this is correct, does it not, then, sound deceptive, brainwashing and insincere to run a campaign with such slogan as "FG to reserve 30% of her workforce for Female to combat Gender Discriminations and Empower Gender Equality"? At first without thinking, you might tag such campaigns as laudable and most welcome. However, if you do a little bit of arithmetic, you will realise that 30% is always largely lesser than 70%, which by implication will be reserved for men!

Where does "Equality" in a mathematical expression states "that 30% of female is equal to 70% of male"?

Personally, I think such innuendoes unreservedly ridicule the women folks as weaker sex and less competent. I think it also counter-suggests that "what a man can do, a woman can do it lesser". This is ridiculous and unacceptable. However, the woes are further compounded by the acceptance of such campaigns by the women communities. They think by reserving certain "lesser" percentages of the share for them is equity. I wonder how they cannot read in between the lines to understand that they are being largely undermined, suppressed, opppressed and marginalized.

In fact, I think any school of thought that attempt to enact such policy/law in any community should be tagged as criminal. Apart from the fact that such ideas plant seed of discord between genders, it also judge the potentials of our unborn daughters on "alleged" incompetencies, and weaknesses. This is REAL CRIME! And the perpetrators and the conspirators should not be left without due consequences.

Our mothers, our sisters, daughters and friends deserve more than these mediocrities and I think we should stand firmly against any barbarian who attempts to disrespect them, and taint their dignity and reputation with "partial equality". Why can't females be exposed to the same opportunities as men? In fact, a 50-50 arrangement is unacceptable. In sociological mathematics, only a 100-100 arrangement suffices. Everyone, irrespective of gender, should be accorded equal opportunities and respect. The only criteria I see that should sieve people (not gender) out is competency and nothing else.

If there are contrary opinions, kindly express them. I think as female, beyond the definition of the Creator, you have been beautifully made and endowed with everything that is required for you to excel as much as, or beyond your male peers.

Resist this humilation! Resist this discrimination!