Nigeria’s Currencyprofile has,notably, failed to serve the needs of our people and oureconomy. Evidently,lower denominations of primary kobo coins and low value noteshave been largelyrejected by the public because of their extremely negligiblepurchasing power. TheNaira Currency has lost significant value overtime, as thehighest existingcompact denomination of N20 (the celebrated Muri) in 1977 wasequivalent toover $20.
Although, in 2005, thepresenthighest denomination of N1000 note exchanged for over $8initially, but regrettablynow, exchanges disturbingly around $3. The N1000 note alsocompares ratherawkwardly, for example, with the new Ghana Cedi which wasintroduced between2006-2007, with highest denomination of a 100 Cedi note, andexchanges today (2019)for about $20 after the exchange rate steadily depreciated fromthe initialGH₵100=$110 when the Cedi was redenominated.
So now that thehighest Nairadenomination of N1000 is presently just $3, a more robustcurrency profile thatwill truly reflect the cherished qualities of money (i.e.portability,stability in value, durability, acceptability, etc.) has becomenecessary. The ultimatechoice is now between Naira redenomination and the issue ofhigher valuedenominations of N5,000 and N10,000 notes. In contrast, theprofile of foreigncurrencies of US and UK has removed resilient for decades withthe highestdenomination of $100 and £100 respectively because inflationrate has largelyremained below 3 per cent.
The above title “The InevitableChoice BetweenN10,000 Note And Redenomination” was first published on August 15, 2016. The issues raisedtherein,unfortunately, still remain very resonant today. Please read on.
“Householdsacross Nigeria have become severely traumatized by escalatingprices of goodsand services. The uneasy feeling that one’s pocket, has beenpicked hasprobably become common after every visit to the market, wherethe smallest nylonsachet may be all that is needed to pack over N10,000purchase(s).”
“Inretrospect, in 1977, the highest Naira denomination was N20note, popularlyhailed as ‘Muri’ (because of its embossment with the effigy ofLate PresidentMurtala Muhammad); the N20 exchanged for the princely sum ofalmost $30; regrettably,however, after the serial devaluations which followed the IMF,inspiredStructural Adjustment Program between 1985-90, the N1,000 notewas issued asNaira’s highest denomination and it exchanged for just over $8in 2005. Sadly, afterthe Naira devaluation in 2016, the same N1000 presentlyexchanges for just about$3.”
“Invariably,kobo coins have become widely rejected because of theirworthless present value;consequently, the erstwhile secondary denomination notes of N5,N10, N20, N50,N100, now perform roles normally reserved for hard wearing,longer lasting,metal currency designed to facilitate change in transactions.”
“Nonetheless,if the Naira’s free-fall remains unchecked, and the Nairaultimately tumbles toN1000=$1, the N1000 note will, similarly, also assume theintensive role oflower denomination coins, despite its inappropriate fragilepaper fabric. Insuch event, even if N10,000 note is also issued as the highestdenomination, itwill, regrettably only exchange for $10. Similarly, new issuesof N2,000 andN5,000 notes will also exchange for $2 and $5 respectively.Clearly, unless thefundamental flaw in the pricing model that eternally produces aweaker Nairaexchange rate is addressed, annual inflation rates may climbwell beyond 20 percent and propel further Naira depreciation which may ultimatelycompel theintroduction of N20,000 and N50,000 notes, just as Ghana’scurrency profile in2006 included 50,000Cedi notes which, alarmingly exchanged forjust $5, before the4-point Cedi redecimalisation in 2006-7!”
“Although,the issue of N2,000, N3,000, N5,000 and N10,000 notes willfacilitate cash transactions,it will also challenge the cashless project, on which governmenthas invested tensof billions to implement. However, the relative success of thecashlessproject, notwithstanding, some critics may contend that, withrespect to MonetaryPolicy, the cashless project may be actually counterproductive, as theincreased velocity in moneycirculation, that it induces, also worsens an already subsistingincendiaryinflationary spiral! In other words, if for example, the same N1,000can be usedconsecutively in say 10 transactions in one day on the cashlessplatform, thiswould expectedly spike consumer demand and sustain a moreintense inflationarypressure, than if the same N1,000 could only be used in a singletransaction inone day.”
