₦airaland Forum

This he said really makes sense.
Please lalasticlala push this to front page.
This needs to trend and make sense to those who matter.

"Time to Revisit Redenomination
--

Nigeria is officially in a recession but that is not even the troubling thing. The more troubling thing is that our naira is very unstable especially after it was allowed to float.

It may take some time for the naira to stabilize or it may never stabilize. But one thing is clear, while the naira is going up and down it will affect businesses.

Businessmen will have difficulty planning because you need stability to plan. Foreign Direct Investors will be wary of Nigeria because they need certainty before they can invest.

Already several international financial institutions including WorldRemit have suspended money transfers to and from Nigeria.

The truth is that if we keep on doing the same thing, we will keep on having the same results. That is just plain commonsense.

We need to do something radical to change our situation for the better.

I recommend going back to the idea of re-denomination of the naira that was floated by the former Central Bank of Nigeria governor, Professor Charles Soludo about eight years ago.

That idea was a brilliant one which had worked in Ghana and helped stabilise their currency and boost their economy.

Many Nigerians remember the Ghanaian cedi from the eighties as a very weak currency compared to the Naira. Many of us who are old enough used to laugh at that currency.

However, after Ghana re-denominated the cedi in 2007, the currency bounced back and became stronger vis-a-vis other major world currencies.

In the 80s, one Naira could get you over 40 cedis, but as of today, one cedi would get you 80 Naira. The table has been reversed! The cedi is now stronger than the Naira and Ghanaians are having the last laugh.

One dollar would get you 4 cedis today whereas one dollar could get you almost 400 Naira. But the main difference is in the stability. The value of the cedi remains strong and stable while the Naira is weak and unstable.

Ghana was not the first country to re-denominate its currency. Turkey re-denominated its currency in 2005 and it was a success in fighting inflation.

In fact, before their re-denomination exercise, Turkey suffered from hyper-inflation, but after the Turkish Lira was re-denominated and six zeroes were removed from the currency, their inflation reduced to single digit rates.

China has also re-denominated and their currency now competes with the dollar as a world currency.

Professor Soludo planned the same thing for Nigeria. The naira re-denomination he planned for would have taken two zeros from the Naira meaning that N10 would automatically become 10 kobo while N100 would become N1 and N1,000 would become N10.

The expected result of the re-denomination was that it would neutralize inflation because more currency would be in coins and just the psychological effect of that alone would drive down prices.

Also, one of the major reasons why a currency has or does not have value is the cost of printing it. With the re-denomination, the cost of printing the Naira would have gone down as less high quantity of high denominations of the currency would be printed and be in circulation.

Also, re-denominations immediately drives down the costs of handling cash and book keeping as well as other accounting costs.

The international consulting firm, PriceWaterhouseCoopers noted that the re-denomination of the Ghanaian cedi reduced the cost of doing business in Ghana by, and I quote, ‘reducing the time taken to input financial data and time spent by management in reviewing the same’.

Nigeria has a great economic challenge today. Inflation is now in double digits whereas it was in single digits last year. The purchasing power of the naira is losing value everyday. The naira is exchanging for the dollar at double the cost it did last year. Banks are firing their staff. Businesses are closing down.

If we continue to do the same thing, we will continue to have the same results. It is time to try new ideas.

Over 50 nations have re-denominated their currency. There is enough evidence of the success of this exercise. We do not have to reinvent the wheel. Let us learn from others and save our economy.

Was it not Einstein who said that doing the same things and expecting different results amounts to insanity? We can keep switching from the Dutch Auction System to the Modified Dutch Auction System to stopping the sale of foreign exchange to Bureau de Change and reversing that policy, but where would that leave us? Where has that left us?

And some of the policies we are putting out there just look to me like panic measures which cannot get us the results we are seeking.

Let us do the prudent thing and redenominate and then going forward there should be a convergence of the official interbank rates and the black market rates.

Once we have a redenomination in place, the next thing we will need is for the Central Bank of Nigeria to be truly independent. No more should anybody or institution, no matter how powerful, have a say or any influence on how the CBN directs the monetary policy of the nation.

The CBN governor must be allowed to take decisions without looking over his shoulders. If he is always being second guessed by the executive or by influential captains of industry, he will lose his gumption and his command presence.

This is what happened to Professor Charles Soludo after then President Umaru Yar’Adua intervened to halt his naira redenomination project on the flimsy excuse that Soludo did not consult with him.

