My major fear is that of inflation . A 5N busicuit that some of us are used to will now be 5 kobo . Dont u see a scenerio where such sellers of such commodities would want to make it like 10 kobo instead of the 5 kobo redenomination equivalent , that is inflations coming to play very fast .

My answer to C.V. 2007 pray is AMEN.

All Nigerians need now is God help.

@ell77
I agree that that may be a minute possibility of some of what you said could happen, but even if it does, I don’t see anything of it being catastrophic to the economy, the Nigerian economy is way to large to be greatly affected by some of its small markets , for example, Nigeria has experienced inflation for decades, oil prices doubled, telecoms, price of commodities, real estate etc it has been dealt blows from all angles for decades, but see how resilient the economy has proven.

@goodbobo
I understand your concern, but market forces are way too strong to allow Mamma Putt affect it. If she wishes to raise her price, let her, if there are people that want to buy, they will buy, but my guess is she will run out of business if her competitors are selling for much lower or hopefully she reduces her price before that happens.

esco399:

@ell77
I agree that that may be a minute possibility of some of what you said could happen, but even if it does, I don’t see anything of it being catastrophic to the economy, the Nigerian economy is way to large to be greatly affected by some of its small markets , for example, Nigeria has experienced inflation for decades, oil prices doubled, telecoms, price of commodities, real estate etc it has been dealt blows from all angles for decades, but see how resilient the economy has proven.

@goodbobo
I understand your concern, but market forces are way too strong to allow Mamma Putt affect it. If she wishes to raise her price, let her, if there are people that want to buy, they will buy, but my guess is she will run out of business if her competitors are selling for much lower or hopefully she reduces her price before that happens.

don't i just love this guy!. . . tell em brother!!

question is, do we start saving them 20's? (i doubt it'll be used then tho)

Like I said, this could be the greatest thing to happen to Nigeria provided precautions are taken.

The economy of Nigeria has been blown up before, when oil prices decreased Nigeria was forced to go into debt which has only just been paid off!

If UK, USA, Australia and Japan have been effected by backlash of subprime mortgage loans of one country (USA), then I don't think it is inconceivable the same could happen to Nigeria. As I said there are ways businesses and the government can shield themselves from this, they should take the time to find out what these ways are.

http://news.bbc.co.uk/1/hi/business/6939899.stm

http://news.bbc.co.uk/1/hi/business/6939899.stm

http://news.bbc.co.uk/1/hi/business/6950731.stm

Nigeria should learn from the mistakes of others both in the wealthier and poorer nations and strategically align themselves to benefit from things. Ask yourself if CBN is as ready as the rest of these Central banks were and even if they are. You can see how they suffered and it is not over yet.

I understand, and I agree we need to be cautious and learn from others mistakes. I honestly, am not trying to attack you, I just enjoy having intelligent conversations. Thanks to all nairalanders that have made it possible.

I read the articles you posted, and I seriously dislike when the media blows things out of proportion by saying investors (stock market wise) have lost billions etc, they haven’t lost anything yet unless they decide to sell now that the stock price has dipped (maybe some people did, too bad.). You don’t gain or loose till you buy/sell… all that other stuff is virtual. It is only fear and uncertainty of the entire situation that has caused the prices to dip in all these countries. It should surely rebound after however long it takes them to clean up the mess, and investors that hold on may not have lost anything but the opportunity cost of the money they invested, inflation , factoring how long it takes to rebound etc, but even then who said it may not rebound higher to the extent that those losses are null. It takes bulls & bears. I bet you some people are taking advantage of these price dips as we speak.
It is not a crash, just market fluctuation driven by fear and sentiment. I’m a true optimist.

@ magneto, thanks, but no need to save the 20s except you plan on spraying it a party during the interim / transitionary period , maybe they may look similar from far away or people hear u r spraying 20s/ or some new to the country peeps think u r one paid up guy, just kidding, dispose of them before a date they are no longer acceptable as legal tender (they'll no longer be worth the paper they are printed on), you may keep a few as collectors item though who knows. all the best man.

