I think it may rank as one of the most ridiculous piece of news I would ever publish. But, wait a minute, it is Naira and Nigeria and absolutely anything can happen. I am not sure it is beyond reality. this piece may just wake up president buhari’s economic team.
At the pace at which inflation is soaring on a daily basis, with the naira purchasing power being limited and diminished in the open market, a Lagos-based Developmental Economist, Henry Boyo, has predicted that the Federal Government, might have no option than to introduce an additional N10,000 note, if the negative trend is not checked.
It could be recalled, that since 2015, the naira has been subjected to intense pressure, due to the introduction of diverse contradictory monetary policies by the President Muhammadu Buhari-led led Federal Government.
The straw that broke the camel’s back, was the hike in Premium Motor Spirit, PMS, popularly called petrol, from N86.50 per litre to N145 per litre, which has also affected the price of Diesel, Kerosene and Aviation fuel.
According to Financial Experts, the spiral increase in energy sources, coupled with the hike in electricity price, had triggered inflation across board, from 11.4 percent in February, to 16.5 percent in June.
Boyo, postulated that many households across the country are presently severely traumatised by the escalating prices of goods and services, particularly in the last six months, or so.
The uneasy feeling according to him, has probably become common after every visit to the market, where the smallest available plastic sachet, may be all that is needed to pack your N10,000 purchase (s) from the ubiquitous street corner medicine stores in our cities.
Boyo said, ”If the currency’s present free fall remains unchecked, and the naira tumbles to N1,000=$1, the N10,00 note may sadly ultimately, also, assume the intensive role of lower denomination coins despite its fragile fabric.
“Indeed, if the naira could drop from N165 to almost N400=$1 as it did in the last 12 months, while dollar supply still remains grossly inadequate to match the subsisting excess naira supply, naira rates will continue to dip and ultimately an exchange rate of N1,000=$1, may become inevitable.
“In such an event, even if N10,000 note is introduced as the highest denomination, it will only exchange for $10.
“Similarly, new issues of N2,000 and N5,000 notes, will exchange for $2 and $5 respectively.
“Clearly, unless the fundamental flaw in the pricing model that produces the naira exchange rate is addressed, inflation rate will also rage well beyond 20 percent and further naira depreciation will prevail, and ultimately compel the introduction of N20,000 and N50,000 notes”.
He added: “This may seem far-fetched, but we should be reminded that Ghana’s currency profile included 50,000 Cedi notes, before the four point re-decimalization in 2006.
“Higher denomination naira notes will obviously facilitate portability, but they may also attract the usual threat to security associated with large cash transactions, and will also set back the gains of the cashless initiative.
“Higher denominations will however, become inevitable if the continuous slide of the naira exchange rate is not arrested.
“From a cost perspective, the issuance of higher notes may require relatively modest outlay for production and promotion, since the existing currency profile and format will remain unchanged,” Boyo said.