Ideally, the CBN governor should consult with the CBN board and the Monetary Policy Committee and once decisions are taken at those meetings, the President should be informed first as a matter of courtesy and not for the purpose of seeking approval from him.

Ideally, it is the Senate that should oversight the CBN and that is why we get regular briefings from both the CBN and the Minister of Finance.

In America, their version of our Central Bank (known as the Federal Reserve), like many other central banks, is an independent government agency that is only accountable to the public through the United States Congress. Neither the US Federal Reserve nor its chairperson are answerable to the American president.

The result of this is that the monetary policy of America is completely divorced from politics. It does not matter whether there is an election or not, if the US Federal Reserve needs to take a decisive action, it takes it.

This same practice is in operation in almost all nations that have a stable economy. The only nations I can think of where the President interferes with the autonomy of the central bank are Venezuela and Zimbabwe, and looking at the state of their currency, I am not sure that is the route Nigeria wants to take.

My name is Ben Murray-Bruce and I just want to make Commonsense!"

God Bless you Sen. Murray-Bruce for this wonderful write up. The present economy is really affecting everybody, even the rich are not exempted.
PMB need to invite the likes of Soludo, Alhaji Sanusi Lamido, Professor Utomi, and other financial experts/economist for discussion on how to get out of this mess. This is not about APC/PDP, cos na when person chop full Belle you go fit shout Sai Baba or PDP power.

May God help us.

.

W

I know someone will raise that issue......It will be done but not now!

Oyinkinola

What did I tell you?

And how does he expect an illiterate to understand his logic?

And how does he expect an illiterate to understand his logic?

Re-denomination: when 100k becomes 1k. Time to resurrect the kobo.

Indomie generation doesn't even know we have coins in Nigeria.

Realdeals:
I know someone will raise that issue......It will be done but not now!

I wonder what happened to Mr Bruce common sense to have made such a disappointing suggestion.

Redenomination will lead to astronomical inflation if applied to a volatile currency like Naira. It is best intriduced after stability has been achieved. Stability in Nigeria's case means when our economy moves away from dependence on only one commodity.

The only significant advantage is reduction of funds used in currency minting which IMHO has been reduced with emergence of electronic banking.

Redenomination might have its demerits in that the cost of printing new notes and coins will be high,. ..disposing of the old notes properly will add to the cost, manpower would be wasted while changing this money at the bank and sensitization of masses might backfire.. but redenomination indicates that the era of failed economic pilicies has ended and a commitment to start on a new sheet. It also resets ones psyche and remove money illusion of looting trillions

The timing is right now just after a *change of government, but the opposition will use it against the government if it is done close to an election year..

.. I recommend killing one zero and making N100 our highest denomination, but..

.. Yes, Buhari can make $1 = N4.19

Sack the economic management team and CBN governor.

Why is good plan like this always come in English? Please someone should help us translate it to Hausa so that the dullard will understand.

Thank you my brother.

It will not help anything. Rather it will encourage the dollarization of the economy. People would prefer to be paid in dollars as they know the value could be hedged. When we would have benefited from it has long passed. Go ask Ghana, without a strong foreign reserve to back the demand, it would result in hyper inflation and weak currency.

What Ben Bruce forgot to mention was that when it was redenominated, one Ghana cedis was equal to one dollar but for how long? When demand became high the dollar rate sky rocket Ted and has not come down.

Redenominating the Naira now would not prevent the exchange rate from skyrocketing. It wouldn't be long before we wake up and see the dollar at 8 naira

eziokwubundunuwa:
I wonder what happened to Mr Bruce common sense to have made such a disappointing suggestion.

Redenomination will lead to astronomical inflation if applied to a volatile currency like Naira. It is best intriduced after stability has been achieved. Stability in Nigeria's case means when our economy moves away from dependence on only one commodity.

The only significant advantage is reduction of funds used in currency minting which IMHO has been reduced with emergence of electronic banking.

Re denomination is beautiful nonsense it will only make sense to those that have their wealth stored in foreign currency but those having their wealth stored in Nigerian banks will lose out initially when the zeros are removed ..the only pro for rede nomination is the in the ease transporting cash and the atmosphere of sanity it will give (it's embarrassing when you go and price a car and they tell you 70 million naira) ..Lastly if we must take this option we must never take it under the leadership of General Buhari because if we do we might have to redenominateagain pretty soon .

