Economics of the N5000 Note
4 Pages Posted: 31 May 2014
Date Written: May 29, 2014
The statement by the central bank of Nigeria that N5000 will be introduced and N5, N10, and N20 notes will be coined in 2013 has generated a lot of debate. Many of the contributions have however strayed off the key point. Namely, the reason currency notes and coins are necessary. Notes and coins are held primarily for retail payments. To be relevant, their face values, nature, sizes and weights must be suited to the retail transactions they are needed for. The proposed introduction of N5000 is in the right direction, but is arbitrary, as it is not proposed in reference to retail price realities, and is hardly the optimal highest face value for the Naira notes at the moment. It is the end that justifies the means. It is the items that people need to pay for with notes that should determine how much we print on the currency notes. That is the economics of Naira note denominations.
Keywords: Nigeria, Naira, Currency Notes, Banknotes, Coins, Re-denomination, Re-decimalization, Retail Prices, Retail Payments, Electronic Payments
JEL Classification: D78, E42, E58
Suggested Citation: Suggested Citation