“Invariably,higher denomination Naira notes will facilitate portability, butthe facilitationof large cash transactions also poses a security threat.Instructively, however,higher denominations will be inevitable, if the continuous slideof Nairaexchange rate is not arrested. From a cost perspective, theissuance of highernotes may cost less, if the existing currency profile and designremain thesame, while the addition of N2,000,N3,000, N5,000 and N10,000 new notes will also be popularlywelcomed to replacethe increasingly ‘worthless’ and grimy lower denominations belowN1,000. Notably,however, as long as primary kobo coins remain worthless andrejected,competitive retail pricing will again be in huge leaps of N500and N1,000!”
“Alternatively,the need to restore value, portability and competitive retailbest practicewith the embedded usage of primary coins, may advise a 3-pointdecimalizationof the present Naira profile to drive these objectives. Undersuch arrangement,the current N1,000 note will be replaced with a New N1 note,while the existingN100 note will be replaced with a 10Kobo coin, so that theexisting N50 notewill become a New 5kobo coin; similarly, the present N10 willbecome a new 1kobocoin.”
“Instructively,the nominal value of all Naira incomes, whether salaries orrents and alltransactional balances, including bank balances will also beredecimalized bythree points. In the end nothing changes but the Naira profilewill become morecompact.”
“Insuchevent, one US dollar, will exchange for N3.05, in consonancewith thesubsisting average exchange rate of about N305=$1; however, ifthe Nairafurther dips to say N500=$1 before redecimalization, the New N5will exchangefor $1 and so forth.”
“Invariably,currency redenomination is a much more expensive undertakingthan thealternative of higher Naira note issues, because a redenominatedprofile willincorporate the whole gamut from kobo coin (old N10) to thehighest new N100=$305,with the inclusion of new designs for other standarddenominations in-between.”
Furthermore,redenomination would require longer production lead time andextensive publicenlightenment and campaign to facilitate adoption nationwide.
“Acompactcurrency profile would notably, provide digital margins forcompetitive retailpricing as kobo coins and lower denomination secondary coins andnotes becomereadily acceptable; in such event, the attrition caused by theshortage ofchange in transactions between petrol attendants, shop keepersand customerswill become minimized. Furthermore, the re-introduction of coinswith a greaterpurchasing value, will encourage acceptance and similarlyfacilitate trade withthe use of slot machines, which are commonplace 24hour dumbservice outlets fora wide range of consumables abroad. (See Articles titled “Redenominationof Ghana’sCurrency” and “Redenomination: Why& Why Not?”, published in the VanguardNewspapereditions of 15/01/07 and 17/09/07 respectively or visit www.lesleba.com ).”
“Advisedly,however,the heavy funding requirement for Redenomination and thecomplete overhaul ofthe Naira profile can be reduced, if the Nigerian SecurityPrinting and MintingCompany is appropriately upgraded to produce a substantial part,if not all thenew cash requirements.”
“Unfortunately,nonetheless, the underlying triggers of inflation and Nairadepreciation, willnot be neutralized by the mere issue of higher Nairadenominations or thecomplete overhaul of the Naira profile with redenomination.Consequently,unrestrained double-digit inflation rates and a Naira exchangerate, that is perenniallybeleagued by undeniable systemic surplus of Naira (excessliquidity) in CBNauctions, will inevitably, fuel a new cycle of currencyrejection that will,ultimately, demand these same options of higher currencydenominations orcomplete currency overhaul, in order to recreate a compactcurrency profilewhich will be accepted and also facilitate both transactions and the accounting process.
