ACN Advises CBN Against 5000 Naira Note

The Action Congress of Nigeria has advised the Central Bank of Nigeria to have a rethink about its widely publicised intention to introduce the N5,000 note as the highest denominated legal tender in Nigeria by 2013.
In a statement issued in Lagos on Sunday by its National Publicity Secretary, Alhaji Lai Mohammed, the party warned that while the introduction of this new high denomination may serve the dual purpose of raising revenue for government on the one hand and reducing the cost of transactions on the other hand, the unintended consequences and collateral damage of introducing the N5,000 may far outweigh the benefits of the new measure.
First, according to the party, there is a strong historical evidence that the introduction of higher and higher face value currency notes in an economy often signifies a regime of increased and sustained fiscal deficit financing.
Secondly, the issuance of such high value currency notes is likely to be perceived as an indication of government’s failure to effectively control inflation. Unfortunately, the party said, once this perception takes hold, increased inflation expectations can be built up quite rapidly and these have pushed many countries into a situation of hyper-inflation in the past, which has typically culminated in the redenomination or even complete abandonment of the entire currency system.