@esco - Nope your perfectly right and I don't think you are attacking me don't worry!

Yes, even now I was thinking it would be a good time to buy stocks and shares in UK and USA because they will most likely return to levels they were at. I guess I am just a bit protective when it comes to Nigeria as whenever we follow something done elsewhere we don't seem to have the same good results.

I too love intelligent conversation and to be honest all of this is speculation no one knows the answer until it actually happens.

Take care and thank you too for your points they are good as they make people think. I am the ying to your yang I guess! lol. No I am optimistic too, just very cautious!

hey! lets learn to be patient with our policy makers 4 once. some times i wish we all know what is like to be up there servin the people,its a daunting task u know. there is nothing u do that people are'nt going to complain about.how many of us pray 4 our leaders on a daily bases?that sure goes a long way, trust me.they are'nt perfect u know.lets all pray 4 'em and give 'em all the support thay need.

EVERYBODY IS SAYING CONFUSSION, BUT I DONT THINK IT WOULD CATCH UP WITH NAIRALANDERS COS WE DO A LOT OF RESEARCH AND WE ARE NOT UNAWARE!!
THANK GOD FOR THE ORIGINATOR OF THIS QUESTION, COS I WAS THINKING ON POSTING SAME. ALL THE BEST

dear people,
Nigerian used Petrol tankers,but in very good condition are on sale RIght now and at very affordable prices.call me on 08067100632 if u,re interested.HURRY NOW! limited stock.
TANKERS are presently in onitsha.
N>B find a buyer and get a commission.

lets be honest everything affects a'normal' stock market even the weather!

what's the rate of inflation at the moment?

Confusion?'ll it cause any confusion? I dn't think so, what we'll all do is divide the value by 100 and get d real value,dn convert to naira&kobo.

Guys, what effect 'll it av n our domiciliary a/c,i.e. receivg money n foreign currency

If there was a limit to the amount you could receive before (probably $10,00), this limit should increase and in many cases domicillary accounts will be no different to nrmal accounts as there will be more access to foreign exchange through banks anyway - one of the benefits of capital account convertibility.

Here is an article from Bloomberg:

Nigeria to Float Naira, Helping to Boost Investment (Update3)

By Paul Okolo and Nasreen Seria


Charles Soludo, governor of the Central Bank of Nigeria Aug. 14 (Bloomberg) -- Nigeria will allow its currency to trade freely and adopt an inflation-targeting policy by January 2009, helping to boost investment in sub-Saharan Africa's second-largest economy.

The west African nation will gradually phase out its policy of setting the exchange rate at bi-weekly auctions, giving foreign investors greater access to local currency and enabling them to invest more in the country's equities and bonds. The central bank will have ``low and stable inflation'' as its long- term target, Central Bank of Nigeria Governor Charles Soludo told reporters in the capital Abuja today.

``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,'' he said.

Nigeria is the region's second-largest economy after South Africa and the continent's biggest oil producer and most populous country. The new policies come after the central bank began liberalizing foreign-exchange trade in March 2006 in a bid to discourage illegal dealing in the currency.

``The greater role for the market and the move to convertibility of the currency is a big step for Nigeria,'' said Razia Khan, head of Africa economic research at Standard Chartered Plc in London. ``It opens the way for Nigeria to be traded as any other emerging-market economy.''

Dollar Accounts

The naira has strengthened 1.5 percent against the U.S. currency so far this year to 126.9 per dollar. The west African nation will redenominate the currency on Aug. 1, 2008, by removing two zeroes, Soludo said.

In an effort to deepen the nation's foreign-exchange market, a portion of revenue allocated to federal and state governments, known as the federation account, will be distributed in dollars with effect from September, Soludo said. The authorities will be required to open accounts with commercial banks, where the funds will be deposited, and will only be allowed to use them after converting them to naira.

