Guest post: Nigerian currency restructuring: Is “Project Cure” really what the doctor ordered?

Image: 500 Naira note Chippla; GFDL, CC BY SA-3.0

By Nicky Warner

While it may seem that all eyes are on the EU and the state of the Euro, an equally intense financial debate is taking place across the pond in West Africa. On September 9, 2012 the Lagos Chamber of Commerce gave the green light to “Project Cure” – the proposed restructuring of Nigeria’s currency, the Naira, which was first introduced as legal tender in January 1973. The Central Bank of Nigeria caused a stir a couple of weeks ago with the announcement of their intention to introduce a new N5,000 banknote denomination from the beginning on next year; the Bank’s plans also included the conversion of N5, N10, N20 and N50 banknotes into coins. 

Overall, the planned currency reconstruction would lead to the Nigerian Naira having twelve denominations in total (namely six banknotes and six coins). Sanusi Lamido Sanusi, Governor of the CBN, told press that the introduction of the N5,000 note would fit well with the Bank’s cashless policy, and that restructuring and redesigning Nigeria's currency would also give the CBN a chance  to improve on the Naira's security features. The announcement has been met with widely varying responses from strong criticism to strong support.

Critics Concerned

One of the major concerns surrounding the proposed introduction of the N5,000 currency note is that it could send Nigeria’s inflation rate skyrocketing; critics have also predicted that a higher note would make it easier for people to carry large amounts of cash and therefore conflict directly with the cashless policy of the CBN. The move has also attracted criticism from Nigeria’s former President, Olusegun Obasanjo, who fears that the introduction of a N5,000 currency denomination would harm the country’s small businesses.

The Other Side of the Coin

There are also those in favour of Nigeria’s “Project Cure”; the CBN has the approval of current President Goodluck Jonathan, and the Lagos Chamber of Commerce (LCCI) predicts that the proposed currency restructuring plan will:

•  Reduce the risk of theft to those carrying cash, as the N5 000 note means that people can carry a larger amount of money more easily and less conspicuously.
•  Give the Bank’s customers better service by increasing the capacity of ATM’s to store money.
•  Increase the popularity of coins in circulation by giving Nigerian coins a higher value (through the conversion of the N5, N10, N20 and N50 notes to coins). Coins are known to be a more durable form of currency than paper notes.
• Make it easier and quicker to conduct business activities where large amounts of currency are required (particularly in Nigeria’s informal business sector).

In addition, the CBN claims that the move will lead to a substantial drop in the cost of printing Nigerian money; “The total cost of currency management will drop” stated the Bank in a recent newspaper advertisement, “and there will be significant savings in cost.” 

As the debate surrounding the restructuring of Nigeria’s currency continues, those with an interest in Nigerian currency exchange will be keeping a close eye on their forex trading systems to see which way the inflation rate moves, and how this drastic financial change affects the economic and political climate in Nigeria.

What’s your take on the proposed Nigerian currency restructuring plan? Share your thoughts with us.