I do support the phasing out of forex auctions and opening up of capital markets, enough of foreign exchange rationing!

I do not see any meaning to taking out the zeros in the Naira or forcefully matching it to the dollar, eventually the market will bring the Naira to its real value in terms of the dollar under a high capital mobility. If we peg it to the dollar, then the CBN has to always stand ready to match the demand of the dollar whenever needed, I doubt we're able to do this.

Okay, I'm beginning to confuse myself, point is that I think re-denomination is fruitless if we do nothing to raise the real productivity of the economy. It's just a nominal change, it will have little effects on REAL values later on.

is there any economist in the house who can break it down for some of us

can anyone possibly give a non-biased analysis of this, how will this benefit the economy , and what are the possible detriments?

i don't want to get too excited, or cynical,


how was the Nigerian economy before the devaluation of the naira in the 80s? (Structural adjustmnt programme) does this mean we are going back to those times?

an economist pleaseeeeee

All the people who supported this idiotic government decision should be rounded up and shipped to Ghana. My worst fears about Professor Charles Soludo have been confirmed. He is not qualified to be called an economist.

Are we talking about the same Soludo, that eased Inflation, Stabilized the Nigerian Economy, and ensured that the Foreign Reserved were properly Managed.

I don't care how bad you think Nigeria is, or where you come from, or how poor of a standard of living you get. Soludo wasn't voted Africa's Best Central Bank Governor for no reason.

God Bless Charles Soludo.

Nigeria wouldn't have to re-dominate the Naira in the first place, if he had been CBN Governor from Independence, till date.

Nigeria's Inflation has been worserning from Independence, but as soon as he cam into office, it eased. The Nigerian economy, is growing steadily and gearing up for 12.5% growth annually. The standard of living in Nigeria has increased. Yet people question his leadership.

@dblock,
do u mean nothing good can come from the Nigerian govt? we shouldn't have such pessimistic, if we want to move forward,

im still calling out for an economist to break it down, before i can join the cynical bandwagon

I mean people are pessimistic. They perceive every decision made by the Nigerian Government as a bad one.

If the same decision was made, in another country with Denomination problems, people would laud the Government. Or at least be able to justify their protest if they opposed it.


The re-denomination, will mean easier Transactions, and less money in circulation. Less money in circulation, will mean less money been produced, and less money been produced, could potentially mean more durable money (Polymer), due to less money been spent on the production of money. The re-denomination will also accelerate the CBN's goal to make Nigeria a cashless economy.

The re-denomination is only achieved after numerous monetary policies. The re-denomination will mean that Naira figures will look less obscure, when presented in mediums such as Newspaper articles etc. It encourages confidence in the economy, and makes monetary figures appear more accurate.

Its a ludicrous idea, If it is capable of improving Nigeria's economy, it would have been done a long time ago.It economic terms, you must have the goods to back up your currency.You ned to look at the real value of economic living.

If minimum wage N10,000 a month, a bottle bag of rice rice is N6000(60%) of income. in US @ $5/hr, 160hr/mnth is $800/mnth bag of rice is $25(3%).Try calculating for price of other essencos(eg palm oil, fuel, housing) and think of how things could possibly change. Unless productivity is improved it is just a wuru-wuru to the answer gamble.
It will not happen! Soludo is just making noise because Yar Adua is about to replace him with a northerner. Kupolukun will go first then Soludo.

In the 70's and early 80's It was the value of living/essencos that made life easy and when price went up remember that Buhari forced it down, and when Babamgida came lprice went up and life went down the drain.Remember bricklayer could afford to eat bread with milk, Titus, and Geisha wash it down with 7up. They were almost the only ones eating these items why can't they do it now? I you understand the word essenco means you know about life in Nigeria before SAP. If you don't know about these thing you can't grasp the scale of the scale of Nigeria's economic failure. No country can depend on joint venture crude production.

Well I very much hope that in the near future Bricklayers will earn enough dough to be able to afford Titus and 7up. Until this is achieved, Nigeria is nothing but a failed state, and the economic policies carried out by economic experts, are futile and very much political.

This is just political gymnastics; a temporal diversionary tactics.