In The Spotlight
The hailstorm of public condemnation that trailed media reports of the outrageous plan by the National Assembly to spend over N5.5b on imported Sports Utility Vehicle (SUV) has once again appropriately refocused public attention on the contentious issue of the emolument of Nigerian legislators. While Nigeria labors for breath under bureaucratic overweight, corruption, a shaky economy and an Islamic insurgency, the nation has been asphyxiated by the huge of cost of governance, especially the jumbo pay and perks of lawmakers. The disclosure by the ad hoc Welfare Committee of the Ahmad Lawan-led Senate of plans to embark on the purchase is coming barely four years after some senators staked about N6.6b on imported brand new luxury vehicles. It is pathetic that while the average Nigerian buckles under the yoke of poverty; unemployment and the failure of government to discharge its statutory responsibility to the populace, elected lawmakers would have so much leeway on profligacy and the mundane, which the SUV issue represents. The nation’s political leaders need to walk the talk; and must understand that service to the nation demands personal sacrifice devoid of self-aggrandizement.
President Buhari must bring the pressure of his office to bear on these “legislooters” to cancel what unarguably is an insult on the collective sensibilities of Nigerians. This is more so at a time government revenue is said to be dwindling. When juxtaposed with an economy in free-fall; and the rising insecurity and government’s failure to ensure safety of lives and property of Nigerians, the extent of government’s contempt and disdain for its citizens becomes obvious. It is just as well that over 7000 Nigerians have sued the Senate over the unsavory development, and the refusal by the lawmakers to opt for cheaper means of transportation or ploughing the funds into the local automobile industry, thereby preventing such a hefty amount from leaving the economy.
Worse even, the squandermania is a blatant breach of the All Progressives Congress (APC)-led Executive Order Three, which mandated patronage of made in Nigeria goods and services. According to stakeholders expending such a humongous amount of money on cars would further affect investment drive into the country, especially in the automobile sector and leave wrong signals for public servants at a time that concerns are being expressed against the high cost of governance in the country especially at a time that government is relying on borrowing to finance the budget and pay workers’ salaries.
In so many ways, lawmakers conduct themselves as if they were above the law to the detriment of public service ethics. This pathetic phenomenon has bogged down the nation, as lawmakers would rather serve themselves than serve the Nigerian people who elected them. It is unacceptable that Nigerians don’t even know the remuneration package of their lawmakers, let alone explain the source of funds for their conspicuous consumption and ostentatious lifestyles. Even from the little information available, there is nowhere in the world where people who do so little get so much pay. This is not part of the attributes of statesmen; rather it is a huge disservice to the nation.
That Nigeria cannot sustain the high cost of governance is incontrovertible. The planned N5.5bn expenditure is unnecessary, insensitive and a flagrant betrayal of the expectations of Nigerians. While the majority of Nigerians wallow in abject poverty, their elected representatives treat themselves so sumptuously that it rankles. This waste in government and the extravagant lifestyle of state actors, especially legislators, constitute such a drain on the treasury that it is impossible for any country carrying such a burden to make progress. This is further compounded by the annual budget; about 70% of which is appropriated to recurrent expenditure. Indeed, the emerging consensus is that lawmakers and their executive counterparts take so much from public coffers, with no such corresponding policy outcomes as could justify the squander; that it even borders on criminality.
In order to kick start his now comatose slugfest with corruption, President Buhari must reduce the high cost of governance. This was a key campaign promise. He promised to cut his own salary but failed to do so during his first term; he wouldn’t be the first to do so. Late President Yar’Adua cut his by 20% in 2009. French President Francois Hollande cut his by 30% in 2012; US President Barack Obama took a 5% cut in 2013 while Russia’s Vladimir Putin cut his by 10% in 2015. Kenya’s Uhuru Kenyatta had a 20% pay cut. The President honoring his promise to cut his salary might have humbled the present legislators and nudge them into taking similar measures. Unfortunately, with legislators seeing themselves as the repository of sovereignty, and not the people; the desired next level change can only be elusive.