``This policy will complement the ongoing programme of allowing Nigerian banks to manage part of our external reserves in collaboration with foreign asset managers,'' Soludo said. ``The net effect of these will be to create and deepen capacity within our banks.''

The new policies follow currency revaluations by other oil- producing nations to offset the impact of higher crude prices on inflation. Russia, the world's biggest energy exporter, has allowed its currency to appreciate three times this year, while Kuwait revalued the dinar against the dollar for a second time in a month in July.

Nigerian Assets

The policy changes will probably boost demand for Nigerian assets by making it easier for foreign investors to access the local market, said Luis Costa, emerging market debt strategist at ING Bank NV, in London.

``In the African credit market, the Nigeria market is perhaps the most exciting one,'' Costa said. ``This move will make its local bonds even more attractive.''

Nigeria's central bank sold 182-day Treasury bills at a 6.1 percent yield on Aug. 9, compared with 8.9 percent a year ago.

While Nigeria receives the most foreign investment in sub- Saharan Africa after South Africa, its currency is currently less liquid than the Kenyan shilling, said Khan.

``Part of that is because of the inconvertibility of the currency,'' Khan said. ``Anything that aims to resolve that is going to be positive for Nigerian financial markets as a whole.''

Inflation Targeting

Soludo said the adoption of an inflation-targeting framework would enable the central bank to pursue its macroeconomic policy, including higher economic growth and employment, in ``a more disciplined manner 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,'' he said, without saying what level of inflation the bank would target.

Nigerian inflation accelerated to 6.4 percent in June, from 4.6 percent in May, the National Bureau of Statistics said July 20.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQuQzQ0JYfXg

Hope this is helpful!

WELL U ALL ARE RYTE ON DIS ISSUE,IT'LL BE CONFUSING, ALSO IT'LL MAKE DA NAIRA POWERFUL
JUST LIKE DA DOLLAR.
WAT DA GOVT & CBN SHLD DO'S EMBARK ON MASSIVE ENLIGHTENMENT CAMPAIGH ON DIS ISSUE.
DA ORDINARY MARKET WOMAN WANTS 2 KNOW IF HER ORANGE SHE SELLS FOR #50 TODAY,CAN DIS #50 BUY HER DA EQUIVALENCE OF THINGS SHE NEEDS DAT #50 FOR?
DA STOCK MKT 'LL NOT BE AFFECTED,ONLY DA PUBLIC PERSEPTION OF DIS & THEIR FURTHER REACTION WILL AFFECT DA MKT.
IF DA PUBLIC IS SCARED & STARTS OFF-LOADING THEIR SHARES OR INVESTMENTS,DA PRICES 'LL COME DOWN,POSSIBLY CRASH; BUT IF THEY BELIV IT'S A GOOD MOVE IT 'LL BOOST DA MKT.

REMEMBA,NIGERIA 'LL BE PUT SIDE BY SIDE WITH DA USA(IN TERMS OF CURRENCY CONVERSION RATES),JUST LIKE IN DA 1980s

I SEE A FUTURE WHERE WE WON'T HAVE TO PAY OVA #5m TO STUDY IN U.K.

MILLIONS 'LL BE HAD TO GET,BUT #1 WOULD BE ABLE TO BUY RECHARGE CARD OR MORE DAN 1LITRE OF PETROL.

GOD BLESS NIGERIA!!!

soludo is taking a big risk, Knockin off 2 zeros frm ur currency is a very dangerous biznes.
Brazil tried it 7x and failed, Argentina tried it 3x and faild.
What soludo shld do is to reintroduce N1 and 50k notes, and remove N1000 note without knockn off any zero frm d currency.
otherwise inflatn will stil overtake d currency

Nigerians are always looking for short cut, but there isn’t any in our quest for economy prosperity. At the moment 1 Naira is about 7.5 South Korean Won, yet Korean economy is world class. 1 Tunisian Dinar is equivalent to 0.78 US dollar. Now does it mean that Tunisians are far much better economically than Americans? No , because this is all about numbers that are not economically significant.

