Sanusi’s 5000 Naira Note and Retrospecting Soludo’s Failed Re-denomination Exercise
In 2007, Nigeria’s central bank governor – Mr Charles Soludo announced a Naira re-denomination exercise. From experience and literature, this is a very good move especially with rising inflation and the fact that the Naira is heavily dependent on the dollar. Those two issues are enough reasons to re-denominate the Naira but a combination of lack of project management and political power play rubbished the laudable plan.
Back in 2007, I had some interesting discussions with my work colleagues in Nigeria. Most people focused on the political reasons behind President Yar’adua’s sudden change of mind. It is important to remember that the President purportedly supported Soludo’s plan and only changed his mind at the last minute after the former announced the plan to the public.
I have a different view about it and whilst I am not disputing the political angle of the matter; I strongly feel that most of our ‘leaders’ lack proper project management and leadership skills. A country’s monetary policy is primarily a function of the Central Bank or the Reserve bank as it might be. Soludo then cannot be faulted for proposing a policy that had a good chance of attacking inflation and bringing the Naira back on track with the dollar.
I was very disappointed that Mr Soludo could not produce a signed off document or charter from the President but took an informal discussion as proof of consent. The concept of stakeholder analysis and meeting their expectations was clearly missing in this case and it was a huge disappointment from such a cerebral man.
The president was not the only stakeholder that should have been considered in this case. There are financial institutions, lawmakers, etc who don’t have to approve but should have been carried along. I bet some of these stakeholders only found out when the news was released to the public. The public were also not truly considered as such a big change should have started with public buy in and education.
You might be wondering why I am talking about an event that happened 5 years ago but it is very relevant to the present 5000 Naira note debacle. The failure of the re-denomination project has come to haunt us again. Rising inflation and a continuous depreciation of the Naira got the CBN governor (Sanusi Lamido) thinking and he has given us what he thinks is a brilliant solution.
One of our biggest problems in Nigeria is the dearth of leaders who can truly reflect. Mr. Sanusi has never been one that is shy of controversies and he has a dismal record of insensitivity. I remember vividly that some staff members of the central bank died in a plane crash just a few days to his turbaning ceremony as Dan Majen Kano in June 2012. Sanusi went ahead with his ceremony and showed up at work later in his full regalia, all while the nation was mourning the Dana plane crash victims. How did we get to this level as a nation? – A nation that is ruled by the most arrogant specie.
I was therefore not surprised by his new 5000 Naira note policy. I was tempted to call it a proposal, but no it is a done deal according to him. Was it well thought through? I don’t think so, especially with his cashless society initiative which was another rushed attempt at solving a problem that is dependent on resolving Nigeria’s many infrastructure issues. But that is a topic for another day.
One of the few positive reasons for high currency denomination is that it eases trade by making high value transactions easier. That is not even something to consider in Nigeria where many traders don’t pay taxes. The reduction of cash transactions would help government to trace transactions easily and though the cashless initiative was not planned properly, discerning Nigerians could see the benefits. Introducing higher denominations is one of the ways to destroy his policy decision to reduce our over-dependency on cash. I haven’t seen a lot of examples where a man deliberately speaks from both sides of the mouth.
I want to adapt an analysis done by an Indian blogger to the Nigerian situation.
|Per Capita Income (A)
|Highest Denomination (B)
The table above shows the ratio of per capita income to highest currency denomination. I don’t think there is a proven economic theory to support the above but it sure tells an interesting story.
We expected better from Mallam Lamido. A better strategy would have been to revisit the re-denomination exercise and implement it in a better way than his predecessor. But the big man mentality won’t allow Nigeria’s ruling class to implement policies from their predecessors in office. It is a sacrilege to them and they would rather bring about their own revolutionary projects.
Once again, the same lack of project management and leadership skills has occurred. Mr. Lamido doesn’t think it makes sense to feel the public’s pulse before rushing into this exercise. The national assembly has also voiced their concerns and the central bank is quick to tell us that they are not forcing anyone to use the new note.
Someone should also please ask him why he is helping our ‘Ghana Must Go’ bag brigade in Abuja and every state capital. Why is he hell bent on making their loads lighter?
I guess the answers won’t be forthcoming anytime soon. The central bank should study the table above and it could simplify their thought process and help them towards making sound economic decisions.
God bless Nigeria!