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Article#0005 Date: 1 June 2006 Country: Nigeria
CBN and the new coins system
Friday Nwagbara • Thursday, Jun 1, 2006
Briefing a combined meeting of the Federal Executive Council in concert with the Economic Management Area recently, the governor of the Central Bank of Nigeria (CBN), Prof. Charles Soludo, announced that arrangements had been concluded by the nation’s apex bank to introduce new bank notes on or before the end of this year.
According to Prof. Soludo, the latest development would see some existing notes and coins being issued in coins while the rest may be redesigned.
The move, he further intimated was part of the restructuring exercise of the Nigerian currency which, he noted, the Central Bank of Nigeria was supposed to carry out once in every five to eight years as done by other central banks worldwide.
This new system would see lower bank denominations like five naira, ten naira, twenty naira as well as fifty naira being redesigned while other denominations such as fifty kobo, one naira would now be turned into coins, including two naira which is expected to be in circulation by the end of 2006.
Soludo also posited that the twenty naira not when redesigned would now be seen in a plastic form or what is generally referred to as polymer subtract, apparently for durability and cost effectiveness.
The most interesting aspect of the briefing was his insistent that CBN would by 2008 hands off currency processing and its distribution in stopping the importation of our currency from foreign countries. Nigeria, he stressed, is the only country with mint that is still importing currency like fuel, very, very sad indeed.
For many years now, we have heard about the privatisation of the Nigeria security and minting company. But what happened to this initiative since is a matter of concern to most Nigerians. Thanks to Soludo who has, at least, allayed our fears in that regard. The arrangement is still on course.
With this background in mind, one has to trace the antecedent factors preceding the introduction or re-introduction of new bank notes in the country.
When in April 1973, the federal government of Nigeria introduced the country’s own currency known today as Naira and Kobo, many saw it as a welcome development, at least, to remove us entirely from the clutches of the colonial rule of the British, widely unacceptable government having gained independence and sovereignty from them.
Even though the struggle was not that easy, but we are all grateful today that the said dream had come true.
At that time, it could be recalled, one British pound sterling was equal to 65 kobo, in fact, less than one naira. Indeed, our economy was strong, even stronger than that of the British government going by this anology. Everybody was happy that naira and kobo would atone their daily businesses.
This growing trend actually put smiles on the faces of most Nigerians who had the pleasure to do away with the colonial currency denominations, besides, the unit of counting then had a good mathematical co-efficient than the British pound sterling or even the American dollars.
As at 1984, one witnessed that most Nigerian students schooling abroad exchanged their course fees at 75k to one British pound sterling in some commercial banks. The Central Bank of Nigeria (CBN) charged even lesser rates. The importers and exporters, business men and women, industrialists and indeed, all that were concerned with commercial activities, had no problem of transferring their monies from one part of the country to another.
The denominations then were in the regions of 50k, N1, N5 and N20 (popularly called “Muri”) and all these were in naira notes and mint, and retained its intrinsic and extrinsic values.
When in 1999 the federal government decided to introduce higher currencies, many actually saw it as a move in the right direction and thereafter the N100, N200, N500 and now (the Nigerian “Dollar”) N1,000, were all brought into circulation.
Certainly, none of these concepts was a wrong one – the motive was rightly in order, that is, to conveniently carry large sums of money about for transactions and other necessary things.
Now let us take a retrospective look at when some of the denominations were reduced to coins. The ½k, 1k, 21/2 , 25k and N1 were all coined, because, according to the CBN’s statement, the cost of printing these denominations in bank notes was higher than the face value of the monies. This is a very valuable justifiable contention. But thereafter how many Nigerians truly carry coins in their pockets today?
Notice that the bus drivers, Okada people or the popular “Ala Alok” and even the borehole sellers started rejecting them. In fact, these categories of people see one as an abnormal human being when settling one’s debt with these denominations of our national currency.
When the one hundred naira notes were introduced a few years ago, the other class of our currency started disappearing. Now the only valuable lower currency in circulation today may be N10 or N20, for due to inflation, one can hardly pay for any service with the N5 note.
It is not that the introduction of these higher currencies themselves that causes inflation. No, but other contingency factors. Since we operate marketing economy in Nigeria and fuel being the mainstay of such economy, any sudden adjustment, especially upwards, automatically has a dramatic effect on the entire system.
It is even moreso when these higher currencies were introduced soon after a protracted industrial action as a result of fuel hike.
Thank God that the President, Chief Olusegun Obasanjo, has foreseen all these problems and while launching the new one thousand notes on the 12th of last month emphasised that the N1,000 bank note was the last in a series of the issue of the new denominations. I hope so too.
On the security of the new note, Chief Obasanjo, said he was satisfied that the security features in the bank note were “sufficiently formidable to make forging almost impossible, explaining however, that when the idea to float the new bank note was initiated, his main concern was its security because, according to him, “if this one is forged, the victims would have lost a lot.”
Looking ahead of ECOWAS and the establishment of an African Central Bank, the president challenged the Central Bank of Nigeria to prepare for additional responsibilities, both within the bank and the security printing and minting company.
The CBN Governor, Charles Soludo, in his brief remarks at the occasion noted that the new denomination has very unique and modern security designs that were not in any currency anywhere in the world. For as he puts it, “its unique feature of a golden patch is not found in any other currency in the world”.
Soludo, however, allayed Nigerians’ fears to the effect that the new bank note would not increase the volume of money in circulation and therefore, would not cause inflation nor the depreciation of other denominations.
According to the nation’s Apex Bank Governor, about N12 was spent on the printing of each of the new bank notes as against N10 used in producing the N500 denominations about four years again. The CBN chieftain also gave the assurance that by the end of 2006, the printing of all currencies would be done locally by the national mint.
One hopes that Soludo would keep strictly to this promise because many Nigerians are still wondering why the CBN should spend such a huge amount of money to go and mint our currency in far away Spain, while the country’s printing and minting company is lying fallow. Perhaps, this new assurance could be deduced to mean that by the end of this year, even our lower currencies, now almost extincted would even be produced locally in banknotes in order to help check the inflationary trend in the country.
A suggestion is made here that instead our N1,000, N500, N200 be put in coin form while the lower ones like 50k and one naira be brought back in paper notes. After all, the one thousand American dollar and British pound sterling are coined. We can still borrow a leaf from these advance countries and even do better.
The truth about it is that we Nigerians, like a lot of birthdays, marriages and other ceremonies and at such occasion, we need to “spread”, and to do that, we need lower currencies instead of the higher ones that would give our CBN headache to reproduce.
Our attitude towards handling of our nation’s currency is as well very important. I hope the CBN should at this point try to re-orientate people’s minds in this direction so as to make their job an easier one.
Original Article: http://www.thetidenews.com/article.aspx?qrDate=06/01/2006&qrTitle=CBN and the new coins system&qrColumn=FEATURES
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