Let us briefly discuss the recent history of avoidable and costly somersaults in government policies with regard to our nation’s currency profile and material of construction.
Prior to 2006, currency denominations of N5, N10, N50, N100, N200, N500 and N1000 were fabricated with paper, while the N20 denomination was converted to polymer note a year earlier. Apparently, as a result of the alleged successful test-run of the N20 polymer notes, three other denominations, viz; N5, N10, and N50, which, were earlier released as new paper designs in 2006, were once again reissued, but this time, with much more expensive polymer material in October 2009, to complement the existing N20 polymer note.
Inexplicably, the objects of cost-effectiveness and currency security, which had necessitated the extensive refurbishment of the Nigerian Mint and Security Company with tens of billions of naira were jettisoned in favour of polymer notes imported from an Australian company, accused in the international media of giving $6m bribe to the proxy of some top Nigerian government officials to win the polymer note contract! See our article, “Where are the coins”, http://www.lesleba.com/090810.doc, (August 2010).
The superiority of polymer notes was, however, identified in the Central Bank of Nigeria’s extensive publicity campaigns as being “user-friendly, they look better and remain crisp over a long period, and they do not stain, rumple or tear easily….” and will also “save the nation huge sums of money used for reprinting the traditional paper notes”!
The polymer notes may indeed be more durable than paper; however, we know nothing about their cost-effectiveness, vis-à-vis the paper notes, or indeed, coins, which, despite any rough handling or harsh climate can last for over 50 years! Nonetheless, in September 2008, we observed in an article titled, “The putrid mess also in CBN (3)”, that the Nigerian public was not deceived, as they quickly recognised that polymer notes fade and peel easily, especially when they are wet or folded. Polymer notes shrivel, when in contact with hot objects, and they are less amenable to the Nigerian culture of folding notes.
As recent as November 2013, however, the CBN ironically indicated that the polymer notes it earlier glorified would now be replaced by the paper quality discarded in 2009! According to its spokesman, Mr. Ugochukwu Okoroafor, “Polymer has been on test-run since 2007; this explains why we did not go the whole hog by printing all the notes in polymer… We soon discovered that the polymer notes easily fade out because of our peculiar hot climate in Nigeria, making them look tattered when in use over time.”
So, who is responsible for the alleged successful earlier evaluation of the durability of polymer notes before committing Nigeria to the purchase of over 1.9 billion units of these notes between 2006 and 2008? Consequently, how much was wasted on production and publicity campaign for this failed project? I guess, we will never know!
Nonetheless, the Bank of England recently indicated that it would soon introduce polymer banknotes of £5 and £10 denominations …, with potential annual savings of £10m to the British economy.
So, in view of the failed experiment in Nigeria, why would the undoubtedly more socially responsible and better-managed Bank of England still adopt polymer notes?
The answer to this question may be found in the purchasing power of N5, N10, N20 and N50 polymer denominations in our currency profile. While, for example, the relatively “lowly” £5 sterling denomination commands more purchasing value than our N1000 note, our highest polymer note of N50 is equal to 20 UK pence, which is fabricated as coins. In other words, our N50 note is actually doing the job best suited for metal coins, which can last over 50 years, and remain hard-wearing despite climate, high velocity of circulation or rough handling! This means that, there may be nothing actually wrong with polymer notes, but what is most likely inappropriate is the denomination for which they are applied.
Undoubtedly, the CBN’s proposed 2014 reinstatement of N5, N10, N20, and N50 paper notes, may be acceptable for a short while, but would certainly, ultimately, be rejected because of the attendant relatively lowly values, the dirt and grime after prolonged use, and the potential health hazard of heavy bacteria colonies on the paper notes!
In this event, in consonance with earlier practices, the CBN may have once again wasted not only the billions spent on production, but also tens of billions more, which would be budgeted to promote acceptance for the “new” paper notes, which regrettably will ultimately also be destined to suffer popular rejection.
Incidentally, in 2006, the CBN had also unsuccessfully released 50k, N1 and N2 denominations as coins into our currency profile because the extant note forms had become cumbersome and almost worthless and were generally rejected by even “lowly” street beggars! Ultimately, the coins were auctioned at a small fraction of cost!
Regrettably, despite the undeniable utility value of primary kobo coins in any economy, the CBN seems incapable of integrating metal coins into our currency profile. However, it is evident that it would be meaningless and wasteful to reintroduce kobo coins, if these coins commanded the same abysmally low purchasing value!
Redenomination or a two-point decimalisation, for example, would however, quickly lead to the acceptance of our erstwhile discarded primary kobo coins, as a 50Kobo coin in such a redenominated profile would be equivalent to over 30 US cents, while a N1 coin would be over 60 US cents or the equivalent of N90 within the present currency profile.
Ghana, for example, successfully reintroduced primary pesewa coins into its currency profile after a four point decimalisation in 2007! (See our article “Redenomination of Ghana currency”, January 2007, http://www.lesleba.com/150107.doc). A former CBN Governor, Charles Soludo, belatedly recognised the wisdom of currency redenomination, in his aborted 2007 Strategic Agenda for the Naira, but unfortunately could not stoutly defend this solution before the late President Musa Yar’Adua, because the same CBN had spent billions of naira to design, print and promote a new currency profile less than 12 months earlier!
“Waste not, want not”, as the saying goes; yet, it is not too late to toe the sensible path of redenomination, to avoid too frequent currency changes that cost an arm and a leg!