A recent economic review by Quartus Economics is strongly advising the Central Bank of Nigeria (CBN) to introduce higher-value currency notes, such as N10,000 and N20,000 bills, as a critical measure to combat the declining purchasing power of the naira and significantly reduce the surging cost of cash transactions.
The report, titled “Is Africa’s Eagle Stuck or Soaring Back to Life?”, highlights that the continued sharp depreciation of the naira has effectively rendered the country’s highest existing denomination, the N1,000 note, practically “obsolete” in terms of real purchasing power.
When the N1,000 note was launched in 2005, it was valued at nearly $7. Today, the same note is worth less than 60 US cents. This drastic fall, which the analysts calculate as a 94 per cent decline in the naira’s real value over the last two decades, is making everyday commerce burdensome, particularly in the cash-dominant informal sector.
“To make the naira portable again, Nigeria can introduce higher-value bills, e.g., N10,000 or N20,000 notes, or redenominate the currency entirely,” the report stated.
Traders, artisans, and rural consumers are now forced to carry “large volumes of cash” for simple transactions that a few higher-value notes could easily cover, thereby slowing down economic activity and creating logistical hurdles.
Quartus Economics directly challenged the common concern that introducing higher-value notes could exacerbate inflation, dismissing it as a “myth unsupported by evidence.” The analysts clarified that inflation is driven by cost-push and demand-pull factors, which are completely unrelated to currency denomination.
“Countries introduce higher-value notes to maintain portability after a period of significant currency depreciation, not to trigger inflation,” the report argues.
The firm emphasized that their proposal is not about “printing more money,” but rather about modernizing the naira’s denominations to reflect current economic realities and make transactions more practical and efficient.
The report also stressed the escalating, prohibitive costs associated with managing the current low-value currency structure. The cost of printing, transporting, and securing notes like the N1,000 bill has become excessive for the CBN.
“Outside the formal sector and the urban elite, the naira’s heavy weight is a drag on the economy and slows down growth. Besides, the cost of printing and transporting today’s low-value notes is prohibitive,” the report explained.
The analysis provided a stark measure of the naira’s devaluation using the cost of two essential items:
Imported Rice (1kg): Price rose from about N150 in 2005 to an average of N2,500 today.
Lagos-Abuja Flight: Cost surged from N12,000 to more than N150,000.
The economists concluded that a N5,000 note that was proposed in 2012 would now need to be equivalent to a N50,000 note today to have the same real value, underscoring the severity of the loss in purchasing power.
The introduction of N10,000 and N20,000 notes is presented as a necessary step to improve transaction efficiency, reduce operational costs for the CBN, and align Nigeria’s currency structure with that of other emerging economies grappling with similar post-depreciation portability issues.
