|
Wednesday, 07 January, 2009 07:01 pm
|
You are here:Home
| The re-denomination of the naira: A hoax? |
|
|
| Friday, 14 December 2007 | ||||||||||||||||||
     That the governor of the apex financial institution, the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo is a great reformer is no news. This must be attributed to the transformation he brought to the banking sector and the economy since he assumed office.This is only possible because he possesses the intellect and has the carte blanche. Unfortunately, his critics regard most of his policies as ecletic, cranky and eccentric. Then came the "bomb" on Tuesday,August 14, 2007, when the CBN governor informed a gathering of the State Governors,l awmakers, Ministers, Chief executive officers of banks and media executives of the re-denomination of the naira and the introduction of coins. According to him, the re-denomination would help strengthen the naira against other currencies and restore its value close to what it was in 1985 and also help in the management of inflation and liquidity.The naira are to be re-denominated by dropping two zeroes or two decimal points to the left (i.e dividing by 100).This implies that N100 would now change to N1 and the naira would exchange at N1.25 to S1 (1 dollar). The President,Alhaji Umaru Yar'Adua countermanded the re-denomination orded.By the cancellation the,Mr President killed two birds with one stone. Firstly,the large amount of money that would have been spent in the printing/production of the notes and coins. Secondly,the re-denomination would not be without its own brouhaha. This is because the re-denomination would only be a change in the "nomenclature" and not the "physiognomy", that is ,it would only be a change of name,whereby Mr D would like to be known and called Mr A. The fact remains whether he is being called Mr D or Mr A, he was (is) still one and the same person. On the other hand, a lecturer that receives N100,000 as salary would now receive N1,000 (after dropping two zeroes to the left). Assuming his counterparts in the United States Of America are receiving S10,000. He would clamour to be paid the naira or the dollar equivalent that his counterpart(s) is (are) receiving since they are involved in the same lecturership. Also,others would start comparing salaries, entitlements etc, and demand that theirs should be in pro rata with that of their counterparts in other countries. Then, it would lead to incessant strikes by workers agitating for the upward review of salaries and other benefits. The CBN governor claimed that the re-denomination would restore the value to what it was in 1985, but I have my reservations. Today, the official pump price of petrol is N70 per litre, 70K after the re-denomination,but in 1985,petrol was sold at 20K and kerosene 10K.Also,a bag of rice sells at more than N6,000, that is N60 after the re-denomination, but in 1985,it was never sold at N60. The re-denomination would be exploited by some unscrupulous traders by increasing their prices. For example,goods that are sold at say N1880 (which is N18.80K,after dropping two zeoes to the left) would be increased by the traders to N19 to avoid the coins. What the CBN ought to do is "disinflation" of the economy which is defined in Economics as the, "process of returning the economy of a country from that of an inflationary state to a atable situation in which there is not much variation among prices."The strenght of any country's currency depends on or is affected by many factors like:The balance of payment, the country's productivity and the Gross National Product (GNP). Series of fiscal and monetary measures should be taken to safeguard the country's balance of payment.The poor state of our economy and the decline in the value of naira was caused by corruption. This results from burden (by the past administrators borrowings) for non-performing projects which debilitated the economy and the naira. The importation of goods which were capable of being produced in the country should be stopped,and some imports should be removed from the Open General Import and put under ther Special Licence System. Also, they should be clamp down on a non developmental use of foreign exchange.The conversion of foreign exchange to naira must be carried out through the bureau de change or money deposit banks and not through the apex bank,CBN.The CBN as the power of monetary policies should embark on monetariism, that is, closely monitor the federation exchange because any kobo that is (was) released, tend to swell the monetary supply leading to inflation. To have recommended anything short of that would seemed scratching the problem of inflation on the surface. The Minimum Rediscount Rate (MRR) which is the rate at which the commercial banks borrow from the CBN should be reviewed (reduced). This would reduce the Prime Lending Rate (cost of borrowing) from the banks,so that the Small and Medium Scale Enterprises (SME) and the manufacturers could borrow and produce for export to generate foreign exchange to grow the economy. The irrefutable truth is that the re-denomination of the currency is not an end to the high rate of inflation and the poor state of our economy. The re-denomination of the naira to halt or curb inflation or revive the value of the naira,is nothing but only quixotic and mere window-dressing. Mgbii Anthony. Nnamdi Azikiwe University, Awka,Anambra State. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it  Quote this article on your site | Views: 1504 | Print | E-mail
Write Comment
Powered by AkoComment Tweaked Special Edition v.1.4.6 |
||||||||||||||||||
| < Prev | Next > |
|---|
