Nigerians breathed a sigh of relief when news filtered out on Thursday, 20th September, that President Goodluck Jonathan had directed the CBN to suspend its proposed naira restructuring programme.  For the avoidance of doubt, on Friday, September 21, 2012, the CBN itself carried a timely advertorial titled “Update on the Proposed Currency Restructuring Exercise, ‘Project Cure’”.

In the advertorial  signed by Director, Corporate Communications, Ugo Okoroafor, CBN defended the validity of the proposed exercise under Section 19(1) of the CBN Act 2007, which gives the right for currency restructuring to CBN after due approval from Mr. President, who apparently gave his blessing on the 19th of December, 2011.   However, consequent upon Jonathan’s volte-face on Thursday, 20th September 2012, CBN has stepped down further action on the restructuring exercise.

The apex bank also confirmed that “no contracts whatsoever had been awarded in connection with the printing and minting of the new currency notes; consequently, no currency note or coin had been printed or minted under the proposed exercise”.

In the light of the above, a lot of Nigerians may believe that CBN’s ‘Program Cure’ has been buried forever!  However, the comment by Reuben Abati, Presidential Media Adviser, may suggest that we may not have seen the end of CBN’s ‘Project Cure’.  Abati has this to say on Mr. President’s suspension order on the currency restructuring “The introduction of the new notes is being suspended for now, to enable CBN do more enlightenment on the issue.  Yes, President Jonathan has directed that the implementation of the new N5000 note be suspended for now.  This is to enable the apex bank to do more to make the majority of Nigerians to understand why it proposed it in the first place.  So, for now, the full implementation is on hold”.
It should be apparent from the above, that even though the CBN advertorial under reference explicitly states that Mr. President has directed that “further action on the approved restructuring exercise be stopped”, Abati, on the other hand, seems to leave wide open a window to suggest that CBN’s ‘Program Cure’ can be reintroduced after further enlightenment campaign to the public.

Indeed, in view of the several contradictions in CBN’s posturings and arguments in support of the restructuring exercise, it is difficult to see how further public enlightenment would erase, for example, public perception of the apparent mismatch between CBN’s Cash-Lite policy and introduction of the N5000 note.  It is also not clear how CBN can defend the elimination of primary coins (Kobo) from our currency profile and yet maintain that such action would not instigate inflation!  How can CBN launder its fraudulent argument that higher denomination notes will reduce inflation rate, after the same CBN had predicated its argument on the non-inflationary impact of high denomination notes on the platform that high denominations do not increase money supply and cannot therefore instigate inflation?

Indeed, this whole exercise may have severely dented CBN’s credibility amongst Nigerians, and a concerted enlightenment campaign may prove inadequate to restore the public confidence in the ability of the current Central Bank team to redeem our economy.  

The feudal mindset brought to the table by Sanusi serves as a clear warning that other control platforms would need to be put in place to save Nigerians from the tyranny of a despotic Central Bank governor with less liberal autonomy in its conduct. 

In an earlier article titled “N5000 Note as Red Herring” in this column, we had inferred that the introduction of N5000 note was contrived by the Central Bank to distract public attention from its abysmal failure to achieve its core mandate of price stability.  Incidentally, if the cause of this failure is not identified and tackled, Nigerians may actually be on their knees begging for higher denomination notes, or alternatively, at least a two decimal point redenomination in less than five years, if core inflation continues to gallop at over 15%.

This is because, in the next five years, N1000 note for example, may have less than the purchasing value of N50 (or US$0.50), when the N1000 note was first introduced in 2007.  

Until spiralling inflation is contained, Nigerians may have no other choice than to openly welcome higher denomination notes in the coming years.  On the other hand, if CBN stops substituting naira allocations for dollar revenue, such that beneficiaries of the federation pool will be paid with dollar certificates for dollar denominated revenue, inflation would recede significantly, petrol prices will fall, cost of funds will similarly fall and the purchasing value of the naira will improve significantly and ultimately, the N1000 and N500 notes may be phased out, as N100 may become as powerful as the current N1000 with CBN’s achievement of price stability.