Inflation bites harder, renders N20, N10, N5 ‘irrelevant’

In major markets, prices of goods are shifting away from the lower denominations of the Naira currency due to worsening inflation.

Not too long ago, items like a sachet of pure water were priced at N5, while N20 was commonly used to “settle” police officers at checkpoints. However, in recent years, these smaller denominations have struggled to purchase much.

A recent market survey by DAILY POST revealed that more than half of Nigeria’s legal tender is insufficient for making purchases.

Despite this, the Central Bank of Nigeria (CBN) recognizes denominations such as 50 kobo, N1, and N2 in coin form, as well as N5, N10, N20, and N50 printed on polymer materials.

Currently, a sachet of pure water is priced at N30, and retail prices for items like sugar and candies have increased, with goods often being priced in multiples of 50 or 100, rendering smaller denominations irrelevant.

Over the past six months, the Naira has significantly depreciated against the dollar, with the intervention by the CBN bringing it to around N1050 to a dollar from a previous high of about N1,900.

This means that Nigeria’s highest denomination of N1000 is now worth less than a single dollar. Holding $1000 makes one a millionaire in Naira based on the current exchange rate, while even $1 exceeds N1,000.

Despite the recent appreciation of the Naira, commodity prices remain high, attributed to various factors including foreign exchange (FX) issues.

However, the Nigerian government continues to print lower denomination currencies at a substantial cost. It reportedly costs N1000 to print each lower denomination due to limitations in printing on polymer.

Experts are urging the CBN to cease printing lower denominations and reconsider the currency structure in line with present circumstances. Some suggest adopting a re-denomination policy similar to Ghana’s, which removed zeros from their currency in 2007.

Former plans by the CBN to introduce N5000 notes and coin lower denominations like N5, N10, and N20 were met with public backlash in 2012, leading to the abandonment of the proposals. However, prices of goods and services have since risen beyond 2012 levels.