The Lagos Chamber of Commerce and Industry (LCCI) has advised the coining of N100 to N500 Naira notes as a more appropriate action to redesigning N100 to N1000 notes to curb wastage.
Dr Chinyere Almona, Director General, LCCI, gave the advice in reaction to the Central Bank of Nigeria (CBN) plans to redesign and circulate N100, N200, N500, and N1,000 banknotes with effect Dec. 15.
Almona stated that redesigning the N100 to N1000 notes, which should not be a priority now, was a waste of the nation’s time and resources.
According to her, the N100 (equivalent to US 20 cents) to N500 (equivalent to USD1) were due for replacement with naira coins of the same denominations.
This, she explained, was to make room for the introduction of higher denominations of Naira notes that would be more in line with the value of denominations of currency notes circulating in other climes.
She noted that the proposal to suddenly withdraw notes for replacement with redesigned notes was of no economic benefit to the country, but would come at huge costs.
“The Naira will likely experience more exchange pressures that may further weaken it against major currencies if more people decide to buy foreign currencies as alternative store of value.
“The CBN needs to be more innovative to establish appropriate policies and take actions that will drive down the inflation rate and strengthen the value of our Naira,” she said.
The LCCI DG added that fixing the deadline of circulation few weeks ahead of yuletide, two months ahead of the general election, was disruptive and insensitive.
She noted that the organised private sector was already enduring a lot of disruptions ranging from local forex supply, exchange rate, and interest rate shocks.
“These aggravate food and energy shocks, and they deserve to be spared the needless disruption from the wild goose chase proposed by CBN so close to the yuletide and the polls.
“The fact that over 80 per cent of currency in circulation (i.e., N2.73 trillion out of N3.23 trillion) exists outside the commercial banks is not sufficient evidence of ‘persistent hoarding of banknotes by members of the public.
“The only reason that currencies are printed is for them to be put in circulation, not to be kept in banks.
“Only a negligible faction of currency in circulation should ideally stay in banks’ vaults because it only stays in the vaults when in transit,” she said.
Almona also noted that the fact that currency in circulation had more than doubled since 2015; rising from N1.46 trillion in December 2015 to N3.23 trillion in September 2022 does not necessarily present a problem.
This, she said, was because the Gross Domestic Product (GDP) also increased from N95 trillion to N210 trillion over the reference period.
“The value of currencies in circulation has been a stable fraction of GDP, roughly 1.34 per cent, over the period.
“The appropriate action to take is to coin N100 to N500 notes and replace them with about a billion pieces of larger denomination Naira notes to cut the monumental waste implicit in continuing to print pieces of low-value notes with a short lifespan,” she said.
