Its funny how we nigerians do things. How come Soludo never thought about re-dominating the naira before he come up with the new naira notes. Is it not just pure waste of money when he is trying to phase out the higher denominations. I really hope then if someone earns N200 as regards N20,000 of today, it will be worth it.

Anyway lets seat back and relax and enjoy the ride, its a whole new experience for Us.

it will change our economy in the sense that things will be a lil bit cheap; and so many inferior goods will be instincted; like cheap buscuits and so many other cheap things will be upgraded.

akins4:

it will change our economy in the sense that things will be a little bit cheap; and so many inferior goods will be instincted; like cheap buscuits and so many other cheap things will be upgraded.

I dont think it has anything to do with a particular product because the plan is designed to actually have multiple effect.

@ post
I dont think it will have any adverse effect on our capital market,instead it will make it look attractive to foreigners as more direct investment would come into our economy.

what most Nigerians are not seeing is the international reaction to the idea. Everyone is just talking about my salary and house rent which i beleive is no issue in this matter.

akins4:

it will change our economy in the sense that things will be a little bit cheap; and so many inferior goods will be instincted; like cheap buscuits and so many other cheap things will be upgraded.

How can you say it will make things cheap when my salary has been equally divided by 100. The only difference is we will start talking of kobos and hundereds rather than million and thousands.

Effect on the stock? yep, I finally got the answer this morning going to work and listening to AM 570-Wall street Journal radio. Nigeria was specifically mentioned in the scheme of things and how some of the brokers here in the states are looking forward to helping investors buying stocks in the volatile developing economy. The main thing is they screaming is - The return is great.

The upside is that lot of money is going to be invested in the economy. Not in developmental terms but in growth. Stock is going to jump up as crazy.

The downside, those freaking investors are just financial investors and will speculate like crazy to get the stocks as high as possible. Then, the big bang will happen. They will take out their money to go invest in another sucker economy. While crashing the stock market. Another thing is, we will not be insulated from the global market downside again.

Guys not all investments are good. some are predatory!

md_dude:

Effect on the stock? yes, I finally got the answer this morning going to work and listening to AM 570-Wall street Journal radio. Nigeria was specifically mentioned in the scheme of things and how some of the brokers here in the states are looking forward to helping investors buying stocks in the volatile developing economy. The main thing is they screaming is - The return is great.

The upside is that lot of money is going to be invested in the economy. Not in developmental terms but in growth. Stock is going to jump up as crazy.

The downside, those freaking investors are just financial investors and will speculate like crazy to get the stocks as high as possible. Then, the big bang will happen. They will take out their money to go invest in another sucker economy. While crashing the stock market. Another thing is, we will not be insulated from the global market downside again.

Guys not all investments are good. some are predatory!

@ md_dude


AT last!
One sensible post from someone who understands the topic, well apart from stock market
please if u can help out, what do you think the effects of this will be on FOREX trading, (not capital market)

am confused of everything.

@senu, i totally support you,

confusion all over.

swiftycool:

@ md_dude


AT last!
One sensible post from someone who understands the topic, well apart from stock market
please if u can help out, what do you think the effects of this will be on FOREX trading, (not capital market)

I think your post is a bit patronising to say the least what exactly would you classify as sensible? peeps on this forum are just sharing their opinions as far as they understand so you coming with your sensible-than-thou attitude is quite offensive to say the least
Nothing personal but that attitude just doesnt sit right with me. You could be a bit more gracious to those that have endeavoured to reply your post either sensible(like to know your definition of sensible) or not . This attitude is not what we are about on this forum we are here to share and educate ourselves

@ Lagoschic
i feel u oooooo do they still sell that sweet? it was top of the worl sweet oh
@ everybody
i dont think there will be serious confusion only for the ignorant ones i believe it will make our economy better people will hold on to our beloved currency more with respect than ever ans also our ever loyal political leaders will be looking for a way again to carry out naira God will help us

While I appreciate all our apprehension about this re-domination,  one thing everybody seems to forget is that MONEY IS JUST A MEANS OF EXCHANGE. The paper itself isn't exactly a reflection of once wealth but THE VALUE(goods & services) it can get.

There should not be any problem with this exercise,there's adequate notice, and I will asume equally sufficient publication & awareness,

What we should all be concerned with is WILL THE GOVT SUPPORT THE CURRENCY WITH PROPER FISCAL POLICIES??

Once you have all the factors of production to back up your currency ,you don't have a problem,afterall somebody unilaterally devalued the currency(although this should'nt e mixed up with re-denomination).

Another thing we must realise is that money is a political tool,worldwide. Thats why the British refused to join the Euro & the US has been fighting China to float its currency.

Lets support our Naira /Country please,

I support my country, but I need not support bad decisions made in the name of my country. Thanks to democracy.

