The decision of the Central Bank of Nigeria (CBN) to end the persistent scarcity of the lower denomination banknotes in the country is a right step in the right direction. It is also understood to be part of its resolve to increase the circulation of the denomination in the country so as to ensure that effective trade and commerce are carried out seamlessly at market levels where such denominations are required.
To activate that resolve, the apex bank has commenced direct disbursement of these currency denominations. Prior to this, the scarcity of the notes, especially N5, N20, N50 and N100, had posed a serious challenge to market men and women who need those in their transactions.
Without doubt, the measure by the CBN will bring some measure of relief to many Nigerians, especially the men and women who operate in the streets and need these currency denominations as an indispensable companion. Before now, they have been groaning under the inflationary effect of the scarcity of the notes mostly used for economic transactions among the masses.
To ensure that this policy thrust achieved the desired effect, the apex bank embarked on a sensitisation campaign during which its officials told the traders that the CBN is determined to make the policy a success. To this effect, it will ensure that the lower denominations are made available to Nigerians who need them in their business transactions.
Before this policy was rolled out, there was a growing concern regarding the economic implications of the scarcity of the lower denomination naira notes in the country. The Senate on February 13 noted that this development portends severe threat to the nation’s economy, which is just recovering from recession.
The lawmakers said that traders had taken advantage of the scarcity of lower denomination notes to raise the prices of goods. And not only traders, service providers like bus drivers, for instance, have used the excuse of the scarcity of the denominations to hike their fares.
This apprehension was worsened with the commercial banks’ reluctance to continue dispensing the lower naira denominations to customers claiming that they hardly receive enough of them from the CBN. Now that the CBN has said it will increase the circulation of the naira notes, we hope there will be no arguments against the relevance of the denominations in the economic activities of the nation.
Another factor blamed for the scarcity of the naira notes is the printing and procurement of the smaller denomination currencies abroad with the attendant economic and security implications. Even with this consideration, the federal government, through the apex bank, must have taken cognisance of those before the policy intervention.
Without doubt, it is a commendable monetary policy that is well intentioned. But we urge the CBN to step up its monitoring mechanisms to check the inanities of some unscrupulous people who are likely to see it as an opportunity to make brisk business by hoarding the currencies and after hawk them at public places like motor parks, social events venues, and sometimes, in the banks’ premises.
It is a fact that such people will not let go of the illegal and high yielding business. In our opinion, the apex bank should put in place stern punishment for anyone caught in the business of hoarding and hawking the currencies so as to serve as a deterrent.
In our view, this move by the apex bank to increase the circulation of the smaller banknotes will help lower inflation because it is a fact that when the petty businesses cannot get these small denominations to transact business, it shows that inflation is catching up on them resulting in increase in prices of goods and services.
On a positive note, the scarcity of these denominations enhanced the average Nigerian’s banking habit. It necessitated the penetration of e-banking. With the introduction of facilities like Point of Sale (POS) facility and the Automated Teller Machine (ATM), financial activities among that segment of the population became keen as no one was interested in losing money, it doesn’t matter how much, just because there is no change. A electronic bank transfer will make everyone happy.
A recent data from the Nigeria Interbank Settlement System (NIBSS) for four major electronic payment channels showed that the total value of transactions rose by 35 per cent to N69.7 trillion in 2017, from N51.6 trillion in 2016. Even with this positive indicator, there is no denying the fact that the lower banknotes are very much needed in the economic space.
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