Posted by By AMECHI OGBONNA, SEUN ADESIDA, Lagos, ISAAC ANUMIHE and DENNIS MERNYI, Abuja on
The plan by the Central Bank of Nigeria to revalue the naira has been received with mixed feelings by various stakeholders across the country. This is more so, because of the far-reaching socio-economic implications of Professor Chukwuma Soludo's policy pronouncement.
The plan by the Central Bank of Nigeria to revalue the naira has been received with mixed feelings by various stakeholders across the country. This is more so, because of the far-reaching socio-economic implications of Professor Chukwuma Soludo's policy pronouncement.
Just like his historic July 6, 2004 pronouncement on N25 billion bank recapitalization, many are wondering what would have given Prof Soludo, governor of the Central Bank of Nigeria (CBN), the confidence to dare what ordinarily looks like an impossible task.
As would be expected, opinions are already divided as to the necessity of revaluation of the naira when the nation's economic infrastructure still remain weak compared with its other trading partners. The major question the CBN needs to urgently find answers to is whether the country's prostrate production base could support the exercise.
Nigeria as a net importer of foreign products also remains an exporter of primary products, ranging from oil and other unprocessed goods.
Soludo had chosen an august assembly of state governors, deputy governors, ministers, bank chiefs and the media to let the world know what he plans to do with the existing denominations of the naira from August 1, 2008. It was, among other objectives, intended to let the state chief executives know that the window and avenues for profligacy and mindless looting of public treasuries were gradually tinning out.
The governor, who hinted that one of the objectives of the policy was to make the naira a reference currency in the world, explained that the United States dollar would exchange for N1.25, when the policy takes off, in line with the plans to make Nigeria the financial hub of Africa by 2020. He described the policy, as the beginning of the second phase of the reform agenda, which he said, was even more critical.
Soludo said that in line with the provisions of the CBN 2007 Act, fresh impetus would now be given to the core mandates of monetary and price stability, maintaining external reserves so as to protect the international value of the naira as well as build a sound financial system in the country.
The renewed impetus on the naira at the moment, according to the governor, was to ensure that it continues to play the pivotal role of a central bank as well as provide the synergy required to boost economic development in Nigeria and the African continent.
He noted that the decision to pursue this policy was largely informed by the significant progress recorded by the 25 banks that survived the recapitalisation programme in penetrating other economies due to their enhanced financial capacity.
However, while many could acknowledge the achievements reeled out by the CBN, a number of questions are still begging for answer from an institution that barely less than a year ago executed a major currency reform that phased out some denominations of the naira and introduced new ones.
Many have come to ask whether the CBN was adopting a trial and error mechanism in running the affairs of the banking industry, especially as it has jettisoned an initiative that must have cost the nation a fortune to implement. Indeed, it is difficult to convince Nigerians that they have actually reaped the full benefit of the recent currency restructuring, to warrant the new policy of dumping higher naira notes after spending so much money to print and mint them. Again, how will the policy be taken by Nigeria's major trading partners, most of whom have supported its economic reform agenda on the basis of a devalued currency?
However, some experts have described the policy as a welcome development, which will enhance the efforts by the authorities to fully integrate the new coins into the financial system.
According to Mr Abimbola Olashore, executive director, wholesale banking, Ecobank Nigeria Plc, the revaluation does not affect the value of the naira. He said it was meant to help Nigerians to begin to accept the coins in transactions.
Said he: "The policy will bring about the reintroduction of the coins, because it is about time we started using coins again. It will discourage people from carrying large cash at any point in time and this will help us all to clean up the naira and this will be in the overall interest of the people of Nigeria."
The Ecobank boss stated that the CBN would require much education to convince Nigerians that the new system is in their interest, since, in actual fact, no value has been lost due to the policy.
However, he called on the government to provide the enabling environment, to step up the productive base of the economy, arguing that the strength of any currency was usually anchored on the productive capacity of the economy.
Mr Godwin Madumere, managing director, MoneyManager, said the new initiative remains a beautiful idea, for which Soludo needs to be commended by all Nigerians. He said that this would make the Naira to compete favorably with other currencies in the world as it has been unduly devalued over the years.
He said: "I just want to support and salute Soludo's courage to make such pronouncement on the naira."
Similarly, Mr Patrick Okomiso, managing director of Nko Oil and Gas, said the policy would affect the economy positively, as it would cause all factors of production and manufacturing to witness a positive improvement.
He said: "But what I want to understand is, do we have so much money now to support this policy, because it will affect the oil and gas industry, in the sense that it will generate more jobs for citizens? With more people working, the economy will be better for it and people's purchasing power will be enhanced.
