CBN allays fears, N1,000 note out Oct. 12
 

From Mathias Okwe, Abuja

2005

Nigeria's newest currency, the N1,000 note, will be launched on October 12 by President Olusegun Obasanjo in Abuja. A copy of the note was displayed yesterday in Abuja by the Central Bank of Nigeria (CBN). Officials of the apex bank said Obasanjo would launch it at the Federal Executive Council (FEC) meeting on Wednesday, October 12.

The new N1,000 note bears the portraits of the first two Nigerian governors of the CBN, Alhaji Mai - Bornu and Dr. Clement Isong. Its introduction to the economy, the CBN said, would not raise the current inflation rate, put at 13 per cent. The CBN also said that the amount of cash in circulation now stands at N500 billion.

At a press briefing by the CBN Deputy Governor, Operations, Dr. Shamsudeen Usman and the bank's Director in Charge of Currency and Branch Operations, Mr. Ben Onyido, the apex bank stated that 120 million pieces of the notes had been placed on order from its producers, De La Rue of Britain, which is printing the notes at 49.85 Euros per 1,000 piece. One Euro exchanges for about N157. For the quantity for which order has been placed, the apex bank is to spend N936 million for its supply.

According to Usman, the new notes would arrive in the country before the launch and would be in all CBN branches before the date, clarifying however that the notes would only become a legal tender after the official launch by the President.

He also explained that De La Rue was selected from a competitive bidding with three other currency producers but did not give the names of the other two companies.

The CBN deputy governor stated that though the N1,000 was originally planned to come in notes and polymer, it was no longer feasible because the only known polymer producer in the world in Australia said it could not meet the October launch date.

Accordingly, Onyido said the polymer had been suspended and a decision was yet to be taken on whether the N1,000 and other denominations would still be printed on polymer or not.

He was confident that with the reforms going on at the Nigerian Security Printing and Minting Company (NSPMC), there might be no more importation of currency by the end of this year, adding that the company had considerably improved and for the first time in many years, met production target.

Usman insisted that the introduction of the N1,000 currency was not a pointer that the apex bank was contradicting itself on efforts geared towards a cashless system with the recent inauguration of the E-Payment System.

He said: "The introduction of the N1,000 currency note is not to suggest that we have jettisoned the e-payments project but to address the cash component of the payment systems. The e-payment project is still on-going. The reality is that cash transaction has refused to die. You cannot have a cashless society, it's not possible not even in the United States of America with all their technology.''

On the features of the N1,000 note, the CBN chief said: "The new note is protected by a number of sophisticated security features both to protect against counterfeiting and to ease the recognition of a genuine note. Some of these security features are sensed by touch, others are visible to the naked eyes, with the aid of a magnifying lens or under ultraviolet light."

Insisting that its introduction would not cause inflation or depreciation of the naira, he said: "Inflation is a sustained rise in the general price level. A once-and-for all rise in the price level may not be termed an inflationary phenomenon, but if its level remains high, it would be of serious macro-economic concern.''

He continued: "For the avoidance of doubt, inflation results from an increase in the money supply, upward pressure of production costs and supply shortages (especially agricultural products). Whatever source, inflation cannot be sustained without an accommodating increase in the money supply.

"The sources of increase in money supply include fiscal deficit financed by government borrowing from the banking system, especially the CBN, monetisation of the increases in foreign exchange earnings (in the case of Nigeria monetisation of the Naira counterpart of the excess foreign exchange receipts from crude oil exports) and credit expansion to the private sector by the deposit money banks. The issuance of the N1,000 note will not increase the money supply.

"Exchange depreciation is caused not by higher denomination notes, but by demand pressure influenced largely by the persistence of excess liquidity, inadequate supply of foreign exchange, especially from autonomous sources and speculative activities.

"The introduction of the new note will not amount to a reduction in the volume of the lower denominations. All the denominations will continue to be issued in the right mix and volume to meet the demands of the Nigerians and the general public, " Usman stated.

The note, it would be recalled, is the last in the series of higher denomination currencies approved for issuance by the Federal Government in 1999. The other denominations were the N100, N200, and N500, which were issued in 1999, 2000 and 2001.

The design of the N1,000 started in the fourth quarter of 2004 and the CBN said yesterday that it subjected the process through a competitive bidding to ensure due process and value for money.

The publicity for the new note ahead of its launch starts in earnest this week.