Corruption is one of the main reasons lawmakers have failed to perform their duties creditably and dutifully. Their oversight functions – a crucial part of their legislative duties – has been transformed into avenues for rent-seeking as lawmakers “shake-down” Ministers and Heads of parastatals for bribes during budget and committee hearings. The 7th legislature took this obnoxious practice to asinine levels, and went the distance to settle scores with officials who “refused to play ball.” The legislators fought a long-running battle with SEC chair, Arunma Oteh after she openly accused the Chairman of the House Committee on Capital Market of demanding a bribe from the Commission. This allegation culminated in the arraignment of the committee chairman on corruption charges. There was no love lost as the Reps mounted sustained pressure on President Jonathan to sack her. Not getting their way, the legislators refused to allocate funds to the SEC. Of course, this was blackmail carried too far, which did little credit to the image of the House and that of its members.
Legislative powers in all civilized democracies are not deployed to gratify the ego and whims of the legislature or its members. The last legislature was known to pick on anyone who takes it to task even when there is justification for doing so. For example, former Central Bank of Nigeria (CBN) Governor, Lamido Sanusi’s comment on the emolument of lawmakers put him at loggerheads with the legislators. In a brazen show of megalomania ostensibly to teach Sanusi a lesson, the Reps embarked on amending the CBN Act purposely to curtail the powers of its governor, disregarding the fact that Sanusi’s term as governor of the apex bank was near its end. This shows the extent to which the legislators could go to deal with perceived “enemies”.
Nigerian lawmakers remain bitterly opposed to disclosure of their salaries and allowances. Their emoluments have always been shrouded in darkness, like backroom dealings among the Mafia. The authoritative London-based magazine, The Economist, in a recent report, ranked Nigerian lawmakers as the highest paid in the world. The report revealed the annual salary of legislators in several countries, which include USA, $174,000; Ghana, $46,500; Indonesia, $65,800; Thailand, $43,800; India, $11,200; Italy, $182,000; Bangladesh, $4,000; Israel, $114,800; Hong Kong, $130,000; Japan, $149,700; and Singapore, $154,000. The Nigerian federal legislator’s annual earning was put at about $189,000 (N30 million) annually. This amount, scandalous as it may seem, is nothing compared to what they get from the system through other means. The sensibility of the people may be further incensed when the various allowances ostensibly for running their offices which include oversight allowance, recess allowance, wardrobe allowance and the bizarre constituency allowance, among others, are computed.
Nigerian lawmakers are quick to dismiss such figures as not factual, but it is instructive that each of them has always dodged questions about the actual salary and corresponding allowances suggesting that there is something to hide. Legislators are representatives elected by the people to create and pass laws, represent the people who elected them and also do oversight functions. They pass the budget and through the public accounts committee, scrutinize the financial transactions of government and through the approval of the report of auditor-general of the federation. It is an irony that the National Assembly, which ought to be the legislative gendarme of the treasury, has derailed in its function. Instead, it constitutes a drain pipe on the same treasury.
Nigerian legislators have subverted their role of ensuring transparency and accountability in government through self-enrichment and primitive accumulation. Lawmakers draw salaries on first-line charge on the federation account. There is nothing evident in their activities to suggest they are in office to represent the people who elected them and who desire the dividends of democracy. Nigerian legislators have not only lost their moral authority, they also have by their dealings transformed the National Assembly into an infrastructure of corruption. The matter has gone past the caution threshold.
The National Assembly has itself become part of the problem of the nation’s democracy and needs total restructuring. In the developed world where cost of governance is coterminous with concrete deliverables and not on padded emolument of public officers, the US spends 21% of its budget on running the government; Netherlands (47.7%); Sweden, (42.8%) and England (37.8%). Senegal scrapped its Senate in order to free resources for development. In Nigeria’s case, the bi-cameral arrangement is not only expensive and unnecessary, legislative business must be made a part-time activity so that it is only those Nigerians desirous of public service will seek public office. Amidst the abject poverty in the land, Nigerians can no longer tolerate a situation where a legislators feed fat on the commonwealth. The planned expenditure of N5.5bn on cars smack of a massive moral deficit on the part of the Senate President and should be canceled immediately as a sign of respect for the suffering people of this nation. If the NASS hopes to get away with this, it will not get away with the harsh verdict of history.