Economic experts have said that the reinforcement of coin usage that was recently proposed by the House of Representatives to curb price inflation might not address the continued soaring prices of goods and services.
The experts, while reacting to the motion moved by the green chamber on Tuesday, last week, urging the Central Bank of Nigeria to enforce use of coins as a legal tender to stabilize the economy and control price inflation, submitted that rather than inject coins into the economy, Africa’s largest economy should tackle the basic factors Influencing the escalating prices of goods and services.
In separate interviews with BusinessDay, recently, in Benin City, Mike Obadan, Non-Executive director of the Central Bank of Nigeria (CBN), and Anthony Monye-Emina, a professor of Economics at the University of Benin, opined that the reintroduction of coins might not be helpful to the challenge of inflation.
Obadan, a professor of Economics, who expressed concern over the high level of inflation in the country, said the cost burden associated with minting coins would be huge.
“It will just add so much cost to the cost of printing money and minting coins. If CBN is being directed to start minting lower denominations, I am not sure what it will achieve in terms of stemming Inflation because it involves so much cost and even when you mint the coins, the coins may not be useful in buying anything because of the psychological elements in the pricing of goods and services and the current inflation,” Obadan said.
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“The problem now is that the inflation rate is on the high side and the prices of goods and services are already at a higher level. So, I’m not so sure whether the use of coins for the purpose of stemming inflation will be helpful in any way because with the way the price level is; today, you will find that it is very hard to buy anything meaningful with N20, N50.”
Recommending, he said there are fundamental factors such as unstable exchange rate, shocks emanating from the global market among others that are causing the present high level of prices or inflation which need to be addressed “and if we are able to maintain stability in exchange rate, it will help to contain the rising prices.
“There is also an element of arbitrariness. For example, the high energy price, even though the price of diesel and aviation fuel have gone up in the world market, the rate at which the economic agents jack up the prices of the goods and services is much higher.
“Economic agents are pricing the goods and services with impunity and the government should come in by way of moral suasion and let Nigerians know that the arbitrary pricing of goods and services doesn’t help the people in terms of the standard of living.
“They must drive goods and services in relation to their cost because the cost they acquire most of these goods and services doesn’t reflect the prices which they are charging. In other words, the prices are very much higher than the cost therefore resulting in profiteering.”
He also advocated for a solution to the insecurity challenges in communities and called for a ban of market unions who act as middlemen to manipulate the prices of agricultural products so as to stabilize agricultural food prices and improve the welfare of Nigerians.
“This is what should be done not currency denominations or minting of coins which is an aberration. In other words, it will be chasing the shadows rather than addressing the fundamental factors causing the rise of prices of goods and services.
Monye-Emina, on his part, said though coins are more durable than notes and are not easily abused, the issue with rising prices is as a result of shortage of supply in the face of excess demand and “I don’t know how the nature of the currency will have impact on the prices of goods and services.
“It is in this part of the world that coins are no longer in use. If you go to other countries, they still make use of it. But to say that they want to bring it back and use it as a means of controlling the rising inflation, that is laughable because the nature of your currency is not responsible for rising prices,” he said.
