Cents Make No Sense After realizing the shortage of cents in banks, my colleague George 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 things that include cents at the end. I think George is on to something here, I also don’t understand why we use cents and this really got me thinking. First let me correct him, the controlled prices of petrol has the price in Nairobi at Kshs 117.67 per litre,but this is not a problem because nobody orders petrol in litres.we ask for a certain shillings worth quantity say Kshs 500. I remember the days of price control when sugar would cost Kshs 4.50 per kilo.A half a kilo would cost Kshs 2.25 and a quarter Kshs 1.125.But since the smallest denomination coin was 5 cents (ndululu) in my language, shopkeepers faced an interesting problem-should they charge shs 1.10 or shs 1.15. The standard business practice was to charge the higher amount. If there was a rumour that government inspectors were in town, the shopkeepers simply refused to sell the quantities whose prices were not multiples of 5 cents. Today the ‘ndululu’ is no longer a legal tender, indeed the 10 cents (ing’otole) is also out. The smallest denomination issued by the central bank is 50 cents but then this is facing serious rejection by the public. Many traders refuse to accept it arguing that their banks don’t recognize 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 cents from the Kenyan currency? From my layman’s point of view, I don’t see any; after all we are not using the currency anyway! In addition even commercial banks are facing problems acquiring cents coins. But curiously, two of my bank accounts have balances with 87 and 62 cents respectively, I have wondered what would happen if I demanded the full amounts in cash. Where would they get the coins? 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. Dominic Musyoka The author is the Financial Controller at Senaca Group –A leading security services Provision and Consultancy Company with interests in Africa, Asia, North America and the Middle East Cents Make No Sense After realizing the shortage of cents in banks, my colleague George 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 things that include cents at the end. I think George is on to something here, I also don’t understand why we use cents and this really got me thinking. First let me correct him, the controlled prices of petrol has the price in Nairobi at Kshs 117.67 per litre,but this is not a problem because nobody orders petrol in litres.we ask for a certain shillings worth quantity say Kshs 500. I remember the days of price control when sugar would cost Kshs 4.50 per kilo.A half a kilo would cost Kshs 2.25 and a quarter Kshs 1.125.But since the smallest denomination coin was 5 cents (ndululu) in my language, shopkeepers faced an interesting problem-should they charge shs 1.10 or shs 1.15. The standard business practice was to charge the higher amount. If there was a rumour that government inspectors were in town, the shopkeepers simply refused to sell the quantities whose prices were not multiples of 5 cents. Today the ‘ndululu’ is no longer a legal tender, indeed the 10 cents (ing’otole) is also out. The smallest denomination issued by the central bank is 50 cents but then this is facing serious rejection by the public. Many traders refuse to accept it arguing that their banks don’t recognize 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 cents from the Kenyan currency? From my layman’s point of view, I don’t see any; after all we are not using the currency anyway! In addition even commercial banks are facing problems acquiring cents coins. But curiously, two of my bank accounts have balances with 87 and 62 cents respectively, I have wondered what would happen if I demanded the full amounts in cash. Where would they get the coins? 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. Dominic Musyoka The author is the Financial Controller at Senaca Group –A leading security services Provision and Consultancy Company with interests in Africa, Asia, North America and the Middle East
Posted on: Fri, 31 May 2013 11:07:21 +0000
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