A Costly Policy Reversal

Fri, Apr 26, 2013

By publisher

4 MIN READ

After spending several millions of Naira on campaign on migration from paper notes to polymer, the CBN is going back to paper note in less than four years

|  By Anayo Ezugwu  |  May 6, 2013 @ 01:00 GMT

THE plan by the Central Bank of Nigeria, CBN, to go back to paper as against polymer notes has generated a lot of controversy in the country. People, who spoke to Realnews on the issue, said the move was a deliberate attempt by the CBN authorities to award unnecessary contracts to their friends and relatives.

Simon Okechukwu, a social commentator, said the CBN is confused and derives joy in wasting the country’s limited funds. “This is a clear evidence of CBN’s confusion and inability to look before leaping. This is not the first policy brouhaha of the CBN. We still recall the attempt to introduce N5,000 note without any clear reason. Take for example, the introduction of coin ATM machines, the cashless policy, among others. Mallam Sanusi Lamido Sanusi, CBN governor, will just invoke anything that interests him without considering the long and short term implications in the country’s economy,” he said.

Juliet Okonkwo, a banker, said the new policy should be reconsidered, stressing that apart from the fact that paper lasts longer than polymer, the latter is not good for our economy because it has a short life span. She suggested that instead of converting to paper, lower denominations should be coined because of the velocity of usage by Nigerians. “We use lower denominations every day at both the rural and urban centres at the retail end of the market for daily transaction. Therefore, it is better to coin lower denominations, instead of changing to paper,” she said.

Steven Alumona, a lecturer at Nnamdi Azikiwe University, Awka, Anambra State, said the way and manner the CBN is changing its policies is bad, stressing that the issue was not whether we are going to use polymer or paper notes, but the costs involved. “The CBN is built around individuals instead of an institution. We must be consistent in our policy. We must know the cost implications of the paper notes. We need to streamline the new reform,” Alumona said.

According to him, the CBN spent millions of naira to campaign on switch-over to polymer notes a few years ago and it wants to spend another to return to paper notes. He said the CBN should rather focus on reducing the abuse of naira and strengthening of the economy. Alumona explained that the position of the CBN law which prohibits people from selling and spreading naira in a public function, has not been applied against any offender, even though the ban is still in force. The illegality has continued to thrive as if there is no law, he said.

But Ugochukuwu Okoroafor, director, cooperate communications of CBN, said the issue of naira abuse is bound to drastically reduce because campaign would be complemented with the cashless drive. Once the gradual migration from cash transaction to non-cash transaction is completed, the volume of cash in circulation would be reduced. This would   make it possible for a few naira notes in circulation to be neat as pressure on their use would equally be reduced. Okoroafor insisted that the cashless policy is the antidote to different forms of abuses which naira notes are made to undergo in the hands of users.

Meanwhile, Tunde Lemo, deputy governor, CBN, who announced the change on April 21, said the CBN has stopped the printing of polymer notes because they fade easily. He said by the middle of the year, the CBN would start to produce the second generation of lower denomination notes, now in paper and not in polymer.

“My plea is that Nigerians should exercise patience; it wasn’t the fault of the CBN; it was just because we had to go back to the drawing board to rethink the ‘Project Cure’ in the light of the wish of the public that we should not go ahead with the N5,000 notes and lower denominations. We will correct that in the course of the year. Polymer certainly will be phased out. In fact, we are phasing out polymer.  No new note is being printed on polymer now,” Lemo said.