@guyXander, i raised this issue about two months ago, everyone just hid their faces. It sounds all good, but what'd be the possible effects? Naira is currently volatile.

I really wanna see this happen though.

PaulIdu:
Re denomination is beautiful nonsense it will only make sense to those that have their wealth stored in foreign currency but those having their wealth stored in Nigerian banks will lose out initially when the zeros are removed ..the only pro for rede nomination is the in the ease transporting cash and the atmosphere of sanity it will give (it's embarrassing when you go and price a car and they tell you 70 million naira) ..Lastly if we must take this option we must never take it under the leadership of General Buhari because if we do we might have to redenominateagain pretty soon .

When was the last time you or anybody you know priced a 70m Naira car? Yeye!

waxxydude:
@guyXander, i raised this issue about two months ago, everyone just hid their faces. It sounds all good, but what'd be the possible effects? Naira is currently volatile.

I really wanna see this happen though.

Why the hell are Nigerians surprised by the current economic malady? Where were they when GEJ and NOI were flushing our reserves down the drain? The Naira is going in one direction only - down! It isn't even volatile.

..

ibedun:
When was the last time you or anybody you know priced a 70m Naira car? Yeye!

I used it as an example

I agree with u on this, BEN

PaulIdu:
I used it as an example sha but at least I don buy car wey pass 10m and I don't dash people tear leather car which I know u haven't before..I mean I have given out at least two tear leather cars as gift as a youngman and soon I will be able to afford a 70m car soon soon

Amen..

.. remember your boy if you feel like dashing anything again. The hand that gives never lack

Nigeria is gradually becoming Zimbabwe.

and I refuse to agree that its as a result of the oil price fall.

even if oil price was 100$ this economic problem will still surface. the truth must be told this administration lakes economic management. simple as ABC.

guyXander:
This he said really makes sense.
Please lalasticlala push this to front page.
This needs to trend and make sense to those who matter.

"Time to Revisit Redenomination
--

Nigeria is officially in a recession but that is not even the troubling thing. The more troubling thing is that our naira is very unstable especially after it was allowed to float.
B
It may take some time for the naira to stabilize or it may never stabilize. But one thing is clear, while the naira is going up and down it will affect businesses.

Businessmen will have difficulty planning because you need stability to plan. Foreign Direct Investors will be wary of Nigeria because they need certainty before they can invest.

Already several international financial institutions including WorldRemit have suspended money transfers to and from Nigeria.

The truth is that if we keep on doing the same thing, we will keep on having the same results. That is just plain commonsense.

We need to do something radical to change our situation for the better.

I recommend going back to the idea of re-denomination of the naira that was floated by the former Central Bank of Nigeria governor, Professor Charles Soludo about eight years ago.

That idea was a brilliant one which had worked in Ghana and helped stabilise their currency and boost their economy.

Many Nigerians remember the Ghanaian cedi from the eighties as a very weak currency compared to the Naira. Many of us who are old enough used to laugh at that currency.

However, after Ghana re-denominated the cedi in 2007, the currency bounced back and became stronger vis-a-vis other major world currencies.

In the 80s, one Naira could get you over 40 cedis, but as of today, one cedi would get you 80 Naira. The table has been reversed! The cedi is now stronger than the Naira and Ghanaians are having the last laugh.

One dollar would get you 4 cedis today whereas one dollar could get you almost 400 Naira. But the main difference is in the stability. The value of the cedi remains strong and stable while the Naira is weak and unstable.

Ghana was not the first country to re-denominate its currency. Turkey re-denominated its currency in 2005 and it was a success in fighting inflation.

In fact, before their re-denomination exercise, Turkey suffered from hyper-inflation, but after the Turkish Lira was re-denominated and six zeroes were removed from the currency, their inflation reduced to single digit rates.

China has also re-denominated and their currency now competes with the dollar as a world currency.

Professor Soludo planned the same thing for Nigeria. The naira re-denomination he planned for would have taken two zeros from the Naira meaning that N10 would automatically become 10 kobo while N100 would become N1 and N1,000 would become N10.

The expected result of the re-denomination was that it would neutralize inflation because more currency would be in coins and just the psychological effect of that alone would drive down prices.

Also, one of the major reasons why a currency has or does not have value is the cost of printing it. With the re-denomination, the cost of printing the Naira would have gone down as less high quantity of high denominations of the currency would be printed and be in circulation.