Let me chip in this.
There'll be some confusion, but that'll be minimal if adequate publicity is done.
One need not bother much anyway. The value of the naira will remain the same.
people will only need to learn with time that, for example, the N 5 naira new note I'm carring is actually worth N500 old note.

I am in agreement with MD dude and had already for seen the big bang being the fate of the Nigerian stock market but could not envisage how. Thank you for showing the how. Economic strategies work alike for many countries but Nigeria is very unlike many countries. As Seun said, put your seatbelt on. It is not pessimism but the story of Nigeria.

Even America has put it's seat belt on following their crazy real estate boom and bang that eventually trickled into the stockmarket and the auto market. How much more the Nigerian market. Not being derogatory but Nigeria and America have quite different laws and more importantly enforcements.

Above all why rush to spend more money to do it when we just spent a ton on new notes? Are there any short term gains? Even if there are long term gains, they will be in the "long term". Why rush?

Theoretically, nothing changes in terms of value and exchange rate to foreign currency. It is like we agreed that I give you 5 glasses of water in exchange for your 1 pen but instead now pour the 5 glasses of water into 1 jug still in exchange for that same pen. We are still in the same position. The amount of work you will need to do to earn N100 pre-change is what you will need to earn N1 post-change. Apart from psychological effect of saying $1 exchange for N1.25, in real terms, N1 then will only be able to buy what N125 can buy today.

But I said theoretically, it may not be so. We expect everybody to move prices 2 decimal points to the left. A loaf of bread that cost N150 now should move to N1.50 but what stop the trader from pricing it at N2.00. That already bring in inflation of 33%. We need a lot of re-orientation from our mindset b4 the D-day.

As someone said, chrislieb is currently quoted N0.68 i.e 68kobo on the stock exchange. What will be its value in the "new regime" since 1kobo will be the lowest denomination?

The end of spraying niara at parties. spraying dollar will be cheaper

@md dude - couldn't have said it better myself. Whilst investment is good, not all investment will benefit Nigeria in the long-term. I second the idea the market will rise in value but probably crash when Togo or somewhere does the same and the investors move on. Because they have no allegiance ot the country they invest in it is easy for them to pull out money at a whim. So when investments come, Nigerians must be wise with who they do business with and under which terms. Business owners will most probably benefit alot but the average man will not see the rewards unless this filters down.

The confusion is just about to start, but with things done the right way we will be better off. What matters with any currency is the value it holds and not the quantity you hold. Thumbs up for the Governor. I only wish and pray that our politicians and economic killers will be excluded from the formulation and execution of this policy.

I want to believe that the stocks will have to be revalued also. So a stock currently priced at N200 will be reduced to N2. That is the only it will make sense.
Overall, I dont think that the change in stock will have any significant impact on the ordinary man.
It seems it is just a game of numbers. If you were earning N20000, you will now earn N200. But the cost of things will remain basically the same.
I just hope that they have thought it through before making the decision.

Leye
www.naijalowa.com

Prohesy - there is going to be a boom in the next 2 to 3 years in the stock market, some of you good investors will be millionaires overnight if you are investing heavily in stocks and there is going to be a bust the impact will be devasting. The reason why the naira is re-denominated is to attract international fund managers to nigeria, a stock that is N68 will be 0.68kobo, but then the naira will be $1.00 to N1.25. if such a stock were to grow from 0.68k to N2.00, that will be rougly $2.00+, with international fund managers bringing in a lot of dollars to invest this is a good returns on there investment. Imagine a fund manager investing $100 million dollars in some nija stocks and there is growth of Xtimes 4, that fund manager has made $400 million. The head of the nigeria stock exchange over recent months have been touring both Europe and American wooing investors to come and invest in stocks, I have a feeling the re-denomination of our currency is one of the areas that the international fund managers pushed for, they want to get maximum returns on their investment. The same Soludo 4 years ago rejected re-denomination when some tink-tank suggested it to him, why is he accepting it now.

Guys,
Why cant we just believe that this would work out. Just like El-Rufai Master Plan idea, i think Soludo is up to the task.

It will definitely affect the stock market oh. There will have to be share reconstruction excercises since the nominal value of shares quoted on the stock exchange is 50kobo which would translate to half kobo. Such reconstructions cost money.
All companies would have to adjust tneir accounting packages and other documents to reflect the change and this would result in extra cost which may decrease the profit f the companies concerned in the short term and 'globally' result to an increase in inflation.

Hi guyz, i saw this somewhere and i thought i should share with u.
Happy reading


Yesterday the currency was re-denominated by removing 2 zeros. Thus N,1000 is now N10 but the policy takes effect on 1 Aug 2008. Theoretically a dollar becomes N1.25 at current rates. Yes O and all of us wey dey earn million don become thousandnaire.

if prices adjust by the same rate all will be well. But you know say Nigeria no be like that. However, I believe that the key part of our inflation problem is exchange rate valuation issues. There is an attempt to address this problem.

