By Ifeanyi Onuba/PunchThe Governor of the Central Bank of Nigeria, Mallam Lamido Sanusi, on Tuesday, described former President Olusegun Obasanjo as “a very bad economist.”
Sanusi, at the sixth annual conference of the Chartered Institute of Bankers of Nigeria in Abuja, said Obasanjo misinterpreted the impact of the proposed N5000 note on the economy when he argued that it would cause inflation.
He added that he was surprised that the former President could oppose the proposed N5,000 note given that the high currency denominations in the country, including N1000 note, came into being during his (Obasanjo) regime.
“This is an interesting country because my uncle or my father, who is our former Head of State, Gen. Obasanjo, you know he is a very successful farmer, but he is a very bad economist. He stand up and says that this higher denomination (N5000 note) will cause inflation and improve hardship,” Sanusi told the conference participants.
Obasanjo had at a roundtable advocacy forum organised by the Institute of Directors, Nigeria, in Lagos, last Thursday submitted that the N5000 note would kill production and affect small businesses negatively.
He said the way Sanusi was fighting inflation by removing money from circulation was improper.
The former President wondered why the CBN wanted to introduce the new notes and said if all that the bank was focused on was to fight inflation, “then it will kill production.”
He said, “I understand that now he is focused on fighting inflation, which is a good idea. But if this (N5000 note inclusive) and all that he is focused on is fighting inflation, it will kill production.”
But Sanusi said, “Gen. Obasanjo did N20, he did N100, N200, N500 and N1,000. He introduced higher denominations in Nigeria than any other head of state. He did a N100 note in 1999, he did N200 in 2000, he did N500 two years later and in that period inflation was coming down because it was accompanied by prudent fiscal and monetary policy.
“For somebody (Obasanjo) who had done this to stand up and say introducing a higher denomination will cause inflation must be an empirical, most important determinant of inflation in our country given the number of notes he had printed.
“We all know that we cannot have inflation by printing higher bills if you don’t increase money supply and this is simple economics.”
Sanusi said those opposing the N5000 were ignorant of its benefits, adding that its introduction would lead to efficiency of the country’s payment system since the policy is targeted at a small number of Nigerians handling huge cash.
The CBN governor stated, “We are introducing coins for various reasons. First as part of cost management, the N5, N10 and N20 notes have a very high frequency and we have to replace them every three months but the coins last longer.
“Second, we are working on a hypothesis that the reason Nigerians do not accept the coins is because they can’t buy anything with them and maybe if you give them coins that have value as a medium of exchange they would accept them.”
He said the introduction of the N5000 would enhance the store of value function of the naira.
Sanusi said, “In the 1970s, when the N20 was introduced, N20 was the equivalent of $30. In 2012, when we would have introduced N5000 note, N5000 will be the equivalent of $30.
“If you could buy $30 with one N20 bill in 1978, you now need 250 N20 bill to buy $30 and you would have had to print those 250 bills, pay for the paper, the ink, for the security features, for transportation, for insurance, for clearing, for the bullion van and processing and these are costs to the economy.
“You have had years of inflation, we had devalaution of currency after the crisis and we are printing more and more paper.
“Those comparing our Gross Domestic Product with that of United Kingdom, why don’t you tell me what is the potential rate of the money supply in the United States and the currency in circulation and what proportion of transactions in the US and UK that are done in cash?”
Sanusi said the cashless policy of the apex bank had helped to reduce the cost of printing the naira.
For instance, he said N47bn was spent on currency printing in 2009, while N25bn would be used for the same purpose in 2014.
He said, ”The total cost of printing and minting all denominations in Nigeria in 2009 was N47bn and by 2011 we have brought it down to N32bn and by 2014 we will be spending N25bn and we would have saved 50 per cent of the total cost of procurement.
“These notes (N5000) won’t cost us more than N1bn to N2bn.”
He faulted the argument that N5000 would increase corruption as baseless because those involved in money laundering no longer carry naira but dollars.
He said, “50 to 70 per cent of the entire dollars that are bought from the Bureau the Change operators are for transactions in Nigeria. The dollar has become the second national currency in Nigeria.
“People go, change N3m into dollars and put in their wallets . There is corruption but not everybody who uses cash is corrupt and there is a valid point that if a currency has lost its store of value, it makes economic sense to produce a higher denomination.”
On the complaints by the families of the three women (Funmilayo Ransone-Kuti Margret Ekpo; Sawaba) that would have their portraits on the N5000 note, Sanusi said their arguments were baseless as the women were mothers of the nation.
He said, “Some people are raising another argument that we are putting women ahead of our national heroes and that what the CBN should have done is to put the women on N5. Can you imagine what people will say if I put Ahmadu Bello on the N5000 note?
“So how should I decide who should be on the N5000? The way we see it at the CBN is different from how people see it. For us, the more important you are, you should be placed on the notes that have higher level of circulation and the N5 note is the one that is mostly circulated among Nigerians and you have the prime minister there.
“People should know that these women are mothers of the nation and nobody can claim them. The biological families of all these women should now know that we all have claim to them.
“We do not need anybody’s permission to put them on the naira because they are mothers of the nation.”