Appraisal of the Central Bank of Nigeria’s 2012 Currency Restructuring Proposal

Abstract

This paper examines the 2012 proposed currency restructuring in Nigeria, under which a new higher bill of N5,000 was to be introduced alongside the coining of the existing N20, N10 and N5 notes. The paper identifies the implications of the currency regime to include; increased portability, annual saving of about N7 billion from the cost of production, distribution and disposal of banknotes, enhanced quality and integrity of the banknotes, incorporation of a more effective feature for the visually challenged, and elimination of the payment of royalties on erstwhile patented security features. However, the implementation of the policy might exacerbate money laundering and corruption, increase in general public apathy for coin utilization, and  inflationary pressures due to ill-informed expectations and cost-push factors, making locally produced tradable goods less competitive, enhanced smuggling, and increased unemployment and crime rates. The paper identifies the challenges which militated against the policy to include; high illiteracy level, poor public enlightenment, and poor project management. It also reveals that relative currency stability is the major driver of dollarization and mere introduction of a higher denomination of a volatile currency would not stop the practice. The paper, therefore, recommends that the Central Bank of Nigeria (CBN) should put currency restructuring at bay until the Cash-less policy project permeates the entire economy. A root-cause analysis of the public apathy in the utilization of coin, massive enlightenment and re-orientation of the public (including labour unions) on the non-correlation of higher currency denomination with inflation or devaluation should be carried out by the CBN.  Finally, the apex bank should also ensure sound project management ideals are followed while embarking on new projects.

Keywords: Currency Restructuring, Implications, Challenges