The Alarm Over Fake Naira
A former Deputy Governor of the Central Bank of Nigeria (CBN), Obadiah Mailafiya, has raised the alarm over what he perceived as a dangerous trend in which a whole 20 per cent of the Nigerian currency in circulation is fake. He blames this for the rise in the prices of food and other items. As he understands it, when fake currency of that volume is in circulation, original currency becomes scarce. Bad money, he said, chases away good money. What this implies, in our interpretation, is that for every five naira in one’s pocket, one is an illegal tender. If true, then, there is real cause for worry.
For most Nigerians, it is bad enough that the naira, the nation’s legal tender and medium of exchange, is in short supply. It will be compounding their problem if they also have to contend with the quality of the little they have in their pockets.
But the greater concern ought to be the impact on the economy and the nation in general of such a disclosure by a highly placed Nigerian who was in a position to know. If the information was intended to raise the awareness level of the ordinary Nigerian regarding the quality of the currency in their possession, we think that there should have been a better way of putting the point of view across. Giving out the information that alleges that part of the nation’s currency is no longer legal tender is not the same thing as saying that a car battery or fruit juice is fake.
Also, another problem with trying to be categorical when discussing percentages and figures is that such are very easy to puncture. In the debate that this is likely to generate, the question may be asked: 20 per cent of what number? And who did the counting to suggest its accuracy? Was the fake currency printed locally or imported? How was the fake currency able to penetrate the market? Resolving these issues is usually burdensome by the simple reason that they have to do with statistics.
Even more disturbing, in our view, is the reality that the nation’s economy is largely cash based. Bank penetration is still very low and a sizeable number of Nigerians still believe that their pillow cases are safer. Now, they are being told that a good percentage of the currency they are hoarding is, in actual fact, worthless by virtue of the fact that a good part of it is fake.
Central Bank is the institution which, by law, is authorised to handle the nation’s legal tender. It has an intelligence unit charged with the duty of monitoring and managing threats to the integrity of the currency, among other functions. Such information in the possession of its former executive could have been appropriately channelled to the authorities for proper investigation and necessary action if found to be true. Unleashing it on the nation the way it was done, especially considering the obvious reality that the public is already distraught by other economic, political and security matters, is likely to be counter-productive.
We conjecture that the typical Nigerian will become wary of cash transactions. The information is also likely to exacerbate the challenge of rising food prices, the falling value of the currency and the spiralling inflation. This is likely to further erode investor confidence in the currency and by extension the economy. What we are telling them even before they come in is that the currency used in the business environment is not reliable. It will fit into the picture they already have of the country and her citizens- a country of fraudsters riddled with corruption.
Every country has its own fair share of corrupt citizens and fraudsters. We are not sure that they celebrate their failings the way we do it here. The major currencies of the world have fake versions of them put in the marketplace by some unscrupulous elements. It is the job of the security agencies to trail such bad copies, covertly, in the public interest. Why should it be different in Nigeria? It is this kind of doomsday proclamation that is partly responsible for the crisis in the economy. However, we urge the CBN and the security agencies to follow up on this. The nation has a right to know where it leads if only to assure them that the money in their pocket is worth its stated value in quality and integrity.