FG moves to re-introduce naira redenomination

No Comments » January 5th, 2009 posted by // Categories: Nigeriawatch



FG moves to re-introduce naira redenomination


Written by Musa Simon Reef   

Sunday, 04 January 2009


When on August 14, 2007 the governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Charles Soludo announced plans by the CBN to redenominate the Naira, a cacophony of voices trailed it. The CBN was summarily summoned to the Federal Executive Council where he defended the action of the apex bank in pursuing the redenomination of the local currency which simply entails the removal of two zeros from the local currency.

Coming from a beaten path where he has imbibed the strategies of survival, some Nigerians thought his days were numbered as the CBN boss. President Umaru Musa Yar’adua was later to order Soludo to liaise with the Economic Management Team (EMT) on the issue and get back to the presidency for re-assessment.

Unknown to Soludo, according to some sources then, his days were numbered as some of his past policies had hurt certain sections of the public. In an obvious signal of where the pendulum would swing to in the weeks to follow, the erudite economist was disengaged from the EMT. As if to tell Soludo that all was over, the Minister of Justice and Attorney General of the Federal, Mr. Michael Aondoakaa suspended the Naira redenomination on the simple reasons that the Anambra State-born economist did not get the written consent of the president before going public with the issue. Despite the public odium that accompanied the large scale condemnation of the new strategy of the CBN on the Naira, Soludo remained unruffled and never gave his critics any attention.

Over one year after the entire Naira redenomination plan was thrown into the dustbin of irrelevance, the federal government, according to informed sources, is about taking a second look at the issue. The need to re-assess the Naira redenomination is coming on the trail of the appointment of Soludo to be a member of a world financial group of globally recognised distinguished economists to tackle the world economic meltdown and proffer solution to the problem. Supporters of the CBN boss are quick to point out that the appointment of the CBN governor is a clear testimony to his foresight and capacity to deliver.

But the coordinator of the International Press Centre (IPC), Lanre Arogundade has advised Nigerians not to attach much significance to Soludo’s appointment as what the West wanted “is our reserves since they know that we have very high foreign reserves. So, there is nothing unique about the appointment. All they need is our money. They are just targeting the reserves.”

The critics of the CBN governor say that Soludo’s appointment is a self-serving venture by the West to curry favour from Nigeria reserve have grown tremendously since Soludo became the boss of the apex bank. As a strategist well versed in the rules of survival, his ability to remain calm in the most turbulent moments of his life has earned him a place in the survival hall of governance.

Three weeks ago, it was reported that the PDP-led federal government was about making a u-turn on the Naira redenomination it earlier kicked against about a year ago. According to the news story, Vice President Goodluck Jonathan had met a group of experts to look at the issue with a view to reporting to the president. The meeting, which source said took place in Abuja was attended by Soludo, financial experts and top officials of the PDP to re-asses the Naira redenomination option.

The Abuja meeting, which held last month at the Transcorp Hilton Hotel, saw many opposing the option of re-introducing the redenomination, which a vocal few insisted it was high time for Nigeria to borrow a cue from other countries that have implemented the redenomination strategy as a means of strengthening local currencies.

The meeting had in attendance people like the chairman of the United Bank for Africa, Tony Elumelu, former Minister of  Finance, Mrs. Esther Nenadi Usman among others, was expected to re-examine the issue so as to guide the administration in taking a decision. But just as the previous debate generated heated controversy over the matter, the Tony Elumelu-led panel was devoid of unison. A convincing number of the experts still kicked against the idea.

  But even as the Anambra State-born economist was the only African in the 10-member world class economists empanelled by the United Nations to resolve the global economic meltdown, Soludo’s critics are kicking against the redenomination exercise, insisting that the Nigerian economic condition is not as bad to warrant the redenomination of the Naira.

Professor Mike Kwanashie of the Ahmadu Bello University and Economic Adviser to former Vice President Atiku Abubakar told Sunday Trust that adopting redenomination was not the best way of tackling the problems of the economy. Though the economist identified some of the advantages associated with redenomination,  the erudite economist maintained that perceived advantages of redenomination of currency might finally fizzle out if the fundamentals of the economic problem are not tackled.

According to Kwanashie, “I know people have given them explanations and there is the tendency for the government to resolve in implementing the policy but I  advise the administration to tread with caution.  As an economist, I shall advise them to make haste slowly and should not take a short cut that will lead them nowhere. Short cuts are good as long as they lead to the proper location. It is good to strengthen your currency but you must find the right means of strengthening it.  The only way to strengthen your economy is tackling the productivity base of the economy. Only through this can the strength of the local currency be improved.  You want to be the strongest currency in West Africa and you are doing nothing to improve your currency. We just have to do certain things to improve on the value of the Naira.”

Dr. Ibrahim Ayagi, former chairman of the National Economic Intelligence Committee is also against the planned re-introduction of the redenomination option. Like Kwanashie, he insisted that the option has been implemented in countries suffering from hyper-inflation.

“Introducing the redenomination at this stage of our economy is very dangerous and risky to the country,” Ayagi maintained.

For now, no one seems to be speaking for the CBN which is the advocate of the redenomination plan. When Sunday Trust contacted the spokesman of the CBN, Mr. Festus Idoko, he said, information regarding the redenomination of the Naira could be accessed from the CBN official website. He was also not forthcoming on whether the policy would be re-introduced by the CBN.

The CBN in its website clearly faulted claims that redenomination of the Naira could lead to confusion and distort the economic activities of the people. Besides mentioning names of countries that have implemented the policy, the apex bank said that it was ready to embark on mass education of the people to fully make them understand what the policy stands for.

The CBN also made it clear that redenomination is not the same as re-evaluation stating that the Naira redenomination was aimed at ensuring a strong economy and solid financial base for the country.  

Considering the footprints left by Soludo in the sands of the country’s financial sector, it is most certain that redenomination would continue to be a recurring issue. What is not certain is whether the boss of the Nigeria’s apex bank would sway the opinion of anti-redenomination group to his camp. Considering the flood of opposition that has trailed the planned re-introduction of the Naira policy, the controversy may take a long time to abate.

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