One pet theory is that the government plans to depreciate the Naira, and is using this re-denomination as a cover.

anyone that studied economics will agree with me that this is a welcome development for the Nigerian economy in the long run

I have a question for the house and soludo. Please, can soludo or anybody in the house tell me what happens to existing amount in the bank of various individuals,will the division of 100 affect the total amount too ?

THATS A GOOD NEWS,BUT WILL THE STANDARD OF LIVING IMPROVE AS WELL, COS THE NAIRA MIGHT BE EQUIVALENT TO A USD BUT THE STANDARD OF LIVING MIGHT STILL BE THE SAME DONT YOU THINK ABOUT THAT,

kenwhyte:

I have a question for the house and soludo. Please, can soludo or anybody in the house tell me what happens to existing amount in the bank of various individuals,will the division of 100 affect the total amount too ?

I believe the accounts will all be divided by 100, and a new currency will be introduced. The Naira will be re-dominated, August Next year. the naira will be worth more then, so due to the amount of Naira already in circulation, and the disastrous effect it wil have on the economy, a new Naira will have to be introduced. The Old naira will then be exchanged for New Naira, at a exchange rate of 100 Old Naira = 1 New Naira.

My fear is how to sustain the revaluation. As an import dependent nation, where everybody demands for forex to trade and import goods, and you plan paying local, state, fed. allocation in dollars, and goverment  have to trade forex to spend  their allocation and vis a vis the naira is now hard to come by, by the time they revaluate. By implication we will just be going back to square one.
Japanese yen is worthless but that has not affected their standard of living, i see the revaluation coming at the wrong time. We should put more effort to improve the economy more. more of policies to increase production, export, manufacturing and aiding all this with favourably economic enviroment.
The rationale behind revaluation now is what i dont understand cos i am sure it has not improve the standard of living of nigerians, neither will it in anyway affect the economy positively, it is just making naira scarce to come by, it is definately not what is needed now. SAP was given so much economic theory hype then, but this initiative was dissastrous then. lets thread with cautions

Question.

If I have 5 million in the bank, what becomes of it?

Remember Nigeria in the late 70's,thats what is going to happen, sound Economy,where parents will be sending school fees from home to their children who are studing abroad.

Where those in Abroad will come back home with thousands of Dollars and euro only to get few same equevalent with Naira.

We should really be happy about this, we have always been praying to GOD to send us a leader and not a Ruler,to send us some group of people who will deliver us from what the military regime has turn our country to, and here our prayers are been answered little by little yet some people are crying, because they want to continue money laundery.

Do you people think that Soludo and the entire CBN can do this without been in accord with the federal Government? Even if some people thinks is not good, remember is just for a few years as Africa is heading towards a single currency.

“The African Union has granted Nigeria the right to host the headquarters of the African Central Bank when the common currency in Africa materialises. We must, therefore, lead the way in terms of properly aligned currency structure and sound monetary policy framework.

SO whether everyone likes it or not it changes nothing, it is going to be implimented

BBC news this morning call it a welcome development for Nigeria, as it will make Nigeria the China of Africa according to them.More Foreign Investment,employment etc.

I guess Soludo was hired because he has proven his worth,i am not an economist so i am leaving it to those who know these things,hoping that we are not mere copy cats. i learnt that Germany did it in 1923 and most recently Ghana did it this year etc,etc

All the same we have about 11months and 2 weeks to shake it,sieve it and analyse it,consodering the pecularities of our great nation.Nairaland economists,over to you.

So get ready people, if ur salary used to be 50000naira,it just might become 500naira.  

This is going to be great, Nigeria is becoming great again.

Economy will go back to that of 60s and 70s.

More opportunities will be created for our talents in this country.

What a right action in the right direction.

Thank you God for giving us Obasanjo.

Thank you Obasanjo for giving us Soludo.

@arshy: The prayer should be Thank you God for giving us Obasanjo,Thank you Obasanjo for giving us Soludo;and thank you God for Giving us yara dua who mentain Soludo in Office

From an earlier post I made on a different thread:

( What is wrong with Soludo? After minting billions of coins that nobody uses with our hard earned money, and after spending billions of dollars printing new N5, N10, N20 and N50 only recently, he wants to give out another contract for minting and printing so soon?