"The only snag in the whole issue is lack of basic infrastructure, without which the whole exercise would be counter-productive. Soludo has done it with the banking sector and I believe he will deliver on this one too. The scenario now is that with the policy in place, goods are likely to become cheaper."
Engineer Toyin Ali-Balogun, a civil servant, said: "Basically, our salary will equally be reduced by two digits, but then it still has the same purchasing power. I believe in the macroeconomic projections. That is where this is going to be effective. Initially, within our pockets not much will be felt."
He said that merely recognizing that Nigeria was an importing country, "is where I think it is going to help us. Since we are aspiring to become one of the developed economies and we start exporting, the whole economy will be affected, making us to get real values for goods we import into the economy.
"I think the Nigerian economy is going to compete better internationally now that the currency is being processed to be appropriately valued against the dollar. This policy was long overdue, as there was nothing stopping the government from introducing it long before now.
"The Naira, at its current value, is a total devaluation of humanity in Nigeria, and I believe the present level of our reserve is playing a critical role in this policy. As for government projects, it's going to impact greatly on the volume of projects that we can handle. Where we were handling 90 transformers in a month, now it means we can handle 900 transformers once that policy takes effect. That means electrification projects will improve across the country."
Mr David, an auto mechanic, said: "It is going to affect artisans much, but with more enlightenment, I think it is a good thing for us. When I came to Lagos in 1985, spark plug was selling for N10, tyre sold for N300, but today the prices have gone haywire, and so, if the government can implement this policy, I think it will be very good."
In the same vein, Mr Dapo Adelaja, a chartered accountant and a businessman, said it is a good policy, advising Nigerians not to expect immediate benefits.
"What Nigerians should expect is that the policy will generate more employment and will further boost purchasing power and this will have direct impact on our business in the IT sector," he said.
Tunde Adedeji, an economist, said in the early 80s, the world economy suffered a severe glut as Nigeria could not export enough oil during that period. The naira was forcefully devalued on the instruction of the International Monetary Fund (IMF). Since that time, the naira has been on a roller coaster down the devaluation road. He pointed out that Soludo created the first check last year when he announced that the naira would exchange for N126.
"Today how much is the dollar compared with the naira? So, the ground has been prepared for the eventual take off of a N1.25 to $1effective from next year," he said.
Tochukwu Ezieani, a businessman, doubts if it was possible to have such a thing in Nigeria. He wondered how the manufacturers would prepare for that development.
"The government cannot just talk about re-denominating the naira without talking first about infrastructure development. Whatever the government or the CBN is doing will not translate to anything meaningful without adequate infrastructure provision," he said.
Mr. Jeremiah Terpenda, IT Consultant, said: "I don't think it is the best approach to revive the economy. My opinion is that then government should diversify the nation's economy and particularly, give agriculture a proper consideration. My belief is that, if agriculture is given a lifeline, there will be no dependence on oil. I don't think reducing naira's denomination is the solution to the nation's economy."
For Bala Mohammed, a police Sergeant, it is a good development "if the N20 value can earn me food on the table and he could still pay my bills."
Mr Emma Njoku, a journalist, argued that until the policy is implemented or the CBN sensitizes Nigerians about it, people can't say much. He, however, said: "I think if the highest denomination is brought down to N20 and it is able to pay for your services, then I do not see anything wrong with it."
Mr Joseph Inokotong, a consultant, believes that the revaluation of the naira is a good step in the right direction, because, according to him, "it is what we have been clamouring for over the years. Now that government has intervened to strengthen the naira vis a vis other currencies, like the dollars and the pound sterling, all Nigerians should welcome it."
According to him, from the presentation of the Central Bank governor, "you discover that although it is going to be N1.25 to a dollar, the CBN will intervene to check inflation. What I think that the government will do is just by fiat. That is the only way it will work out."
However, Mr Steve Inalegu Adamson, an applicant, believes that "the government has good intentions in denominating the naira, in that for a long time we were carrying loads.
We want to go back to what was happening in the ‘70s, when N3, 000 was able to buy a car, N3, 000 was able to build a house."
He advised that people should understand the fact that N20, being the highest denomination, does not mean that the money will be devalued. "Instead, it means that N20 will buy you something reasonable," he said.
Pastor Casmir King also welcomes the idea, stressing that what Soludo is doing was right, as, according to him, "currency restructuring will help our naira regain its much value and against other currencies. This very restructuring will help curb fraud in the public sector in particular."
A woman, who simply identified herself as Mrs. Moyo, said that when fully implemented, the policy would practically make going abroad, in search of greener pasture, worthless, as the incentive will no longer be there. She stated that before now, Nigerians were traveling abroad in droves because the dollar is stronger than the naira, but that with the new policy, it may be better to remain in the country than go and suffer for the same value people could get locally.