Also, re-denominations immediately drives down the costs of handling cash and book keeping as well as other accounting costs.

The international consulting firm, PriceWaterhouseCoopers noted that the re-denomination of the Ghanaian cedi reduced the cost of doing business in Ghana by, and I quote, ‘reducing the time taken to input financial data and time spent by management in reviewing the same’.

Nigeria has a great economic challenge today. Inflation is now in double digits whereas it was in single digits last year. The purchasing power of the naira is losing value everyday. The naira is exchanging for the dollar at double the cost it did last year. Banks are firing their staff. Businesses are closing down.

If we continue to do the same thing, we will continue to have the same results. It is time to try new ideas.

Over 50 nations have re-denominated their currency. There is enough evidence of the success of this exercise. We do not have to reinvent the wheel. Let us learn from others and save our economy.

Was it not Einstein who said that doing the same things and expecting different results amounts to insanity? We can keep switching from the Dutch Auction System to the Modified Dutch Auction System to stopping the sale of foreign exchange to Bureau de Change and reversing that policy, but where would that leave us? Where has that left us?

And some of the policies we are putting out there just look to me like panic measures which cannot get us the results we are seeking.

Let us do the prudent thing and redenominate and then going forward there should be a convergence of the official interbank rates and the black market rates.

Once we have a redenomination in place, the next thing we will need is for the Central Bank of Nigeria to be truly independent. No more should anybody or institution, no matter how powerful, have a say or any influence on how the CBN directs the monetary policy of the nation.

The CBN governor must be allowed to take decisions without looking over his shoulders. If he is always being second guessed by the executive or by influential captains of industry, he will lose his gumption and his command presence.

This is what happened to Professor Charles Soludo after then President Umaru Yar’Adua intervened to halt his naira redenomination project on the flimsy excuse that Soludo did not consult with him.

Ideally, the CBN governor should consult with the CBN board and the Monetary Policy Committee and once decisions are taken at those meetings, the President should be informed first as a matter of courtesy and not for the purpose of seeking approval from him.

Ideally, it is the Senate that should oversight the CBN and that is why we get regular briefings from both the CBN and the Minister of Finance.

In America, their version of our Central Bank (known as the Federal Reserve), like many other central banks, is an independent government agency that is only accountable to the public through the United States Congress. Neither the US Federal Reserve nor its chairperson are answerable to the American president.

The result of this is that the monetary policy of America is completely divorced from politics. It does not matter whether there is an election or not, if the US Federal Reserve needs to take a decisive action, it takes it.

This same practice is in operation in almost all nations that have a stable economy. The only nations I can think of where the President interferes with the autonomy of the central bank are Venezuela and Zimbabwe, and looking at the state of their currency, I am not sure that is the route Nigeria wants to take.

My name is Ben Murray-Bruce and I just want to make Commonsense!"

What difference will that make except that FG will use the opportunity to pay people less in the new naira. While exchange rate will soon reach what it should be.

We should learn to industrialize the entire nation instead of hoping on some magical recombination as solution. It is like saying Nigeria is no longer the biggest economy makes any difference

this would be a suicide mission and a medicine after death if done under the ineffectual herdsman.

989900:
It's not actually a bad idea; not exactly an elixir to a falling economy/currency, but should help with hyper-inflation in all facets.

And that part that ensures that all them looters with stashes of hidden billions in farms, tanks, and e.t.c. scampering to dump their old currencies, just excites me -- both houses will never support this move, if the CBN needs to get a pass from them to do this!

The demand for Forex will sky-rocket in those times!

My concern is the cost. Nigeria is infamous for making monumental changes at huge costs to the treasury.

Maybe when Nigeria is no longer a mono-economy it would be sustainable. Until then, doing this would simply be for the kicks.

-Lord

Sunofgod:
And how does he expect an illiterate to understand his logic?

dont mind them. They still don't understand what is going on. How can redenomination work when a complete deaf dullard is the president

Redenomination is only very suitable for a weak currency that has attained stability for a reasonable period of time. Nigeria definitely will consider it later in the future not now.

But if we insist and do it now am afraid it failure will be colossal.

What Nigeria need is economic diversification and food security. If we can stop the importation of petroleum products and food,the pressure on the dollar will reduce by upto 50%.I don't think there is any quick solution to our current economic challenges.