By Samuel Ogude (Warri)
It is no longer news the cost of living in Nigeria has gone astronomical while the standard of living drops on daily basis. Part of the problems is the exchange rate of the local currency (naira) against other currencies of the world especially that of the dollars. The printing of the higher domination of the local currency is a factor. The printing of higher denominations of local currency affects the economy as producers produce and sell their goods and services based on the currency prevalent at a time in the economy. That means, that the lower the denomination of local currency, the cheaper the prices of products. While we are not here for history, it is pertinent to highlight in a summary, the different stages and changes the Nigeria currency has undergone.
The use of Nigeria currency dates back to 1880 as the first major currency was issued sequel to the Colonial Ordinance which brought about shillings and pence as legal tender currency in British West Africa. The unit coin managed by Bank of England was 1 shelling, ½ penny, and 1/10 penny and was distributed by private bank, the Bank of Africa and so on. At this time in the economy, things were very cheap.
Then in 1st July 1959, the Central Bank of Nigeria issued Nigeria currency banknote while WACB issued banknote and coins were withdrawn. It was not until 1st July 1962 that currency was changed the to country’s Republican status, the banknote which bore “Federal Republic” now became Republic of Nigeria. The notes were again changed 1968 because of the misused of the currency banknote during Nigeria Civil war. In 1973, the unit of the currency which used to be one pounce ceased to exist and one naira which was equivalent to ten shillings became the major unit while the minor unit was called kobo, hundreds of which made one naira.
On 11th February, 1977, a new banknote with the value twenty naira (N20) was issued. This, no doubt, was the highest donomination introduced as a result of the growth of the economy. The preference for cash transaction and the need for convenience was the focus. In 2nd July, 1979, a new currency banknote of three denominations of N1,N5,N10 was introduced. In April, 1984, the colours of all the banknotes in circulation were changed except that of 50k banknote. According to the government then, was to arrest currency trafficking prevalent at that time. In 1971, the 50k and N1 were both coins.
Again, the federal government came with another policy: it said, in response to the expansion of economic activities and facilitate efficient payment system, N100 (December 1999) N200(November,2000) ,N500(April 2001) and N1000(October 2005) bank notes were introduced . In each of these steps, the federal government must give one reason or the other. Recently again, this year (2022), it said, it plans to redesign N200, N500 and N1000. Reasons? According to the Governor of Central Bank of Nigeria, Godwin Emefiele, there are too much money in the hands of non- state actors such as the bandits, kidnappers etc. No doubt, policies of currency changing and introduction led and still lead to high cost of living. In an interview with Bailout Magazine,an Accountant and Public Affairs Analylist , Mr Williams Edore said, the more higher donomination of local currency is introduced, the more inflations as producers of goods and services work with the prevalent money in circulation. He said” You know, in Nigeria, manufactures import most of these items for production and have to pay in dollars. This makes products expensive in Nigeria. These introductions, the higher the denominations, the lesser the value of the local currency”. In the years under review, many Nigerians complained that the cost of living was higher yet at that time; cost of goods and services was relatively cheap and could be afforded by the common man.
But today, the local currency now exchanged for between N670 to N690 to a dollar and this has adversely affected the prices of goods and services in the country. To mention but a few, it has affected transports, foodstuffs, and other essential commodities. For instance, Premier tablet soap that used to be sold for N150 has plumed to between N270 to N300, a short distance drop of tricycle known as Keke in Warri has plumed from between N50 to N100 while a far distance that used to be N100 has moved to between N150 to N200. A basket of garri, the staple food that used to be sold for between N900 to N1200 has jumped to N1500. And during the flood that ravaged the nation recently, the price of garri went between N1800 to N2000 and so on. The naira has lost its purchasing power.
As Nigerians groan on this situation, the federal government through the Central Bank of Nigeria (CBN) which is headed by Godwin Emefiele has planned to redesign the N200, N500 and N1000 notes as there is too much money in circulation and it tends to mop excess cash liquidity from the economy, take control of money supply and curb the spinning inflation. According the federal government, this step is aimed at bringing back large volume of money in circulation outside the banking sector. According to CBN, the illicit funds circulating in the hands of bandits, kidnapers have been used by them to exploit and perpetuate crimes. He said, 85% of currency in circulation is outside the vaults of the country’s bank and this has reduced the efficacy of the Central Bank monetary policies.
In an interview with Bailout Magazine with a Senior and Head of Economic Department, College of Education Warri, in Warri South Local Government, Delta State Deacon Johnson Evbie said the policy of the federal to redesign the local currency has positive and negative effects. According to him, the change would not save the country from its economic woes. He said when the Central Bank of Nigeria announced that out of the 3.2 trillion naira in circulation, it is only six hundred million in the vault while 2.7 trillion in circulation and in hands of the bandits, kidnapers, politicians who are not state actors, as this can reduce the money in circulation, he said, although, it would help to reduce the money but again, it will not help the economy to grow. According to him, though Nigeria is trying to operate on cashless economy, there is no way the government can operate without much money in circulation on the ground that Nigeria economy is made of informal sector (those in rural areas) need cash to involve in transaction just as he said even the urban areas need cash because, a garri trader would not accept transfer to garri after sales.
He said the money should be given to commercial banks to enable people access loan thereby making the bank beat down the interest rate for borrowers. He said:” the policy of the federal government of redesigning the naira has both positive and negative effects. Yes, too much money in circulation has stocked money in hands of non -state actors such as the bandits, kidnappers etc. However, the shortage of money in circulation is dangerous because, we have large informal sector” He said, the money in circulation would boost the economy adding, the announcement of the federal government made people to start converting their naira to dollars.
He said a dollar which was about N500 to a dollar quickly went up to between N690 to N700. 00 to dollar in the black market. He said there is need for enough money to be in circulation because; according economics theory, man needs money for transaction, precautionary and speculative purposes. He added that, the aim of the federal government may be defeated because, even after redesigning the money, after the exercise, the same people who informed this decision would get access to this money and the problem remains. He said:”though the federal government meant well for Nigerians, but the problem remains because the exercise the bandits, kidnappers, they would still get access to the same money”.
Deacon Evbie said federal government should think of other ways to reduce money in circulation, which according to him, is to reduce the salary of the legislators. He said, the money in circulation would boost the economy adding, the announcement of the federal government made people to start converting their money to dollars.
He said: “the government is fond of doing this. For instance, before they increase salary, they have already announced it and before the increment comes, traders have already increased the prices of their goods and services awaiting the increment and by the time the increment comes, the prices of the goods and services would have taken up the salary”.
He added that the information about the currency redesigning has made many people to start rejecting the money in some quarters whereas; the money would be operational till 31st of January, 2023. The economic expert therefore advised the federal government that there is still hope for the economy of Nigeria to improve saying, it would be possible if it would look for another ways of improving on the economy. He however advised the federal government to go ahead with the policy saying, already, the information has been let out adding, the government should give enough window for people in the rural areas without bank accounts to change their money. Then, again, the military should flush out the bandits instead of because of them ( bandits, kidnappers) to redesign money.