Abeg we should use what we have till 2010 how can a country be printing new denomination of money every year?

To devalue currency is the easiest thing in the world compared to revaluing. It will most likely fail and even if it succeeds, it will make rubbish of our exports and trade surplus.


Then there is the issue that we will then be unconsciously experiencing massive inflation. After revaluing N1.26 to $1, by the time the currency depreciates a little to N2 per $1, we will not realise that what just happened is that exchange rate just went from N126 per $1 to N200 per $1 in terms of the old currency.

So revaluing the currency is actually devaluing our assets and in essence our lives.


Not to forget that Nigerian bankers are about the smartest in the world when it comes to looking for loopholes in government policies that can be used to rip people or the government off legally.


So please Soludo should leave our currency alone. Japanese Yen is almost equivalent to the Naira yet they have not died. In fact they are doing very well.

This may just be an attempt to please the ignorant masses that complain everyday that our currency has no value.



Now coming back to this issue, I must thank debosky for posting my mind on this matter.

As our economy improves, and we begin to demand payment for our exports in Naira, our currency will APPRECIATE. We don't need these gimmicks of devaluing and revaluing. It's a plot to shyst Nigerians of their hard earned money.


@Echidime

are you yet to learn? Whatever BBC says is good for Nigeria is bad and whatever BBC says is bad for Nigeria is good.

The USA have been begging China to increase the value of the yuan and China has refused. How is it now that when we revalue ours, we'll be the China of Africa?


FELLOW NIGERIANS, WE MUST VEHEMENTLY REJECT AND PROTEST THE ILLEGAL COUNTERFEITING, FORGERY OR FRAUDULENT TAMPERING OF THE NAIRA BY THE CBN. ALL HANDS MUST BE PUT ON DECK TO RESIST THIS MOVE AND PREVENT UNTOLD SUFFERINGS ON NIGERIANS.
(you have to use an Abacha type accent).



NO TO CURRENCY ILLUSIONS.