We have to look at our balance of trade with the world. Well only sell oil and import millions of items. We run a monotonous economy and cannot be competitive in the global market place. So long as we have this disparity in foreign trade, Nigeria will forever remain a backward country economically. China is even devaluing its currency so that the world will consume more of its products. Good balance of trade is what keeps your money strong not by artificial means. This is another exercise in futility.


http://www.oanda.com

@adconline

Super

Well said. Naija people is addicted to short cuts.

time is money,short cut if you can and let others meet you later.
nigerians used to short cutting,whats the evil there?
a lot of countries has done this redomination or decimalization before without any problem.
the value of ur money remains absolutly the same,so whats de fuzz ?

hbrednic:

time is money,short cut if you can and let others meet you later.
nigerians used to short cutting,whats the evil there?
a lot of countries has done this redomination or decimalization before without any problem.
the value of your money remains absolutly the same,so whats de fuzz ?

the evil is that we are partially at this stage right now because of we are cutting corners
a lot of countries less than 15 countries is not a lot mate, and some did it more than once-for you to do it more than once there must be a problem! zimbabwe has done this too by the way
if the value of your money remains the same why not leave it as it is then?

change is good but chnage for the sake of change is

seems majority of CBN's policies has benefited foreign companies, multinationals and big companies more than the average Nigerian.

@dis guy
sorry i cant really understand ur point.

there goes the neighbourhood basically cutting corners to 'hopefully' curb inflation is not good in the long run
people need to know what other policies will be introduced to curb inflation and improve the economy, we also need to know and understand what policies will have direct impact on the lives of nigerians

it will be nice if Nigerian policy makers explain their policy to the masses
they should go live on national T.V to explain properly to lay audience/interviewers
communication is key!

cutting corners is humane,cut corners and sustain it,bet you will never regret.
expect full adverts on this policy from jan.though i am dissapointed that a lot was spent on the old bills, which we have to faze out now.the good old days we ve been wishing for is coming to pass.so lets embrace and give it a chance.

i want to see how all those mago mago and thief thief politicians that buried there stolen money inside there houses ,are going to change all the bills. the wind is about to blow.

cutting corners is humane,cut corners and sustain it,bet you will never regret.
expect full adverts on this policy from jan.though i am dissapointed that a lot was spent on the old bills, which we have to faze out now.the good old days we ve been wishing for is coming to pass.so lets embrace and give it a chance.

adverts? January is too late!! we need proper television presentations to lay audience who will be allowed to ask questions!

people can not/will not/should not embrace things they don't understand

i want to see how all those mago mago and thief thief politicians that buried there stolen money inside there houses ,are going to change all the bills. Grin the wind is about to blow.

hmm you are underestimating those looters! they have relatives, girlfriends, even their mother involved with their looting activities

I've also wanted to say this long ago, After i thought about it i also found it to be tricks with numbers, Lets picture it this way
i earn 50000 mothly i save 10000 monthly over a period of 25 months to buy a car of 250000. After the games of numbers, i'll start earning 500 and the car would cost 2500 which means i'll have to save 100 mothly for 25 months before i get to buy the car; so whats the sense there?
its all a game of numbers.
i do hope it don't affect us adversly with regards to investments in the stock market and others

I've also wanted to say this long ago, After i thought about it i also found it to be tricks with numbers, Lets picture it this way
i earn 50000 mothly i save 10000 monthly over a period of 25 months to buy a car of 250000. After the games of numbers, i'll start earning 500 and the car would cost 2500 which means i'll have to save 100 mothly for 25 months before i get to buy the car; so whats the sense there?
its all a game of numbers.
i do hope it don't affect us adversly with regards to investments in the stock market and others

Well, let me clarify this issue a bit.

Re-denomination is not revaluation. This needs to be understood clearly. The Naira is not going to be re-valued.

What is going to happen is that the bulk of money that will be used in transactions will be reduced by a division factor of 100. The over all value will remain the same.

