ABUJA, Nigeria — As Nigeria revamps its currency to cut costs, streamline financial dealings and update its symbolic value, critics say the move will serve only to fuel corruption and theft.
Early next year Nigeria will introduce a 5,000 naira bill, worth $31.60, a denomination more than five times larger than the country’s current biggest note, according to the Central Bank of Nigeria. The bank also plans to reintroduce coins to the economy and redesign bills to reflect modern Nigeria, including honoring three prominent women.
“The currency is a symbol of the country,” Ugo Okoroafor, the bank’s director of corporate communications told GlobalPost. “And occasionally you have to, to use the American expression: jazz it up.”
Okoroafor said the changes will save Nigeria between 12 and 14 billion naira ($75.8 million to $88.5 million) a year on the cost of printing, storing and transporting cash. Coins save money in printing because they last longer than bills. Also, coins will allow the country to move in technology like parking meters, coin-operated tolls and vending machines, he said.
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Not everyone in Nigeria is as optimistic about the currency changes. The announcement set off a flurry of angry editorials, press releases and political speeches, demanding the bank reconsider its decision.
The Senate Committee on Banking, Currency and other Financial Institutions told reporters Monday the bank should have consulted the legislature before making the decision.
Some analysts say the new 5,000 naira bill will drive up inflation and encourage corruption and money laundering.
Nigeria is Africa’s largest oil exporter and most populous country. Although most of the more than 160 million people in Nigeria live in absolute poverty, the nation as a whole is hardly poor. It produces more than 2.5 million barrels of crude oil a day and is the United States’ fifth-largest supplier.
A lot of those profits, however, never reach public coffers. Corruption watchdog group Transparency International ranks Nigeria at No. 143 out of 183 countries.
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Earlier this year, the legislature compiled a report showing that $6.8 billion worth of public funds had been stolen by oil moguls and corrupt officials.
Wole Olaoye, a member of the editorial board of Leadership, a prominent Nigerian newspaper, said larger bills could intensify the problem.
“My fear is that when you have 5,000 naira notes in a system where a few people are stealing the rest of the country blind, it will be easier for them to take away their loot in cash,” he told GlobalPost. “You are making it five times easier for thieves to loot the country.”
Olaoye also said the move will slow down Nigeria’s attempt to move away from cash in order to modernize the economy. At present, debit or credit cards are only accepted at select few shops here and most people don’t use them. But with roughly 90 million people connected by cell phones, the central bank seeks to encourage mobile payment systems.
Clement Nwankwo, the executive director of the Policy and Legal Advocacy Center in Abuja, said if cash becomes more convenient people will be less likely to engage in cell-phone payments.
“What you do with higher denominations is that you promote a cash-full economy because people can carry more cash in smaller quantities,” he told GlobalPost. “You can tuck easily a million naira in your pockets and not be detected.”
Nwankwo said he hopes the legislature, when it convenes again in September, reviews the currency changes, adding: “I have no understanding how this kind of policy could have been thought out by an economist.”
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Abiola Rasaq, an analyst at Vetiva Capital Management Ltd. in Lagos, Nigeria’s financial capital, disagrees. He said he does not believe the new notes will cause prices to go up and if corruption increases, the move could save more money than it costs. Rasaq said Nigeria currently spends 114 billion naira ($720.4 million) yearly just to move, store and manage money.
“I think it should be viewed on a cost-benefit analysis and cause-effect relationship,” he told GlobalPost in an email. “I do not think cash management policy on its own may trigger corruption/money laundering.”
Jibrin Ibrahim, the executive director of the Centre for Democracy and Development in Abuja, said he was also not worried about the changes, adding that a large portion of Nigeria’s corrupt dealings are handled in dollars, not naira. But past attempts to introduced coins have been a failure, he said.
Over a decade ago Nigerian banknotes were spent while jewelers melted down coins to make ladies’ earrings, according to Ibrahim. He said back then, the metal was worth more than the coins.
“Women need to be adorned in nice jewelry,” he told GlobalPost. “But I think in monetary policy it may not be the most practical step.”
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