Full text of Soludo's address on the subject matter

Strategic Agenda for the Naira
I: Introduction
It is my pleasure to welcome everyone to this important briefing on the ‘Strategic Agenda for the Naira’.  As you may recall, it is about three years since we launched (in this very Auditorium on July 6, 2004) the 13-point reform agenda designed to restructure, refocus and strengthen the Nigerian banking and financial system.  At that meeting, I observed that the agenda constituted ‘Phase One’ of the reforms.  We have since introduced other complementary reforms designed to stabilize the exchange rate, reduce inflation, reform microfinance, restructure the lower denominations of our currency and re-introduce coins, as well as promote the efficiency of the payments system.  We have also launched the design of a comprehensive long-term reform agenda for the financial system (the Financial System Strategy 2020 ---FSS2020).
All these reforms are driven by our medium and long-term objectives to ensure economic prosperity of Nigeria, and for Nigeria to become the Africa’s financial hub by the year 2020.  Only a sustained stable macroeconomic environment and a sound and vibrant financial system can propel the economy to achieve our national desire to become one of the 20 largest economies in the world by the year 2020.
The Strategic Agenda for the Naira is therefore being launched today as ‘Phase Two’ of our reform agenda, and as a necessary complement to the 13-point agenda of Phase One and other reforms.  Phase Two of the reforms has become all the more imperative given the progress so far on Phase One, as well as the emphasis of the new Central Bank of Nigeria Act on ensuring monetary and price stability.  According to the “Central Bank of Nigeria Act, 2007”, (Section 2) the key objects of the Central Bank shall be to: (a) ensure monetary and price stability; (b) issue legal tender currency in Nigeria; (c) maintain external reserves to safeguard the international value of the legal tender currency; (d) promote a sound financial system in Nigeria; and (e) act as banker and provide economic and financial advice to the Federal Government.  The Phase Two, by focusing on the Naira, means that the Central Bank intends to give greater emphasis to the most important function of central banks everywhere in the world namely, to issue legal tender currency and to defend its value (domestically by ensuring low inflation and externally by ensuring appropriate and stable exchange rate regime).  Our specific objective in Phase Two of the reforms is to make the Naira the currency of reference in Africa, and thus a strategic catalyst for achieving the goal of an international financial centre as well as promoting Nigeria’s rapid economic development.  We also need the Phase Two to ensure that the results being achieved under Phase One are deepened and sustained.
II:  Overview of the Reforms since 2004 and Outcomes
Before we outline the elements of the Strategic Agenda, it is germane to briefly review our progress so far. As you are aware, most of our reforms have focused on structural and institutional reforms, and have included the following:
• Strengthened the institutional framework for the conduct of monetary policy
• Bank recapitalization/consolidation
• Programme to possibly eliminate or reduce government ownership of any bank (to no more than 10 percent)
• Improved transparency and corporate governance
• Zero tolerance to misreporting and data rendition, and strict adherence to the Anti-money laundering regulations
• Implementation of Basel II Principles and Risk-based supervision
• Payments system reforms for efficiency---- especially the e-payment
• Reforming the Exchange rate management system--- adoption of the Wholesale Dutch Auction System (WDAS) and increased liberalization of the forex market (which since 2006 led to the convergence of the parallel and official exchange rates for the first time in 20 years).
• Restructuring the Nigerian Security Printing and Minting, Plc;
• Addressing issues of technology and skills in the banking industry especially in risk management and ICT.
• Launching of a new Micro finance policy and regulatory framework to serve the un-served 65 percent of the bankable public
• Ongoing Pension, Consumer credit, and Mortgage system reforms
• Forging strategic alliances and partnerships between Nigerian banks and foreign financial institutions especially in the area of reserve/asset management
• Establishment of Africa Finance Corporation (AFC), as first private-sector led African Investment Bank
• Encouragement of Nigerian banks to go global, leading to more than doubling of branch network in West Africa since 2004; setting up of subsidiaries in London as well as Nigerian banks successfully issuing Eurobonds and getting listed on the London Stock Exchange.
Our grand objective in the banking sector reforms was to re-engineer and fast-track a system that will engender confidence and power a new economy. So far, the grand objectives of that policy are being achieved, and our consolidation programme has been adjudged about the most successful and at least cost to the tax payers in the world. The total deposits trapped in the failed banks as percentage of GDP is about 0.7% (the lowest in the world), and no private sector depositor would lose a kobo of his/her deposit. The banking system is the safest and soundest it has ever been in history. Deposits and credits have more than doubled, and non-performing loans as percentage of total loans have gone down from about 23% before consolidation to about 7% currently. Individual banks now finance big projects valued at hundreds of millions of dollars and also operate in the oil and gas sector --- a feat they never could do before now.  Interest rates are gradually coming down (with average lending rate at about 16.9%, down from 25%). Currently, commercial bank branches have gone up from about 3,200 before reforms to over 4,100, and total employment in the sector has gone up from about 55,000 before reforms to over 61,000 currently.   