Cents don’t make any sense: abolish them
The Sunday Nation
Nairobi,
08 July 2012
After reading the article on shortage of coins at the bank, Mike Rono wondered why we still use cents in our currency; in his own words, “these cents don’t make any sense, so they should be abolished”. His reasoning is that, these days, there is nothing you can buy with less than one shilling and furthermore, there are no prices of anything that include cents at the end.
I think Mike is on to something here. I also don’t understand why we use
cents. But first let me correct him: the controlled prices of petrol do
include cents. The current price of super petrol in
I still remember the old days of price controls when sugar cost Sh4.50 per kilo. A half kilo would go for Sh2.25 and a quarter for Sh1.125. But since the smallest denomination coin was 5 cents (ndururu in my language), shopkeepers faced an interesting problem: should they charge Sh1.10 or Sh1.15.
The standard business practice was to charge the higher amount. However, if there was a rumour that government inspectors were in town, the shopkeepers simply refused to sell quantities whose prices were not multiples of 5 cents.
Today, the ndururu is no longer a legal tender; indeed, the 10-cent (king’otore) is also out. The smallest denomination coin issued by the Central Bank of Kenya (CBK) is the 50-cent, but even this is facing serious rejection by the public. Many traders refuse to accept it arguing that their banks do not recognise it.
While the CBK has issued notices stating that the 50-cent remains legal tender, the public rejection is a clear indication that this coin is now redundant: nobody needs it and, therefore, we shouldn’t spend money minting it.
But the question still remains: what would be the effect of abolishing the cents from Kenyan currency? I am not an economist but from my layman’s point of view, I don’t see any; after all, we are not using the cents anyway! In addition, as the article from two weeks ago demonstrated, even commercial banks are facing problems acquiring the cents coins.
Curiously, however, two of my bank accounts have balances with 87 cents and 19 cents respectively. I wonder what the bank would do if I demanded to be paid the full amounts in cash. Where would they get the one cent coins (let alone 10 and 5 cents)?
In contrast, my M-Pesa balance never reflects any cents and I have never encountered any problem or inconvenience as a result of that. I guess this is the same case with all other mobile phone money transfer services. Perhaps this is the proof of the uselessness of cents that the CBK needs in order to take the bold step of abolishing them from our currency.
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