The Bahamas could say goodbye to the one-cent coin at the end of next year, demoting the nickel to the lowest denomination in the bank and alleviating the cost of creating and distributing the coin for the Central Bank of The Bahamas (CBOB), according to a study commissioned by the bank.
According to CBOB, in 2017 it cost the bank $443,000 to distribute the one cent coin. The study found that the bank could save $7 million over ten years by eliminating the coin.
“Additionally, there are logistical and processing costs to the commercial banks and the retail trade,” the bank’s study found.
CBOB said that in 2018 it began the study on the need for the one cent coin with the assistance of a company called Secura Monde International.
“The proposal is that the one cent coin should cease to be legal tender with effect from December 31, 2020,” the study states.
“If the one cent coin is eliminated, the five cent coin will be the lowest denomination issued.”
According to the bank, the removal of the coin will not have an effect on electronic payments, while cash payments will be rounded off to the nearest five cents.
The CBOB outlines its rounding rules as such:
• One and two would be rounded down to zero (e.g. $4.21 becomes $4.20).
• Three and four would be rounded up to five (e.g. $7.23 becomes $7.25).
• Six and seven would be rounded down to five (e.g. $15.67 becomes $15.65).
• Eight and nine would be rounded up to 10 (e.g. $27.89 becomes $27.90).
The bank explained in its study that rounding should only take place on the total bill and that individual item prices should not be adjusted.
“… prices should not be changed in advance and existing price points (such as with items priced at 99 cents) should remain,” the bank noted.
“The amount of VAT (value-added tax) paid is unaffected by rounding. VAT is calculated on the amount charged for taxable supplies. Rounding should take place after the VAT is calculated on a bill and only when the customer is paying the total amount of an invoice in cash or paying the balance of an invoice in cash.
“If the customer is paying the total bill with cash and card, an amount rounded to the nearest five cents should be paid in cash and the remaining odd amount paid by card. For example, a total bill of $23.39 could be paid with $3.00 in cash and $20.39 by card.”
The CBOB further explained in its study that the one cent coin, since its first use in 1966, “has lost around 90 percent of its purchasing power, while the cost of its production and administration grew in line with inflation and now exceeds its face value”.
The bank said countries such as Australia, Brazil, Canada, Denmark, Ireland, Norway, Sweden, South Africa, and Trinidad and Tobago have already eliminated their lowest denomination.
“Countries that have implemented a low denomination coin withdrawal, universally assessed as unlikely that consumer prices will change to such an extent that it has an impact on the inflation,” the study points out.
“The competition in the retail sector typically restrains price increases. The overall impact on the cost of living and on retailers’ sales and profitability from the low denomination coin withdrawal is generally very small.”
The bank said it would allow 12 to 24 months for informational campaigns on the withdrawal of the coin, after which time coins will still be able to be redeemed up to the end of June 2021.