The world is celebrating Nigeria’s success, and over $1.5 billion of foreign investment has gone into the sector since 2005. By end 2007, there will be about 7 or more banks with shareholders fund in excess of $1 billion and over 10 banks with market capitalization of over $2 billion each (there was none in 2004).  In 2004, there was no Nigerian bank in the top 1000 banks in the world. As at the end of 2006, there were 12 banks in the top 1000, with one ranked 355th (top 500 in the world).  Our banking system is powering the Nigerian Stock Exchange. Today, Nigeria has the fastest growing banking system in Africa, and one of the fastest in the world. As seasoned commentators have observed, it has taken Nigeria less than three years to achieve what it took South Africa 20 years to achieve in the area of banking. To put it succinctly, a new banking system has emerged, and will only get stronger for the benefit of the Nigerian economy. We firmly believe that with the sustenance of the reforms as the CBN is determined to do, the best is yet to come.
On the macroeconomic front, double-digit and volatile inflation rate (which used to be the norm) have been subdued as inflation rate has remained at single-digit since last year. However, inflation risks remain high. The Naira/US dollar exchange rate has remained stable (with steady appreciation of Naira against the dollar) since 2004, and the GDP has maintained a robust growth rate of over 6% per annum since 2003.
III:  Matters Arising and Challenges Ahead
Despite progress on a number of fronts, there are still enormous challenges and unfinished business.  At the economy-wide level, there are still chronic challenges of insecurity of lives and property, infrastructure deficiency (especially power and transportation), education crisis, among others. 
At the level of the financial system, we have the huge task of effectively implementing the FSS 2020. There is still the risk of fiscal dominance and volatility in the fiscal operations of government.  Evolving Fiscal Responsibility arrangements and framework for managing highly volatile oil revenues will be critical. Other unfinished business in the reforms includes:
• Risk-based, consolidated and strengthened banking supervision
• Mortgage, SME, and consumer credit reforms
• Adherence of States and LGs to the requirement under the Micro Finance policy to devote at least 1 percent of their annual budget to micro credit
• Continued reform of the payments system, especially the e-payments system and enforcement of the Dud cheque offences Act.
Efforts will continue to be made to address these unfinished issues.
IV: The Strategic Agenda
The thrust of the agenda focuses on the Naira as our national currency---- to realign its denominations, ensure its stability and global integration.  These will help to deepen the reforms of the financial system and national economy, and make the Naira the currency of reference in Africa thereby facilitating our quest for international financial status.
The new focus is an extension of our previous currency redesign and re-issuance of the lower denominations and attempt to re-introduce coins.  Our goals were to redesign the currencies after 23 years (contrary to the international norm of currency redesign after 6- 8 years), drive down the cost of currency printing and experiment with the polymer substrate.  Our objectives are largely achieved and we have learnt a lot from the exercise.  However, in the light of the new mandate by the CBN Act (2007) to ‘ensure monetary and price stability’, as well as the vision articulated under the FSS 2020, it has become imperative for us to evolve a more comprehensive strategy for the Naira as a reference currency.
Currency redenomination and liberalization are not without risks especially for small open economies such as Nigeria. However, we believe that the time is auspicious for such reforms especially in the light of the following enabling conditions:
• Overall commitment of the Federal Government under Alhaji Umaru Musa Yar’Adua (GCFR) to sustaining macroeconomic and other structural reforms
• a robust external reserves to meet almost 20 months of foreign exchange disbursements and 25 months of imports
• Stronger banking system powering a new economy and capital market
• Inflation down to single digit, and robust GDP growth of about 6% and above
• Exchange rate stability and elimination of multiple currency practices that had been prevalent before now
• Strong capital inflows (with Central Bank as increasingly marginal player in the forex market)
• Debt relief: Nigeria without a debt burden
• Non-oil exports growing strongly (24% in 2006)
• Nigeria de-listed from the FATF list
New CBN Act not permitting CBN to grant ways and means advances to Government exceeding 5% of previous year’s revenue provided such financing is retired before end of the financial year. Indeed, CBN is not positively disposed to granting any ways and means advances.
It is in the view of the foregoing enabling conditions, and our vision for a Naira that is the currency of reference in Africa that the Board of Directors of the Central Bank of Nigeria has approved the following agenda for the Naira:
A: Currency Re-Denomination
Here, we intend to restructure the entire currency by dropping two zeroes or moving two decimal points to the left from the currency, and issuing more coin denominations.  This would entail a total currency exchange and phasing-out of all the existing denominations from August 1, 2008.  Effectively, at the current exchange rate, this policy would mean that the Naira/US dollar exchange rate would be around N1.25 to US$1 then.  All Naira assets, prices and contracts will be re-denominated by dropping two zeroes or two decimal points to the left with effect from this date.
The proposed currency structure is as follows:
COINS: 1 kobo, 2 kobo, 5 kobo, 10 kobo, 20 kobo
NOTES:
50 kobo, 1 Naira, 5 Naira, 10 Naira, 20 Naira
