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Obasanjo is a bad economist – Sanusi

Central bank governor Sanusi Lamido yesterday said Chief Olusegun Obasanjo might be a successful farmer but he is a very bad economist, referring to the former president’s claims that introducing the new N5000 note will spur inflation.

 

Obasanjo was quoted to have said on Thursday in Lagos that the new naira note, which will be the highest denomination, will kill production and negatively affect small businesses.

 

But delivering a keynote address at a conference of the Chartered Institute of Bankers of Nigeria (CIBN) in Abuja, Sanusi said Obasanjo introduced more higher naira denominations than any other head of state did, and none of these notes caused inflation.

“You know my uncle or my father, the former head of state General Obasanjo, you know I like Obasanjo. He is a very successful farmer but he is a very bad economist,” the CBN governor said.

“He stands up saying that this higher denomination note will cause inflation and untold hardship. General Obasanjo did N20, he did N100, N200, N500 and N1000. He has introduced more higher denominations in Nigeria than any head of state.

“When General Obasanjo did a N100 in 1999, then he did N200 in 2000, did N500 I think two years later, N1000, and in that period inflation was coming down. It was coming down because it was accompanied by very tight monetary and fiscal policies in his reforms.

Now for somebody who has gone through that to come and stand up and say introducing a higher denomination, according to his speech, I don’t know if somebody wrote his speech, I’m trying to see him or if he was misquoted because if actually he said that, then he must be the single most important determinant of inflation in our history given the number of notes he has introduced.

“We all know that you cannot have inflation simply because you produce a new denomination. It will not increase money supply; its basic economics. We all know it and yet we keep repeating the opposite deliberately and people talk and you wonder what is the translation channel between the new denomination and prices.”

Obasanjo’s comments on the proposed naira note were reported to have been made at a roundtable advocacy forum organised by the Institute of Directors in Lagos on Thursday. He also said the way the Sanusi was fighting inflation by removing money from circulation was improper.

The CBN governor also yesterday condemned comparison being made with the United States, to the effect that though the GDP of the US is very high its highest currency denomination is $100, and therefore Nigeria with lower GDP should not have a N5000 note.

“I will give you another statistics,” Sanusi said. “In the 1970s when the N20 was introduced, N20 was the equivalent of $30. In 2013, when we introduced N5000 note, N5000 will be the equivalent of $30, it’s statistics.

“If you could buy $30 with one N20 bill in 1978, you now need 250 of N20 naira bill to buy $30 and we have to print those 250 bills, pay for the paper, the ink, for the security feature, for transportation for insurance, for clearing, for the bullion van, the bank will pay for the staff who are counting, processing, deposit, these are costs to the economy.

“It’s simple, you have had high rate of inflation, you have had devaluation after the financial crisis, we are printing more and more paper for transaction or you can take other statistics.

“Don’t compare the GDP of UK and the GDP of Nigeria and then try to look at the value of the currency. Why don’t you tell me what is the percentage of the money supply in United States that is currently in circulation and what proportion of transactions are the Americans and the UK doing in cash?”

Sanusi said the total cost of minting the new currency will be between N2 billion and N3 billion, and that cost of printing currency is being brought down since 2009.

“By that 2014, we will have saved 50 percent of the total cost of procurement. Now this is N32 billion last year for all denomination currencies printing and minting, and yet somebody wakes up and said the CBN is spending N40 billion to print N5000 note,” he said.

“A newspaper just write the number, quote a source that is unnamed that is supposed to be a staff of the CBN and everybody  have picked that N40 billion. It cost us N32 billion to print and mint every denomination in 2011.This note cannot cost more than N2 billion or N3 billion”

On the coins, the governor said, “N5, N10, N20 notes have very high frequency use and we have to replace them every three months, the coins last longer.”

He said Nigerians have not been accepting N1 and N2 coins because these denominations could hardly buy anything and so they may use coins that have value as means of exchange.

“We will do it,” he said, referring to the coinage of lower naira notes. “I made it very clear that the extent will depend on the acceptance and you know this economy and society is changing.

“In a few months may be less than a year who knows you come to Abuja, park your car and use your coins. You go on the road in toll gates, you use coins, you enter a public bus in Lagos, you use coins. As you create the opportunity for the utilization of the coins people see their utility but if you produce a currency that has no use then you have a problem so this is a gradual process.”

Earlier, Minister of State for Finance, Dr.Yerima Ngama, said he supported the new naira note and even further advocated for a N10,000.

“To me it’s a non-issue,” he said. “People need cash to transact and if it becomes inconvenient for them, then somebody needs to do something. I encourage CBN to quickly start minting N10,000 notes.






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