I think redenomination of the naira alone wont solve the problem.Real currency strenght depends on a lot of factors in which denomination is the least.Trade,foreign reserve,Industrialization,among other factors.If it just simply depend on redecimalization countries like somalia just need to redecimalize and they would be better off.

What those criticising the redenomination failed to note is that we have enough foreign exchange reserve to back it up, plus the banking system is stronger than ever before.

I hope and I pray you're right. You can't tell at this point and it is not about whether there is money in central bank, will the supply it if/when needed? I sincerely hope so. Imagine what Naija would be like if this works to our good! I don't want to imagine to much before I am left disappointed but mehn my heart just de go kpam kpam gidi gidi kpam!

This re-denomination exercise is nothing more than a distraction. That's the way I'm treating it.

New CBN Policy: The Ghana Experience
Posted Thursday, August 16, 2007



The Bank of Ghana on July 1 redenominated the cedi by setting N10,000 cedis to one new Ghana Cedi (GH¢), which will be equivalent to one hundred Ghana Pesewas ( Gp).



That is ¢ 10,000=GH¢ 1=100Gp. New notes and coins will be issued to replace the existing notes and coins over a period of at least six months. Below are some questions asked on the redenomination.



Why is there a need for redenomination?

The current note regime places a significant burden on the economy in terms of: Transaction costs. General inconvenience and high risks of carrying loads of currency. Difficulties in maintaining bookkeeping and statistical records. Problems with accounting and data processing software. Strain on the payments system e.g. ATM withdrawals.



What is replacing the old notes and coins?

We will be issuing the following notes and coins, GH¢ 50, GH¢ 20 GH¢ 10, GH¢ 5, GH¢ 1, GH¢ 1, 50Gp, 20Gp, 10Gp, 5Gp, 1Gp to replace the existing notes and coins of: ¢20,000, ¢10,000, ¢ 5,000 ¢2,000, ¢1,000, ¢500, ¢200, ¢100.



What will be the relationship between the old and new notes and coins?

Since ¢10,000=GH¢1:GH¢ 50=¢500,000,GH¢ 20=¢200,000, GH¢10=¢100,000, GH¢5,=¢50,000, GH¢1=¢10,000, GH¢ 1=¢ 10,000, Gp50=¢ 5,000, Gp20=¢2,00, Gp10=¢1,000, Gp5 = ¢ 500, Gp1 =¢ 100



Will I lose value if I exchange my old notes and coins for new notes and coins?
Definitely not. The new notes and coins will have the same purchasing power as the old ones. For example, fare of ¢2,000 will now cost 20p. Similarly a rent of ¢500,000 will now be G¢50. Since ¢10,000=GH¢1, it means that ¢2,000=20Gp and ¢500,000=GH¢50.



What happens to the old notes and coins when the new notes and coins are intro-duced?
The old notes and coins will be in physical circulation together with the new notes and coins. Prices and fees will have to be quoted in notes -coins.



What happens after the transition period?

You will still be able to exchange the old notes and coins for new notes and coins at any bank or the Bank of Ghana. The old notes and coins will cease to be legal tender and will no longer be in use.



Is the change in name of the cedi to Ghana Cedi permanent?

No. Your wages and salaries will now be denominated in the new currency but its value will remain the same. For example, if you are now earning ¢500,000 a month and you spend ¢400,000 on your household needs, and save ¢100,000, it means that you will now earn GH¢50, spend GH¢40 on your household needs and save GH¢10, which is equivalent to ¢100,000. Thus your situation remains the same.

When the transition period is over and only the new notes and coins are in circulation, Ghana cedi will become simply known as the cedi.



Will this exercise lead to price increases?

No!. The basket of goods and services that old notes and coins can buy would be the same as what its equivalent new notes and coins will buy. For comparison, prices will be quoted in both new and old notes and coins at the same time six months period.



Will this affect my wages and salaries? What will happen if I receive a remittance from abroad?

If $100 remittance from abroad gives you ¢920,000 in the old currency at the current exchange rate, it will be equivalent to GH¢92 in the new currency since ¢10,000= GH¢1.2.

hello folks,
well i think the on going reforms in our currency is what i would term RE-DIGITALIZATION and not naira revaluation cos its not goin to make our naira come any close to the dollar.
i think what the gov should relly focus on now is mass orientation and re-orientation because it will b difficult for a market woman to accept and bring down the price of her commodity from N10 to 10kobo.e go hard well,well.
the truth is most nigerians are illetrate.
katch ya folks, darlynton ewons

Still on this issue of effect of Naira Reduction On Market Investment.
I want to ask if the Government has power the appreciate and or depreciate the value of its currency ith respect to Dolla. In school we were made to understand that it is the market forces that determine the value of the currency with regards to the Dolla. Please i need more explanations.

The government can relabel the money, but the day to date exchange rate remains a function of market forces.