Effectively, our plan will restore the value of the Naira (in the short-term) close to what it was in 1985 before the commencement of the Structural Adjustment Programme (SAP) in 1986.
Re-denomination and re-introduction of totally new currency structure (notes and coins) following the progress so far with other reforms and the enabling conditions in the economy today are designed to better anchor inflationary expectations, strengthen public confidence in the Naira, make for easier conversion to other currencies, reverse tendency for currency substitution, eliminate higher denomination notes with lower value, reduce the cost of production, distribution and processing of currency, promote the usage of coins and thus a more efficient pricing and payments system, and lay the foundation for the convertibility of the Naira as well as make it the ‘Reference currency’ in Africa.  The African Union has granted Nigeria the right to host the Headquarters of the African Central Bank when the common currency in Africa materializes.  We must therefore lead the way in terms of properly aligned currency structure and sound monetary policy framework.
Several countries in the world have undertaken currency re-denomination at various times and for different reasons, including: Afghanistan (2002); Germany (1923, 1948); Argentina (1970; 1983; 1985; 1992); Bolivia (1963, 1987); Brazil (1967, 1970, 1986, 1989, 1990, 1993, 1994); China (1955); South Korea (1962); Mexico (1993, 1996); Ghana (2007); Israel (1948, 1960, 1980, 1985); Turkey (2005); Angola (1995, 1999); and others.  Evidently, many countries have had to undertake the re-denomination more than once. In the case of Brazil, it had to do it many times before it got it right. The major challenge is to undertake other complementary reforms, particularly macroeconomic reforms that will underpin price stability and continuing confidence in the economy.  This is where we believe Nigeria’s experience is likely to be different from others, having learnt from the experiences of other countries.
Consequently, as necessary complements to the currency re-denomination, we intend to introduce three additional measures:
• Adoption of Inflation-Targeting Framework for the conduct of monetary policy;
• Sharing Part of the Federation Account in US Dollars to deepen the Forex Market and for Liquidity Management
• Current Account Liberalization/Co-nvertibility and Accession to Article VIII of the IMF.
B: Adoption of Inflation-Targeting Framework for the Conduct of Monetary Policy: to commence from January 1, 2009.
In the light of the new mandate as contained in the new CBN Act (2007) urging the CBN to “ensure monetary and price stability” as well as the need to provide a transparent, credible framework to lock-in inflationary expectations, the CBN will adopt inflation target as the nominal anchor for monetary policy with effect from January 1, 2009.   Low and stable inflation will be our monetary policy’s primary long-term goal.  Focusing on inflation targeting does not mean that the CBN will not be interested in other broader objectives of macroeconomic policy--- output growth, employment, exchange rate, and balance of payments.  Rather, an inflation-targeting framework will enable CBN to pursue these objectives in a more disciplined and consistent manner rather than the ad-hoc processes of the past. Locking-in inflationary expectations is one effective way of ensuring that the currency re-denomination will be sustainable.  The outcome of this new framework will greatly improve the credibility of the CBN as the Monetary Authority, as well as deepen the financial markets and promote rapid development of a private sector-led economy.
We will use the next 16 months to fully prepare for the introduction of this framework especially in the light of the deep technical issues involved.  The CBN would collaborate with the National Bureau of Statistics in significantly improving the availability of high frequency and reliable data especially those of the GDP and more robust measures of the price indices.
C: Sharing Part of the Federation Account Allocation in US Dollars to Deepen the Forex Market and for Liquidity Management: to commence from September 2007.
Given the structure and development of the financial system, the underdeveloped nature of the Forex markets, as well as the restrictions on foreign exchange transactions, the CBN has traditionally fully monetized the foreign currency receipts in the Federation Accounts, to be shared by the three tiers of government. Initially, the CBN also maintained the accounts for all the tiers of government--- as part of the liquidity management framework.  Subsequently, as the banking system developed, the CBN allowed the share of the states and LGs to be deposited with the commercial banks.
Recently, following the reforms in the banking sector and the further liberalization of the Forex market, both the financial system and the forex market have deepened and become increasingly sophisticated. Since 2006, the CBN adopted the Wholesale Dutch Auction System (WDAS) in the forex market and significantly liberalized the forex market. Furthermore, Nigeria has exited the debt trap, built up significant external reserves, and the autonomous inflows into the Forex market are such that the CBN has become a marginal player in the forex market.  The forex market has become so efficient that Nigeria no longer has multiple currency practices (as defined by the IMF).  In the last two years also, the CBN has consistently intervened in the forex market through the increased sale of foreign exchange as an instrument of liquidity management (the so-called special auctions).  In December 2006, the CBN introduced the Monetary Policy Rate (MPR) with the corridor, and this has eliminated the high volatility in the money market interest rates. The money market is deepening, and the bond market is also evolving.
The above conditions indicate that the private financial markets are getting deeper and sophisticated enough to warrant further steps on the part of the Central Bank to gradually withdraw as a dominant player in the forex market.  The inter-bank forex market is now the dominant segment of the market, and needs to be deepened.
