Between policy and citizens? interests: The fate of the coin
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Posted 19 September 2012 - 04:34 PM
JUST like any other legal tender, the coins have become acceptable in many societies and have failed in some, including Nigeria. The re-introduction of coins into the Nigerian economy in 2007 was welcomed by most. However, the ovation was short-lived as the coins lost public appeal and were consequently phased out.
A lot of reasons have been adduced to the failure of the coins in the past with very little effort to address it. With the planned introduction of higher denomination of the Naira note and conversion of some smaller denominations into coins, there have been fears on the potential effect of the action, when the new notes are eventually circulated.
Specifically, some of the reasons adduced to the failure of the coins include the absence of dispensing machines and relevant point of sale terminals; the discomforting bulky feeling for those carrying them; and their apparent low purchasing value. Many people have had to let go of their balance from a transaction because coins were not in circulation, while goods that should sell for N7 have been sold for N10 because no one will accept the coins.
One of the reasons the United States? One-cent coin has never been phased out is due to the inflationary ramifications of such a move. Experts believe that low denomination coins are important economically.
According to them, when low denomination coins fail to circulate, prices are typically rounded up, not down.
This thus creates a problem for Nigeria as not only is Nigeria?s lowest denomination coin, but all of its coins have failed to remain in circulation. Over time, there has been a blame game for why this is happening, with everyone blaming someone else.
When the N1, N2 and the 50-kobo coins were re-introduced by the Central Bank of Nigeria, there were expectations that their availability would dampen the upward price push, which the absence of these denominations brought about.
That is, prices can be expected to be more competitive and the often forgone change at petrol stations and other consumer mass markets can now be recovered and the usual attrition related to such transactions in the past will be avoided with positive impact on the health disposition of many Nigerians.
However, despite the huge budget by the Central Bank on sensitizing Nigerians on the need to accept coins, the transaction chains were broken as banks and customers reject the currency.
Investigations by The Guardian revealed that coins were not in circulation because of its rejection by the market people and banks.
For instance, it is a common practice to see customers, whom banks have imposed the coins on, going to another transaction officer to deposit it in their accounts, while local retailers kept rejecting the coins because the banks won?t accept them as deposits.
Experts believe that the fear about inflation surpasses the figures released by the National Bureau of Statistics (NBS) on the country?s inflation rate.
According to them, inflation would essentially mean nothing to the average consumer if it had no bearing on the economy. It is in the economy that inflation can either hinder a person?s ability to purchase or cause a lack of growth for businesses. The role inflation plays in the economy is substantial.
Even in the United States, Vice President Joe Biden recently noted that the government has concluded plans to curb waste by reducing the number of coins being produced.
He said: They make hundreds of millions of these coins every year; 40 per cent of them end up being returned to the Federal Reserve because nobody wants them. And here is the worst part: They are still making coins of presidents from the 1800s, meaning the United States Mint is about halfway through its planned production?.
A social commentator, Sanusi Alaba said: ?Why is everybody talking about the N5000 note and no one is saying anything about the proposed conversion of N5, N10 and N20 to coins? The coins are worse! The moment the notes are turned into coins, they will just be rejected. Will politicians; the Governor of the Central Bank of Nigeria, Lamido Sanusi; CBN staff and public officials carry coins? Will they spend them at all? Why punish Nigerians? Likewise, every Nigerian that thinks good about himself or herself will never want to carry coins.
?As coins are being rejected, the naira is being devalued! No matter the value of a coin, they are bulky! Can salaries be paid in coin? Would any gladly receive his or her pay in coins? Now, the United States of America has $10,000 single note, they also have $1! Let them give us our money in notes so that the naira does not devalue further. Let us be realistic, coins cannot work!?
A Financial Analyst, Dr. Kennedy Izuagbe said: ?The fate of rejection suffered by had little to do with the policy to introduce coins. Inflation had taken a toll on the values of those currencies that were changed to coins prior to the policy implementation. Als, the new policy was poorly promoted then and above all these coins were not made readily available for commerce. The currencies ought to have been made ubiquitous especially in the grass root levels.
?I think that acceptability of coins as a means of carrying out transactions is dependent on the value the coins command and pure perception by the economic units. The level of inflation and other factors have made it practically impossible to transact business in the current coin based denominations. Beyond not finding products one can purchase with coins, I have observed that the coins are even very scarce. The Central Bank of Nigeria and the deposit money banks have not made these coins ubiquitous which would have made them indispensable and attractive for business transactions. One way of dealing with the current acceptability status of coins is for the financial industry to tactly make coins very attractive and making them available especially at the grassroots levels?.
A Consultant, Obstetrician and Gynaecologist in the UK, Vincent Bamigboye added that one of the arguments against introduction of higher Naira denomination is worsening of inflation.
According to him, as things are, a lot of Nigerians are hovering at the edge of and some are even completely outside the productive side of the economy.
?The inflationary trend that will be the outcome of further increase in denomination will further serve as the death knell to the poor people and the aspiration of those who are struggling to join the middle class. It is alarming to note how far removed the Abuja politicians and their cronies such as Governor Sanusi are from the realities and economic woes of those they are supposed to be serving.
?It has also been argued that the introduction of N5,000 notes will result in increased corruption and capital flights. Size of Naira notes and the risk of detection somehow limit these practices at the present. Increasing the denomination of the Naira and the relative ease of carrying more Naira notes in smaller forms will encourage these greedy elements in their unpatriotic acts. Those who siphon our scarce resources abroad will be further strengthened in their nefarious activities?, he added.
On the conversion of some lower denomination to coins, he said: ?The coinage of the Kobo denominations had not been successful in the past. One was reliably informed that each time coins were introduced, unscrupulous Nigerians, in collaboration with their foreign counterparts, melt the same down for export. This is mainly because the coins are worth a lot less than their face values thus it is worth more to melt the coins down and sell the metals (copper and silver) to foreign countries. Thus the coins disappeared as soon as they were introduced. My sources expect that the same fate will befall future coins. One has no way of verifying this, but isn?t it interesting to note that the Kobo coins have not been seen in the Nigerian markets for sometimes!?
?The Naira notes that Governor Sanusi wants to turn to coins carry the images of Nigerians leaders that fought for our independence at great personal risks and charted the course of our early history. Common sense dictates that they be preserved. All these and other reasons are against the restructurings being touted by Governor Sanusi. Thus one believes that introducing higher Naira notes and coinage of a large part of our money is not a good idea at this stage of Nigeria?s economic development. May be a revisit of the Professor Soludo?s idea jettisoned by Yar?Adua?s government is a good idea. One hopes that common sense rather than unbridled pride and unnecessary competition will prevail on Governor Sanusi in making a decision that will affect the Nigerian economy and people for years to come?, he added.
BY FEMI ADEKOYA
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