The Action Congress of Nigeria has asked the Governor of the Central Bank of Nigeria (CBN) to have a rethink on its intention to introduce the N5, 000 note as the highest denominated legal tender in Nigeria by year 2013.
CBN Governor, Mallam Sanusi Lamido Sanusi, last week disclosed plans to restructure the naira and introduce a new N5, 000 banknote denomination into the economy. The CBN helmsman had said that under the proposed new currency structure expected to be officially launched early next year, the existing denominations of N50, N100, N200, N500 and N1, 000 are to be redesigned with added security features.
He had said: "In some countries such as Singapore, Germany and Japan, the highest denominations are 10,000 SGD, €500 and Yen 10,000 respectively."
In a statement issued Sunday by its National Publicity Secretary, Alhaji Lai Mohammed, the party warned that while the introduction of this new high denomination may serve the dual purpose of raising revenue for government on the one hand and reducing the cost of transactions, its unintended consequences and collateral damage far outweigh the benefits.
The party warned that the introduction of the N5,000 currency note may be a step in the wrong direction, and down a slippery slope towards hyper-inflation and that it is time to abandon failed inflation-control policies and inadequately thought- through experiments.
According to the party, there is strong historical evidence that the introduction of higher and higher face value currency notes in an economy often signifies a regime of increased and sustained fiscal deficit financing.
It said the other fear is that the issuance of such high value currency notes is likely to be perceived as an indication of government's failure to effectively control inflation.
Meanwhile more Nigerians have expressed displeasure over CBN's plans to introduce a new N5, 000 banknote into the economy.
Those who spoke in separate chat with THISDAY Sunday also advised policy makers to desist from comparing Nigeria with developed economies whenever they want to introduce any policy into the economy.
On his part, the Registrar, Institute of Chartered Economists of Nigeria (ICEN), Mr. Peter Ikpamejo, advised the apex bank to reconsider its stance on the policy.
He however advised the CBN to re-dominate the naira.
"We don't deserve a N5000 note. How can you say you want introduce a N5000 when you have not been able to control inflation. Instead of converting some of the existing currencies to coins, why not think of policies that would make the existing coins in the system become useful?
"Again, if someone is comparing Nigeria with Japan or Singapore, that person is not sincere. These are producing nations whereas our economy is just a consuming nation."
Similarly, a Senior Analyst at BGL Limited, Mr. Femi Ademola, argued that with the proposal to introduce N5000, the CBN could have "admitted that the cash-less policy has failed because with this, you are saying people should carry cash."
According to him, "what I will like is for the CBN to redesign the existing banknotes without introducing a higher denomination. Policies should also be made to encourage the usage of the existing coins. With all these, to me, it looks as if something is wrong somewhere."