As part of the re-denomination (and effective end of this month), State allocation from FAAC will be paid in dollars into an account of the States choice to be maintained in any commercial bank of its choice in Nigeria . However, the States cannot withdraw dollar. The commercial bank is obliged to monetise the dollars at prevailing exchange rates and avail them funds in Naira.This has distinct advantages as it makes foreign exchange available to the commercial banks and thus, ensures supply of foreign exchange to the interbank foreign exchange market. This is expected to have a positive impact on the short run stability of exchange rates and if proceeds from oil continues to grow, the naira might actually appreciate against the major convertible currencies. Since this part of the policy is effective immediately, there is one year period (till 1 August 2008) to tweak and improve upon it.

Some people may express fear that the policy of letting the commercial banks keep the foreign exchange proceeds may lead to rent seeking (commonly referred to as round tripping). However, I believe this is unlikely for the following reasons and thus, the temptation for round tripping is greatly reduced;

the rent between the official rate and the black market rate is virtually gone
the banks report every month on all foreign exchange receipts and payments to the CBN and with, the CBN should be able to monitor the banks
the banks are better capitalised and actually very liquid now and most have re-focussed (hopefully) on the business of banking,
But more importantly, the re-denomination exercise and the subsequent exchange of the old notes for the new ones will mean that at last the CBN will have a near accurate (if not completely accurate and reliable) measure of money supply (particularly currency in circulation). This is a key input in ensuring monetary and price stability, a key objective of the CBN as stated in the new CBN Act.

On the whole, the policy appears to be one in the right direction, however good policies have never been the problem of Nigeria , implementation has always been. Note that these policies are hinged on the success of following and thus the promised land is still far though there is a now a light at the end of the tunnel.

sustained institutional reforms against corruption, money laundering, etc
harmonisation of fiscal policy with monetary policy. This is imperative
Effective monitoring of the banks to forestall round tripping.
Development of the real sector to reduce dependence on import and thus reduce the demand for foreign exchange
I believe the time is right for these changes but we must demonstrate the will and commitment to greater transparency in implementation of the changes enumerated in the Governor's speech, ongoing reforms and those still to be unveiled. May God bless Nigeria

@ all,
I guess removing two zeros from the status –quo is not the best way to strengthen the Naira. It is all mathematical fraud or you may want to call it gimmick. “Water, they say will always find its level”, let the government embark on aggressive revamping of the nation’s infrastructures which will help reduce the cost of product & services and by extension help the real sector (Agriculture, Manufacturing, e.t.c), thereby increasing our GDP which ultimately is the determinant of ex-change rate vis-à-vis the strength of Naira. In summary, let the government implement policies that will enhance our GDP and the industrialization of the country and then the Naira will naturally be strengthen - that is the panacea for strong Naira. Removing 2 zeros is a mere mathematical fraud.

The re designing of yhe currency is quite good but how well will it work cos this is NIGERIA, also for instance if i have 200,000 cant i decide to keep it by changing it to 20 denomination b4 the effective date or will the current 20naira be redesigned

@mddude, ell77 & knowall,
I like your analyses, and agree with most of them, EXCEPT that the result will be a crash in the stock market. When these foreign firms invest in the stock market, especially in the case of POs, new shares being issued etc, they indirectly pump money into Nigeria’s development, these institutions (mostly SMEs) receive a lot of money to improve infrastructure, expand their branches/networks into other markets etc not just growth. Also, when they eventually cash out of the market, they have to sell, which means someone must be willing to buy, so there is still money in the stock market. The stock market is a revolving market. Besides, it takes very big players that have a major share of the market capitalization, in companies that that have a major share of the market cap to colude together to destroy the Nigerian stock market. The banking sector is the most capitalized sector, but the CBN have been doing a very good job during the allotment period to ensure that noone gets such power, that’s why it takes so long to get bank IPO shares certs, and why we hear of some being given a smaller allotment than requested. Granted, I agree that initially the stock market will grow dramatically, then these guys will pull out as it starts slowing down (just because they can make quicker money elsewhere), which will cause it to drop just a little before market forces kick in to stabilize it… but this isn’t new to the NSE, we already see it during a post IPO introduction by many companies,… and then the market will start looking more like a stable/developed country’s stock market.