So cost of goods and services will be reduced by this factor.

Salaries will also be reduced by this factor.

All payments will be reduced by this factor.

Stock prices, dividends, etc etc etc will also be reduced by this value. As a consequence, a new set of coins and notes different from what we use now (even the N5, N10 and N20 notes) will be changed.

This policy was recently done in Ghana, and has been done by other countries in Europe in the past. So it is nothing new.

However stock investors and forex traders in the house need to be informed about how this policy will affect them.

FOREX TRADERS

If you make a forex trade and make a profit of $1000, the Naira value from August 2008 (new Naira) will be N1250. However, your N1,250 will still be equivalent to today's Naira value (old Naira) of N125,000. So you have lost nothing. Status quo remains.

STOCKS

Prices of stocks will also be reduced by two decimal places. So a N60 stock now will be equivalent to a 60 kobo stock in August 2008. This will however force companies to do share reconstructions so as to cut the no. of outstanding shares and boost the share prices.

The highest-priced stock in Nigeria in real terms is not even up to $2. But when the re-denomination of stock prices occur and share reconstructions are done, prices will be boosted and will now be equated in real terms in US dollars. This will boost a lot of foreign investment into quoted companies (knowing that share prices can now compete internationally), and there will be a corresponding boost in share prices.

By then, when a stock gets from a re-denominated value of N6 to maybe N20 or N30 (equivalent then to $20 or $30), then investors will really smile because then their investments in Naira terms will have value internationally.

So anyhow you look at it, it will be great times for investors.

@enolase
STOCKS

Prices of stocks will also be reduced by two decimal places. So a N60 stock now will be equivalent to a 60 kobo stock in August 2008. This will however force companies to do share reconstructions so as to cut the no. of outstanding shares and boost the share prices.

The highest-priced stock in Nigeria in real terms is not even up to $2. But when the re-denomination of stock prices occur and share reconstructions are done, prices will be boosted and will now be equated in real terms in US dollars. This will boost a lot of foreign investment into quoted companies (knowing that share prices can now compete internationally), and there will be a corresponding boost in share prices.

By then, when a stock gets from a re-denominated value of N6 to maybe N20 or N30 (equivalent then to $20 or $30), then investors will really smile because then their investments in Naira terms will have value internationally.

So anyhow you look at it, it will be great times for investors.

I agree with you on all other points which essentially accord with my earlier post Except the portion above. There wont be need for capital reconstruction to cut outstanding shares because the issued share capital of the companies will also reduce by the same proportion. This happened in 1973 when Nigeria converted from Pound to Naira. £1 was exchanged to N2 then.

Also a re-denominated share price will not on its own be a factor for increase in share price. It appears you now juxtapose redenomination with revaluation. The economic and financial fudamentals of a company will determine whether and by how much its price grow or fall. The example of price growing from N6 to N30 means growing from N600 to N3,000 by current denomination even though far-fetched will depend on the company's performance redomination or not.

I think the best way to minimise confusion is to give the new currency another name.

Everybody shld struggle to convert money into shares or foreign currency by 1st of august.
Inflation doesnt affect shares and foreign currency because their values rise with inflation

INSTITUTIONALLY, THERE WON'T BE ANY CONFUSION. BUT ON SOME FEW PEOPLE'S PERSONAL LEVEL, THERE MIGHT BE SOME OVER/UNDER PAYMENT DUE TO WRONG CALCULATION/VALUATION

WHAT I FORSEE IS A SITUATION WHEREBY MOST FOLKS WOULD GO ABOUT WITH THEIR CALCULATORS IN THEIR PALMS!

GENERALLY, THE TRANSITION WILL BE EASIER THAN WHAT HAPPENED WITH EURO SWITCH-OVER SOME YEARS BACK IN EUROPE.

AND OF COURSE, ON A LIGHTER NOTE, SOME OF YOU FOLKS WILL NEED TO BRUSH UP YOUR BASIC ARITHMETICS!!!