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Sunday, August 19, 2007

Revaluing the Nigerian Naira.

I won't say i am very comfortable with this Naira revaluation news. I first read about it on my sister's blog http://www.lindaikeji.blogspot.com/ and tot WTF?!. Then heard it on the radio and on the News. It's a good idea but right now, i think its utter ***ness.
How are the poor going to cope? We manufacture VERY little things here.
The country depends on importation of goods and services to survive. We have got VAST Oil but have to depend on foreign refineries and expats to produce Oil. We used to be large exports of Oil, Minerals, Cocoa, Rubber but the concentration is now more on Oil.
If we want to improve the situation in this country, i think the government should concentrate more on revamping our Oil refineries, and start producing goods locally so we can export them and better the economy of the country.
The Japanese yen has got more value than the US dollar now because their export rates increased. When a country exports goods, there will be more money coming into the country than leaving the country. In order words, the country's economy would grow thereby affecting the value of its currency and enriching its citizens.
I don't think revaluing the Naira would help the country grow. I think concentrating on manufacturing products locally and creating a safe environment for Investors to invest here would help the economy grow.With the manufacture of local goods and Investors coming in, there will be job opportunities to graduates and skilled people, thus reducing the poverty and crime rate in the country.
I don't want to talk much on this topic cos its generating a lot of debates but i will paste what Chief Olu Falae and other renowned Nigerians think about it.
Pls read on:
Chief Olu Falae, secretary to the federal government during the General Ibrahim Babangida regime and one-time finance minister said the new policy has no distinct advantage.
"I don't see much need in the hurry to revalue the naira. The new naira policy has no distinct advantage. I think we should be very careful and properly study what we are planning to go in for and see the potential dangers. How will this policy positively impart on the lives of the ordinary people? Have we thought of that? If it won't positively affect the people, then, why do it? It has no advantage. It won't benefit us. I don't see the positive impart on the ordinary person.
"Okay, what is it saying? It's about knocking off two zeros. If you are earning N10,000 a month and two zeros are knocked off, you will begin to earn N100.
If a loaf of bread is N100 and you knock off two zeros, it would become N1. But would the market woman just knock off two zeros from everything she is selling? Your employer can conveniently do that but a person selling N100 can reduce N10 and sell the bread for N90 and I tell you, that policy can only reduce inflation by 10 per cent. It cannot leave us better-off or worse off.
Can a market woman selling bread divide a loaf of N100 by removing two zeros? Employers can do it but the ordinary people can't and their interest has to be considered. So, why do I it if it won't benefit them?"
Dr Kalu Idika Kalu, also a former finance minister and one-time minister of national planning in his response said what is going on at present says, "If we want to revalue the naira to become comparable to the dollar, we would need a new currency". Ghana recently reprinted the cedi and today in Ghana, there is the new Cedi. My worry is the mix-up in what is going on now, because I don't think it will affect the value of the naira. So, why do that? Would the rural people understand this thing? Does it have anything with Nigeria wanting to be the hub of West Africa? If we want to revalue the naira, we cannot do that with the present notes we have and it's unthinkable to change because we just printed new notes and brought back coins.
"What will affect the value of the naira is the state of our economy. So, why go through the pains when we should concentrate on how to restructure our economy and make life more meaningful for the people? We should approach this Vision 2020 with caution. CBN should take it easy because we are doing too much gra-gra over it. We are doing too much of targeting and visioning. If we want to dominate West Africa with our currency, we shouldn't make noise about it. We should just let it happen. We should be wise and focus more on starting properly. We have so many unpaid pensioners, unemployed graduates, bad roads and collapsed infrastructure requiring government attention. Let's start with them first before going on to this talk about revaluing the naira. I don't understand the hurry."
Former governor of Anambra state, Dr. Chukwuemeka Ezeife toes a similar line.
"The way I understand this thing, it won't change anything. It's a matter of reducing the number of zeros on the naira and reducing the number of millionaires in the system. The new naira policy simply means that somebody who is a millionaire today may not be a millionaire anymore by August 2008.
"Some people have been calling me to ask questions on the implication of this on their business and the economy. Some traders are asking if they should sell off everything in stock or keep them but I have told them it does not matter. It's just CBN trying to define zero or add value to it. It makes no basic difference but helps only in book-keeping and accounting.
"If one dollar is equal to one naira, then, we wont be buying bread with N150 but one naira. The number of millionaires will reduce. Somebody who has one million naira will now only have ten thousand after you have removed two zeros. If your salary is N10,000 and two zeros are knocked off, it will become N100 per month because N10,000 has been revalued to N100.
One Nigerian pound used to be three dollars. N10 will become one kobo. Denominations like N5 or 50k may still be worth something but too small to be counted."
Alhaji Tanko Yakassai, an Kano based elder statesman and First Republic politicians explains the new policy is meant to increase the purchasing power of the naira.
"The naira is now revalued and the currency is moved upward and the purchasing power would be stronger. But I don't understand what would happen to the smaller denominations because I foresee a situation where the holders of small denominations would lose eventually and these consist the poor and the ordinary people. If naira is revalued, there would be nothing to do with 50k, N1 and other small denominations and I hope CBN knows what this new policy can do to poor people."

9 comments:

ekwi said...

Vera, the CBN is redenominating the naira, not revaluing it as you have written. Those are 2 different things. I suggest you check your facts again.

Vera Ikeji said...

Ekwi, i suggest u do three things before u can come back to this blog.
1. Pick up any dictionary and check the meaning of re-valuation
2.Check the meaning of re-denomination.
3.Check ur facts before u return.

diary of a G said...

I'll holla

Atutupoyoyo said...

Well said. This is a short term solution to a long term problem. They are selling people a dream that the Naira will stand shoulder to shoulder with the dollar. It is a LIE!

In the long run, only the strength of the economy can sustain the strength of the Naira. How can this happen when we have a manufacturing industry on it's knees? I tire o!

Marin said...

Vera, I'm with ekwi on this one, redenomination is totally different from revaluation. I was in russia when the same thing was done there in 1998. If properly managed, it won't make any difference to the poor. But, with Nigerian mentality, where everyone wants to become a millionaire, even if it is just in naira, I don't know o....

Nice blog by the way.

Vera Ikeji said...

Thanks Marin.

dream said...
This comment has been removed by the author.
dream said...

This was a welcomed change, and almost all the people I have talked to really were looking forward to this change. Whenever I visit Nigeria (once, every two years) I am at a loss with currency, and usually have my local friends and family handle the money. N350 for a bottle of beer (N600 at Sheraton, Ikeja.)

I remember paying N2.50 for a bottle when I lived there. Having said that, as an economist there is no real change in a re-denomination, and it can be done successfully if the government takes time and effort to educate the people.

what's the point of being a millionaire with no real buying power? This was one of the best news to come out of nigeria in ages

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