I am of the school of though that this is a good thing for the Nigerian economy. It will tend to move us towards a cashless society where the CBN is better able to monitor money in circulation, and is thus better positioned to carry out any needed measures to curb inflation & reduce price fluctuations. It will also mean an increase in dollar/forex inflow into the country which may now give the CBN a better edge to increase Nigeria’s foreign reserves deposits and we may see $1 to N1 conversion rates QUICKER… even though I believe that there are other market forces, and strategies already in place that would have eventually pushed the $1 to N100 without redenomination. Nigeria’s exports, mainly oil, would have been the hardest hit (negatively), but notice all the moves that the Yarudua regime have recently made in this sector (removal of NNPC director, reversal of sale of refineries and several others targeted at NNPC), this sector, especially the downstream, will soon be heavily deregulated causing more competition and increase in oil proceeds. This may be more well thought out than most people give credit for.

Concerning all the “confusion”, I don’t think there should be much confusion, as this isn’t new to Nigerians, we’ve been doing this all along. Banks & even local marketers have been accepting forex, dollars, pounds, euros all this time without much confusion. I think what confuses people is the thought of it being called the same Naira they’re used to even though I’m sure it will be totally redesigned. Ok then, think of it as being called Strong Naira (SN) with 1 SN (Strong Naira) = 100 Naira. If market women and banks have been able to accept & convert other daily fluctuating currencies, I don’t see how confusing it will be for them to sell or credit you 10 SN for something worth 1000 N & vice versa, and still balance their books… and this will only be for a short transition period. Likewise, your landlord, if you told him you only had SN would say bring 10 SN instead of the 1000 Naira you used to pay regardless of how much it cost him to build. If you were offered you same salary now in $ (they divide it by 125) you wouldn’t have any issues with it, so why any issues with it being converted to SN with an even smaller denominator 100. The value is still the same (short term). Maybe the CBN should just call it something different abeg.

Stay Blessed.

KnowAll,
A stock that is N68 will be 68 kobo, GOOD.

What will a stock that is presently 68 kobo be?

.0068 Naira I believe, and I'm sure by the time you buy & sell 10,000 units you'll get your money rounded to the nearest tenth or 2 decimal points,  It shouldn't be difficult for the NSE computer systems to be adjusted (if not already ) to read or calculate u to 5 decimal points,  Leave it to the computers to do the calculations, you get your money rounded to the nearest koo.

**sorry, forgot to mention that that is if there is not going to be share reconstruction, **

Hellow guys,
All said and done, I think what we all need now is to think of what are opportunities this will spring for u and me. If u know of any, I wll be delighted for such comments. The futhure is for the thinkers.

God bless u

yeah. Like designer pouches for coins

The effects on Stock Markets is likely to encourage more local investors (including stolen funds abroad   )

@esco - I like your analysis also!

Yet my issue is investments don't always lead to a better economy.

For example, Mr Bose owns a Television channel named Bose Tv. He lists shares on the stock exchangea N5. Foreign investors see this as an opprotunity to invest and with competition for these shares the share price may jump to N10. Mr Bose uses the money from the shares for the business, but there is alot of wastage and he is also just unlucky on the new technology he invests in and people find his station boring. He posts his annual report at a loss.

There is no profit to pay taxes to the government.
There is no social gain from his station.
There is no money to employ people so the people do not gain from more jobs being created from this investment.

If the investors do not have a substantial shareholding they have no say over how the business is run, and this can easily happen causing the share price to drop again perhaps even lower than the initial N5.

But lets see if the investors did have a substantial sharhold and thus more voting rights into what happens in a business.

Inevitably they will probably want to be a director on the board in some cases or for you to employ directors they are familiar with and have confidence in. Likely from abroad. These people may find it better to give the rubbish jobs to the people and the better jobs to expatriates (look at what is happening with Niger-Delta oil companies). If there is protest the business share price will fall, if there is no protest the people are not benefitting from more jobs (as such). Taxes may be paid by expatriate workers to the government but there is no guarantee this will trickle down to the ordinary Nigerian man. The major foreign shareholders who receive gains when they sell shares or through dividends will pay their taxes to their own governments and it is likely IT WILL trickle down to the average Brit or American.

I am not saying this is a bad thing but business that list must make sure they protect themselves from those who care nothing about the people. Not just for themselves but the people of Nigeria. This is just my opinion though and on a stock basis I really do believe after the market rallies in Nigeria, it will crash. Perhaps not soon, but it will at one point even if it is after a while. The difference between this happening in Nigeria and USA and UK is that the Nigerian market will have become dependent almost entirely on foreign investment, whereas these markets are not. They also have support from their respective governments and economies i.e. the central banks. Nigeria does not - CBN at this stage is probably not capable of injecting cash into the market if it crashes (or atleast that is what they will say).

In theory this won't be bad for the market, there simply has to be alot of scrutiny, regulation and precautions taken and this may be the best thing to happen to Nigeria. Sorry if I sound like I am being down I just want people to look out for those predators!