Consequently, the Monetary Policy Committee (MPC) of the CBN has approved the sharing of part of the Federation Account allocation to the Federal Government and the State Governments in US dollars.  The Local Governments are excluded in this phase.  For the Central Bank, this could also provide an additional instrument for effective liquidity management as we migrate to inflation-targeting framework.
The proportion of the Federation Account to be distributed in dollars will be determined from time to time, but largely dependent on the assessment of the forex market as well as the liquidity management requirements of the CBN.  Both the States and Federal Government will be required to open ‘Special Domiciliary Accounts’ with commercial banks of their choice. The special account can only be accessed by monetizing the balances into Naira. In other words, the Governments cannot withdraw dollar cash but may also utilize part of their domiciliary accounts for settlement of external obligations (e.g. opening of letters of credit).  From September 2007, the exchange rate that will be applied in the monetization of Federation Account as well as the ‘Special Domiciliary Accounts’ will be the inter-bank rate on that day.
As the market deepens, the CBN will gradually withdraw from the WDAS, and only intervene in the market (buy or sell forex) as may be required to achieve defined policy objectives. 
This new policy thrust is expected to deepen the forex market, promote financial market development, and improve the degree of integration among the domestic markets and with international markets. This policy will complement the ongoing programme of allowing Nigerian banks to manage part of our external reserves in collaboration with foreign asset managers. The net effect of these will be to create and deepen capacity within our banks.  All these will also provide important building blocks for the external current account convertibility and attainment of the IMF Article VIII status.  The challenge here is that both the CBN and the commercial banks would have to manage the risks inherent in foreign exchange trading and deploy a sound system of monitoring foreign asset-liability matching. The CBN in particular, would need to sharpen its skills to monitor and regulate the use of domiciliary accounts in accordance with the international best practices as well as the rules and guidelines governing the anti-money laundering laws and regulations. The Governments too would need to be on top of the risk management techniques for optimal management of their portfolios.
The CBN is conscious of the risks of dollarization of the economy and will take steps to avoid such. Also, we are conscious of the dangers of the Dutch Disease and hence the need to avoid the repeat of history in terms of high overvaluation of the Naira in real effective terms as happened during the 1970s until early 1980s.  Non-oil exports have begun to recover and grew by 24% in 2006.  Also, capital inflows have been growing rapidly and highly overvalued exchange rate would hurt these trends. More fundamentally, without a currency re-denomination/realignment, a significant appreciation of the Naira/dollar exchange rate would lead to fiscal crisis given that much of the revenue is dollar denominated, and such appreciation would also significantly deplete our external reserves.  Thus, while we deepen the forex market and effectively manage our liquidity, we would not lose focus on ensuring appropriate exchange rate regime for macroeconomic balance.
D: Current Account Liberalization/Convertibility and Accession to Article VIII of the IMF: to commence January 1, 2009
As a necessary complement to the foregoing policy initiatives, and to further deepen the integration of our financial system and economy into the global economy, we intend to embark upon full current account liberalization/convertibility by January 1, 2009.  This would entail that Nigeria eliminates all restrictions on current account transactions, and accession to Article VIII of the IMF means that the policy is not easily reversible.  Out of the 185 member countries of the IMF, 167 have acceded to the Article VIII on current account convertibility.  It is our belief that the conditions are right for Nigeria to now join the world league.  The timing is proposed to coincide with the commencement of the inflation-targeting framework.
V: Conclusion
These measures constitute a key component of the FSS 2020 agenda: our quest to become an international financial centre and Africa’s financial hub.  They will complement and deepen the ongoing financial system reforms.  The conditions are now right, and despite the challenges, we are determined to ensure effective design and implementation.
Furthermore, we are working towards greater transparency in the formulation and implementation of our monetary policy. A new Monetary Policy Committee (MPC) will soon be reconstituted in accordance with the new CBN Act, and Minutes of the MPC shall be made public.  We also intend to undertake greater public education about what we do and why we do them the way we do.
Are these policies consistent with the drive towards a single currency in West Africa? Yes: Nigeria remains committed towards the ECOWAS goal.  Currently, the Nigerian economy constitutes about 70 percent of the entire ECOWAS economy and accounts for about 80 percent of the total external reserves. It therefore goes without saying that if the Naira is properly aligned and can become the ‘Reference Currency’, the goal of a monetary union becomes all the more credible and sustainable.  Nigeria has met all the primary convergence criteria and hopes that the other countries will do same on a sustained basis.  In the meantime, Nigeria must continue to make progress.
• Professor Soludo, CFR, the Governor of the Central Bank    of   Nigeria, delivered this address yesterday 14th August,2007.

