It is often said that whatever the odds, truth will ultimately triumph! So it will be with the issues of redenomination and the payment of dollar allocations for dollar derived revenue! In our article titled “HURRAY! THE COINS ARE BACK, BUT…” – 26/2/2007, we admonished our CBN to put pride aside and borrow the common sense approach of our ECOWAS sister country, Ghana, which had embarked on the redenomination of their grossly debased currency, the Cedi.

About seven months later, CBN which had all along pretended to be impervious to the wisdom of our advice suddenly capitulated in August 2007 with its ‘Strategic Agenda for the naira’ (SAN) which in reality comprised the nucleus of the subject of our articles for over four years!

Indeed, the suddenness of CBN’s capitulation was made more inexplicable by the open castigation of the author of this column for his poor grasp of economics by no less than one Festus Odoko, CBN’s Manager-Public Affairs, in an international press conference, also broadcast on electronic media a week or so earlier!

Regular readers of this column are familiar with our crusade to ensure payment of dollar allocations for dollar derived revenue and must have wondered if I knew what I was talking about since all the eggheads in our ivory towers and other public and private sector economic ‘experts’ also appeared to be in collusion with CBN’s loud silence on these matters, which were fundamental to our welfare!

The hypocrisy became more painful as CBN insisted on pursuing the suicidal course of substituting bloated naira sums for dollar derived revenue in spite of their awareness of the adverse effects of their actions. Even if those experts do not read this column, many of them cannot deny acquaintance with our paper titled “A LIBERALISED FOREIGN EXCHANGE MARKET: a proposal for a liberalized foreign exchange market in Nigeria and its economic benefits”, Boyo/Ojomaikre, which was despatched to key members of government’s monetary team and over a dozen heads of departments of Economics in at least 12 Nigerian Universities by courier; indeed, about 4000 copies of this paper had also been made available to various critical stakeholders in the Nigerian polity, including key members of the Federal Legislature!

My position was finally vindicated in August 2007, when suddenly, CBN’s ‘SAN’ was launched with fanfare in Abuja and the content surprisingly was in consonance with our observations which had earlier been derided!

Regrettably, CBN’s ‘SAN’ suffered a presidential suspension, but I was always confident that the government would return to its adoption if they expected to achieve economic and industrial progress. We had predicted that increasing dollar revenue would only make us poorer if we resisted the payment of dollar allocations! No doubt, Nigeria’s lowly rating amongst the world’s poorest at a time that we earned more revenue than ever before has endorsed our observation!

It has come as a relief lately to read media reports that “GOVT MAY REVISIT NAIRA REDENOMINATION” (Guardian-17/11/08-pg 25).

The report claimed that “Federal government recently reassembled experts from the financial sector to fine tune mechanisms for the proposed redenomination of the naira”. In his paper on the occasion titled “NAIRA REDENOMINATION: SOME CLARIFICATIONS”, Soludo indicated “that under the proposed currency regime, the naira would be called ‘New Naira’”.

In agreement with our observations in several articles on the futility of the campaign against naira abuse because of the minimal values of our currency profile, the CBN helmsman noted: “Under the new currency structure, the campaign against naira abuse would be more effective, as lower denomination of N5 to N50 would be converted to coins”.

The details of the economic experts’ meeting with CBN Governor and Vice President Jonathan are not yet released, but one hopes that the new thrust also accommodates the issue of payment of “dollar allocations”, as it would be most expedient for the two policies to go together, otherwise, naira redenomination will do no more than to improve portability and improve the effectiveness and utility of ATM machines.

It is the payment of dollar allocations for dollar derived revenue that holds the key to our economic turn around, even with less export revenue. The simultaneous redenomination of the naira would reduce the rigours of necessary adjustment that dollar allocations will mean to the fiscal structure of the three tiers of government and promote efficiency!

The following passages are excerpts from three of our articles on this subject in the last two years:

(1) “REDENOMINATION OF GHANA’S CURRENCY”, 15/01/07: “The highest denomination in our currency portfolio about 20 years ago, was the N20 note.

Indeed, N20 at that time was sufficient to feed a labourer’s family of 2-3 persons for a week! In the interim, our monetary operators have issued higher denominations of N50, N100, N500, and more recently, N1,000 notes, as the value of the naira bought less and less goods and services and our own CBN pumped more and more naira notes into the economy without commensurate productivity!

“The result, like the Ghanaian experience is an emasculated naira; meanwhile, our own CBN, last year,(2006) spent an undisclosed huge amount on printing and promoting the acceptance of the new N1,000 note.

Those of us who warned that this was a childish approach to currency management did not have the same megaphones and promotional budget as our deep pocket and powerful CBN.

“It is now not unusual, less than a year after, to receive payments with dirty, stained and mutilated N1,000 notes; an indication that the new note is probably serving the purpose for which low value coins are designed.”

(2) “REDENOMINATION: WHY & WHY NOT” of 17/9/2007:

“Q: But if this redenomination was envisaged, why did CBN issue new coins and higher denomination notes only last year! Obviously such waste is at great cost to the economy!

“A: Yes, the wasted funds could have been better applied; no matter what CBN Governor might say, it will be a hard sell to convince anyone that the proposed redenomination exercise was part of a master plan!

“Q: Are you saying that payment of dollar allocations will turn all these negatives into positive?

“A: Yes, and much more! Excess cash in the system will disappear, as the government does not have to borrow money that it ends up locking up in CBN vaults while paying interest of N260bn on treasury bills and bonds sold to the banks.

The proposed payment system will end the perennial deluge of Naira chasing limited dollars and the table will be turned in favour of a Naira with rapidly improving value.”

(3) “(GHANA) REDENOMINATION, SO FAR, SO GOOD” of 14/01/2008.

“In particular, the rapid depletion of cash stocks in ATM machines, especially at weekends and public holidays will be traced to the low value of the currency denomination profile of the Naira;

“Meanwhile, instead of accepting the reality that the low values of current Naira denominations is responsible for the poor handling and spraying culture of Nigerians to their currency, CBN has once again embarked on another expensive intimidation exercise with threats of fines and/or jail terms for ‘abuse’ of the Naira!”

Truth, they say, has no hiding place!


Source: Vanguard Nigeria