Pegasus Reporters Issues on the Wing
“Initially, this applied to the kobo end of transactions. Over time, we succeeded in killing the transactional value of the Kobo fractional unit of denomination. Without utility, the Kobo became redundant and faded into obscurity with its relevance restricted to spreadsheet presentations.”
*Acting CBN Governor Folashodun Shonubi
PEGASUS REPORTERS, LAGOS | AUGUST 20, 2023
Nigerians are quite peculiar in one area of money management; more often than not, transactions are rounded up! Products and services that should reasonably be priced at say, N197 will be rounded up to N200! Products in the range of 10 Kobo, 50 Kobo, N1, N2, etc. are virtually wiped out!
* The Toxic Trend
Initially, this applied to the kobo end of transactions. Over time, we succeeded in killing the transactional value of the Kobo fractional unit of denomination. Without utility, the Kobo became redundant and faded into obscurity with its relevance restricted to spreadsheet presentations.
This trend spilled over into the main currency, the Naira, after dealing the Kobo a near mortal blow. The scarcity of small change moved from the domain of the Kobo to small Naira notes.
And just as 5 Kobo, 10 Kobo, 25 Kobo, 50 Kobo coins and notes faded into history, N1, N2, N5, N10, and N20 are gradually fading with the transactional and economic sunsets.
*Nigeria’s neglected kobo currency
* Underlying Reasons
There are a lot of reasons responsible for this sad trajectory. Some of the reasons are the cost of producing these units, the cost of storage, cost of transportation, social acceptability and disdain, rising inflation wiping out intrinsic utility, scarcity and unavailability of the units, etc.
* Inevitable consequences
Thus, the country became trapped in a round-up nightmare. Due to the earlier highlighted issues, it became convenient, nay, the norm, to round-up transaction values.
Some may think this is good as it is increasing the revenues of the merchant, but this is uninformed and misleading.
What it is actually doing is increasing inflationary pressure (more cash chasing fewer goods) and eroding the purchasing power of the nation’s currency.
This, in turn, means citizens (consumers) spend more to get the same or less value. In a connected economy, the revenue gains of the merchant become eroded under the strain of general inflation (costs are transferred).
Another critical import of this toxic trend is that the Naira will continue to weaken. The function of small denominations and fractional units of currency is to ensure the value of products and services are fractionally fungible.
This will imbue an intrinsic value in the currency as more transactions can be done with the countries currency (increased demand for local currency) and serve as a stabilizing factor against aggressive inflationary pressures on the main currency.
Basically, erstwhile managers of the economy whilst trying to frontally address the issues of inflation and Naira depreciation have left a window open for the continued hemorrhaging of value.
*The Naira currency notes
*Proposed Solution
Transactions are 2-way streets. There is a buyer end and a seller end. Transactions are essentially a trade of value wherein both parties are expected to benefit.
The inconveniences at both the buyer and seller’s end need to be addressed and corrective behavior needs to be incentivized and encouraged.
The first thing is to create a currency platform that will not bring the burden of cost of production and storage. Incidentally, we have the eNaira. This can be used as the base structure for this currency resurrection project.
The next thing is to create utility for the eNaira. The lack of utility is the reason for low adoption of the eNaira. Dedicated effort must be applied to introduce the currency variant at nano-transaction levels.
The next thing is to encourage merchant side transactions to price in lower denominations and fractional units. Merchants will be able to access loans on the basis of the volume of small and fraction denominated transactions.
An accounting solution will be created, free download, to help businesses capture transactions, record same, and access a P&L report. Merchants who use this solution will have good credit ratings, and as said earlier, increased access to loans, tax exclusions and business support initiatives.
Businesses and merchants who are not compliant will face higher tax profiles.
On the buyer’s end, a mobile solution will be deployed to accredit the submitted sales prices. These submissions will be broadcasted within the social network so that consumers are advised and notified of merchants who aren’t rounding up prices. Thus, we have created a community self-policing structure.
Consumers will earn eNaira for their contributions to this public service. The earnings, eNaira can be spent at the user’s discretion.
Further, many consumers are unaware of the several thousands of Naira they are losing through this round-up poison. The solution will also enable consumers to see the amount they have saved from dodging the dubious round-up disaster.
The double whammy of benefits will incentivize adoption and proliferation at both the seller (merchant) end and the buyer (consumer) end.
In one fell swoop, we would be on our merry road to resuscitating the economy. Our issues aren’t too complex. We just need a commitment to the objective of having a great and prosperous country we can be proud of.
PS: The tech solutions proposed in this article are already fully developed and available for use.
Femi Onakanren is a Business Consultant and a Socioeconomic Policy Analyst. He writes from Lagos
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