if you thought you were a millionaire, think again

@denex: If you know so much better than soludo, I wonder why you are not the Governor of the central bank of Nigeria.

BRIGHTER DAY AWAIT NIGERIA. DO YOU ONCE SOLUDO SAY'S IT HE WILL ACCOMPLISH IT?LIKE WHAT HE DID IN THE BANKING SECTOR.

DO YOU ALL KNOW WHAT?I TRUST THAT MAN ALOT.

HE WILL DELIVER A VERY GOOD JOB, HE MIGHT NOT BE ABLE TO ACHIEVE IT COME AUGUST NEST YEAR, BUT HE WILL DEFINITELY COME TO THE END OF IT.



ONLY THING WE NEED IS TO CONTINUE PRAYING FOR THAT SHARP(SOLUDO), THAT THEY WILL NEVER SEE HIM TO
KILL IN JESUS NAME.


Thanks
papa

Amen

''Sorry I cannot insert what SEUN posted''

SEUN why are u talking like this? I did not expect this from u knowing Ur status.

you should have asked for the benefits first. Please don't talk like that again.

The change will go a long way to help our economy in the international level.

God Bless Nigeria

I Love Nigeria

So that when Governors ship 2 billion naira to Texas, they can exchange it for 2 billion dolls and . . . WOW! Western union go run down o.


Thanks Mr. Soludo Until we see it happen.

Re-denomination of currency is carried out for various reasons as rightlty pointed out by the CBN governor. Russia did a redenomination in 1998 but their main intention was primarily for convenience and not to have a technical effect on the value of the currency. They still experienced some level of inflation after the redenomination which contributed to the non-success of the exercise because measures to ensure stability of the value of the currrency was not taken into consideration.

Zimbabmwe did it as well but it has not improved their economy.

Ghana is at the verge of implenting their's and their reasons range from reasserting monetary sovereignty to ensuring portability in carriage of their currency and ensuring the development of the informal sector which will be achieved through the use of cashless means of exchange.

However, it must be pointed out that erasing zeros off bank notes cannot do the painless miracle. Rather it should be a signal the government sends  to its citizens that inflation is finally within manageable limits. As for the dollar exchanging for 1.25 naira that is the rate the dollar will exchange for the naira if the rate prevailing today still exists by August next year.

Just imagine footballers and athletes being paid their bonuses in naira because of it's relative strength compared to the dollars. Imagine all those who treated the naira without respect having some modicum of respect for it. Imagine going around africa with the naira in your pocket and using it to carry out transactions in a number of countries.

In life they say we learn from the mistakes of others atimes. I believe the professor has carried out a study on a lot of countries before advocating the policy. He by now will know why it worked in some countries and why it didn't work in others so as to make it work in naija.

It seems Naira will be listed as a Pair in Forex as from August 2008 with this re-denomination:

http://news.tradingcharts.com/forex/5/0/96856005.html

Hope all this Yahoozee Guys and Gals won`t be desperate to scam all this Oyinbo pple b4 that date sha?

Hope it works out with this re-denomination sha.

Love Ya.
Azpunpin