Where Have All The Coins Gone?
How Absence Of Lower Denominations Fuel Inflation
ON February 28, 2007, as part of the economic reforms under Sanusi Lamido Sanusi, the former governor of CBN, N50, N20, N10, and N5 banknotes were reissued with new designs, as well as the coining of N1 and 50k, while a new N2 coin was introduced. Nigerians, however, queried the CBN on what it expected citizens to buy with the coins. Some argued that Sanusi should conclude the ‘good work’ he had started by producing goods to be purchased with the coins, as a 500ml sachet of water (popularly called ‘pure water’), was sold for N5 then. And today, in most parts of the country, the same pack of water goes for N10.
Citizens and banks alike rejected the coins despite the huge budget the CBN expended in sensitisation and advocacy. Citizens asked whether Sanusi himself, politicians and the crème de la crème of the society would ever carry coins. In an economy that has been highly dollarized, those on the highest strata of the society prefer to transact business in dollars.
Arguably, this trend has affected day-to-day business transactions of ordinary Nigerians. The lack of coins and other lower denominations has resulted in prices being rounded. For instance, goods that could have been sold for N8 would rather be sold for N10. Reason: there is no N2 change for someone who might have dropped N10 for such item. The result is people overpaying for goods and services; a scenario economists term inflation.
Professor of Economics, Okey Onuchukwu, at the University of Port Harcourt noted that Nigerians have a wrong attitude to the use of lower currencies, especially coins.
“When you travel outside Nigeria, you see people still using coins. I remember when the CBN tried to orientate Nigerians on the use of coins but it didn’t work. Even economic theory says that prices of goods and services, once they go up, it is difficult to bring them down. And you know, in Nigerian economy, people are used to buying commodities with paper money instead of coins. So, it is a matter of attitude because sometimes when you give coins or even N10 to some people, they are unwilling to collect them,” he said.
Onuchukwu said the reason for the absence of lower denominations and why changes are not readily available is because some people hoard them and make a living selling them. “People hoard lower currencies, like N10, N20, and N50, and sell them to supermarket owners and drivers. They take this as an occupation. Nigerians should endeavour to make use of every denomination. If you are buying something worth N10, you should be proud to use N10, and if change is given to you, collect it,” Onuchukwu said.
Places where one can find coins in the Federal Capital Territory are supermarkets like Park ‘n’ Shop and Shoprite. Goods in these supermarkets are priced carrying along the minor units of the Nigerian currency. So, it is not out of place to find an item with the tag N20.99k.
The Guardian engaged one of the cashiers at Shoprite to know how they came about having coins that are not in circulation. The cashier simply answered that the management of the supermarket made sure coins are available for use as change for customers.
At the exit of the shop is a transparent box marked ‘charity’. What people do is drop in the box whatever coins the shop might have given to them as change. Even those who have no desire to give anything for charity put in their coins, given fact that there is no other place outside the supermarket where the coins could be spent.
Despite the importance of lower denominations at curbing inflation and stabilising the economy, Nigerians have given reasons for its unpopularity. These include its cumbersome nature and low purchasing power. Consumers of petroleum products, however, said they have before now devised a means of getting value for every naira they spend at the pump. Instead of buying the product by litres, they buy according to the money they intend to spend.
Mrs. Henrietta told The Guardian: “I don’t ask them to give me 10 litres or 15 or whatsoever because I know getting a change would be an issue. What I do is just ask for maybe N1000 worth or any amount I want. So, if the N1000 worth of petrol comes to 12.5 litres or whatever it is, I know that I don’t have my change hooked anywhere and that I had gotten value for my money.
Another customer at a filling station in Abuja, Joseph Adisa, is of the view that government is hiding a lot of truth from the citizens.
He said: “Has anyone asked where the coins that were produced with tax payers’ money during Sanusi’s tenure as Central Bank Governor went to? They simply disappeared into thin air. There are claims that some unpatriotic Nigerians melt them and sell them abroad. Now, can an ordinary man on the street do that? There are more questions than answers in this country.
“Have you noticed that all what ATM machines dispense are N1000 notes? You can hardly get N500 notes from them, not to talk of N200 and N100 or N50 banknotes. Well, I won’t rule it out if you get them while withdrawing money in your dream. Overseas, you conveniently transact business at machines and you get your change in coins and you are sure to spend them again and again.”
Dr. Femi Saibu, Lecturer in the Department of Economics at the University of Lagos (UNILAG) said: “Government should increase the number of lower denomination in the economy. We have a situation where our Automated Teller Machines (ATM) are dispensing only N1000. I think it is time our ATMs started dispensing lower denominations. If our ATMs dispense N100 or N200, that would reduce spending. It would also reduce the amount of money you carry around.
“The major problem is caused by the Central Bank of Nigeria because it charges other banks for every amount of money they have. The reason banks are not encouraging lower denominations is because the Central Bank charges higher for every lower currency they have. So, if the CBN can reduce the amount of money it charges, it would encourage other banks to have lower denominations.
“We conducted a research and discovered that countries that use higher denominations are undeveloped. It would affect the development of the economy. Again, it would cause price inflation; the price of goods in the market would jump up and not decrease. For instance, in Nigeria, if the price of an item that is sold for N5 would increase, it would jump to N10, instead of N6. An item that is sold for N10 would jump to N20 or N50. So, using higher denominations put pressure on price. It creates a lot of bottlenecks in business transactions.”