@ okasime & seun,
True ,  There are still some "artificial" ways I believe, like increasing it's amount in reserves,  which is known to boost confidence in that particular currency (as it is being "backed by the dollar", a higher amount that it used to) ,  but some could say that is still a market force though,

Seun:

The government can relabel the money, but the day to date exchange rate remains a function of market forces.

What market forces? If everything were left to market forces capitalism would be dead.

i think soludo wants to secure his job till 1 august, who will drive him if he is precived to be carring out an IMPORTANT ECONOMIC REFORM?

@ATTAHDYE

You hit the nail on the head.

its just 2 decieve nigerians nothing changes its simple mathemetics just removing 2 zeros for $ to be equl to N then $0.01=N1 but people need serious orientation.

Well, my problem is that Soludo knew he would introduce these reforms and went ahead to introduce the N1000 note. He now intends to phase out the note now after tax payers money were used to print this currency at alarming rates.

Nigeria is used to wasting our numerous resources, and this kind of waste must stop for Nigeria to be truly the hub for all African economies.

ATTAHDYE:

i think soludo wants to secure his job till 1 august, who will drive him if he is precived to be carring out an IMPORTANT ECONOMIC REFORM?

This was precisely what people said when he introduced the 25 billion. Now you can deposit your money in the bank and will not loss sleep over it.

Lets give the guy the benefit of the doubt. It may come true.[/color][color=#990000][/color][color=#990000][/color][color=#990000][/color][color=#990000][color=#990000][/color]

one thing but Nigeria is that they leak proper paling.
This is not something u wakeup one day and do.
u ve to give people proper orientation,
eg people in village even the ones in city,
they all confuse.

@ dajunta,
not necessarily, he may not have wasted tax payers' money (plus I don't know if he knew for sure that he would be introducing the redenomination),  ,  I'm assuming the avg life of a note (wether N200, or N500) is about 1-3 years in naija, after all the circulation & how many times it changes hands before it is replaced/reprinted (given that the US' avg life is 3-5 years & Nigeria is much more cash intensive & when u factor all the spraying & dancing untop of money, ),  Anyway, the cost of printing new N1000 notes should have been 5 times cheaper than reprinting five N200 notes (almost the same cost of production regardless of the denomination). So, by him introducing the N1000 notes, he may have saved tax payers much more (by not having to reprint 5 of the N200 notes instead),  Thats why we need to move towards a cashless system, or have fewer "notes" in circulation which I think this redenomination would do.

@ozigbo,
One years "heads up" should be sufficient,  I should think they have educational rallies planned over the next year

What about the enormous cost of re-educating 120 million Nigerians
and updating all accounting records created since independence?
On the long run, it has no effect, but it's disruptive in the short run.
The only people who should be happy about this are accountants. It's not worth it.

@ seun,
Could you give examples of accounting records that "MUST" be changed,  Sorry, I'm neither an accountant nor an economist,  I'm an engineer, both by education & by profession, (my little disclaimer!!)

What accounting records need to be changed. It doesn't significantly affect the accounting system, and why would accountants not be happy. It will generate more jobs for up and coming accountants.

give soludo a chance something must be done abt our ailin economy doin nothin or maintaining the status quo is even more dangerous

If we have a contract that says you owe me 1 million naira, what happens when 1 million naira becomes something else? Won't the contract have to be re-written? When I say all accounting statements I mean all accounting statements. Any document that involves naira and kobo must be updated, and some errors will slip in. Financial statements, for example. Your stationery, price lists, adverts. TV Shows like "Who Wants To be A Millionaire" will have to be renamed to "Who Wants To Win 10,000 Naira" for no sensible reason.

Someone who was earning 40,000 naira per month will now be earning 400 naira. Psychologically, people will feel poorer during the adjustment period. What is good about that? On the long run, it has no effect, yes. People will adjust to it, yes. But why put us through several months of unnecessary stress & confusion?

As for the case of Ghana, someone has already mentioned that they only implemented it in July. But again, that's a country whose currency has depreciated far below the naira (which is roughly on par with the Yen).

Aluko criticises redenomination of naira
By Femi Makinde
Published: Thursday, 23 Aug 2007

Ouote from The PUNCH "A renowned economist and former Chairman of the National Economic Intelligence Committee, Prof. Sam Aluko, has criticised the redomination of naira recently announced by the Central Bank Governor, Prof. Charles Soludo.He said that the policy would severely disrupt the economy because it would fuel inflation by 100 per cent.

Aluko, who is currently on holiday in Canada, spoke on the telephone with an Akure based news agency, Luminous Communication, on Wednesday.He dissociated himself from the reports that he was in support of the new naira policy.

Aluko said that the new highest denomination of naira would be N2000 “in the real sense” in contrary to the N20 claimed by the CBN governor.

According to him, the new policy is “another introduction from the World Bank and International Monetary Fund. It is unnecessary, untimely and imposed on the country without debate, consultation or deep thinking.”

He noted that the apex bank was wrong to have made the announcement without getting clearance from the Federal Government and the Federal Ministry of Finance.

Aluko, who was a former lecturer at the Obafemi Awolowo University, called on the National Assembly to review the appropriate laws on the CBN to “ensure that our monetary policy is in consonance, not only with our fiscal policy but also with our overall economic policy and welfare.”

He said, “Such a policy reversal, which requires public debate just as it was done during the Structural Adjustment Programme in 1986, is another introduction from the World Bank and IMF, having discovered that the current devaluation of the naira has failed, is failing and will lead the country to nowhere.

“The new policy will not revalue the naira! The exchange rate in the real sense will make the highest naira denomination not N20 as Soludo has said, but N2,000, as it will be N20 with two zeros in front of it in the real sense.

“Instead of making the naira convertible and trade-able, they are just arbitrarily jogging with the denomination of the naira, contrary to their own advocacy that the value of the naira would be determined by market forces, whereas the exchange rate of the naira will henceforth be determined by a fiat.

Thanks for another smart article, although i wish you posted the source. What makes these people think they can just impose whatever they like on us without debate? They are supposed to be working for us!

Waiting to see what happens.

depapa06:

Aluko criticises redenomination of naira
By Femi Makinde
Published: Thursday, 23 Aug 2007

Ouote from The PUNCH "A renowned economist and former Chairman of the National Economic Intelligence Committee, Prof. Sam Aluko, has criticised the redomination of naira recently announced by the Central Bank Governor, Prof. Charles Soludo.He said that the policy would severely disrupt the economy because it would fuel inflation by 100 per cent.

Aluko, who is currently on holiday in Canada, spoke on the telephone with an Akure based news agency, Luminous Communication, on Wednesday.He dissociated himself from the reports that he was in support of the new naira policy.

Aluko said that the new highest denomination of naira would be N2000 “in the real sense” in contrary to the N20 claimed by the CBN governor.

According to him, the new policy is “another introduction from the World Bank and International Monetary Fund. It is unnecessary, untimely and imposed on the country without debate, consultation or deep thinking.”

He noted that the apex bank was wrong to have made the announcement without getting clearance from the Federal Government and the Federal Ministry of Finance.

Aluko, who was a former lecturer at the Obafemi Awolowo University, called on the National Assembly to review the appropriate laws on the CBN to “ensure that our monetary policy is in consonance, not only with our fiscal policy but also with our overall economic policy and welfare.”

He said, “Such a policy reversal, which requires public debate just as it was done during the Structural Adjustment Programme in 1986, is another introduction from the World Bank and IMF, having discovered that the current devaluation of the naira has failed, is failing and will lead the country to nowhere.

“The new policy will not revalue the naira! The exchange rate in the real sense will make the highest naira denomination not N20 as Soludo has said, but N2,000, as it will be N20 with two zeros in front of it in the real sense.

“Instead of making the naira convertible and trade-able, they are just arbitrarily jogging with the denomination of the naira, contrary to their own advocacy that the value of the naira would be determined by market forces, whereas the exchange rate of the naira will henceforth be determined by a fiat.

This is wat i said befor.
thank's before information.

CAN PEOPLE (especially my Pops) STOP SAYING THAT 1 NAIRA WILL BE EQUAL TO $1.25, THIS IS SO NOT THE CASE.
NAIRA VALUE REMAINS THE SAME

GOOD IF THEY CAN DROP IT MEEHN COS ALL THIS FOLKS BEEN CONFUSED TEW MUCH.

[b][/b][i][/i]we need to to be patient about this and study with optimism, have we taught about the indiscriminate transfer of funds to foriegn account, or the continous migration of our able bodied youths this is a way of discouraging travaleling out to look for greener patures now u know that it is close to nothing traveling out or laundering money them we shall reduce the level of coruption and give us a better image globally. but for now i keep my mouth sealed.

Breaking News: Naira Redenomination: Suspended?

Money launderers are not happy with the proposed change because the flow of money/capital in and out of the country will be more monitored.

False. Monitoring of the flow of money in and out of the country can occur with or without re-denomination.

i dont think nigeria's case is as bad as that of Ghana and a redenomination at this time is ill advised. we do not have the institutional structures necessary to sustain what the CBN governor planned and it might not favor us in the long run.

after the consolidation of the banks, i was hoping he will push the nigerian financial industry in the direction of sustainable collaboration and support for the productive industry and gradually move the country from a consumer nation to a producer nation

dont forget that japanese and chinese yen are priced at about a hundred yen to the dollar and these are countries that came from where nigeria is and have become world class economies, yet they have not moved their zero by 2 decimal places to the left despite the fact that they have the economic and institutional strength to support such a policy,

so why should nigeria do something like that? because ghana did it? ghana's economy is a tiny fraction of nigeria's economy even in the sorry state that nigeria's economy is in

before declaring support, take time to understand the wider implications of that policy. it is not a bad policy initself but it is not what we need at this time in nigeria. it is like putting the cart before the horse!!!

we need to start producing and relying less on oil money and imports from other countries