Friday, 17 August 2007

Redenomination or Redomination: Give Soludo a Chance

by Hakeem Babalola
The Central Bank Governor, Charles Chukwuma Soludo, recently unveiled a plan to revert the naira to its pre-1986 value. Prof. Soludo said among other thing that #20 will become the country’s highest denomination against #1000 which is currently the highest. Doing this will put the naira at about #1.25 to American (U.S) dollar and invariably transform the naira into a world class currency, and become West African’s common currency by 2009. This isn’t a bad idea. Is it? But is it practical and, or achievable? Are the owners of Nigeria going to tolerate it?

In essence, what the professor is trying to implement is called revaluation or currency re-denomination in economics parlance. He wants Nigerians to be proud of their currency as much as they are proud of their country being the Giant of Africa. Soludo violently believes in economic revolution hence something drastic must be applied urgently. "This would entail a total currency exchange and phasing-out of all the existing denominations from August 1, 2008".

The plan is to "restructure the entire currency by dropping two zeros or moving two decimal points to the left from the currency, and issuing more coin denominations. Effectively our plan will restore the value of the Naira (in short-term) close to what it was in 1985 before the commencement of the Structural Adjustment Programme (SAP) in 1986". The proposed currency structure is as follows: COINS (1 kobo, 2 kobo, 10 kobo, and 20 kobo) NOTES: (50 kobo, 1 Naira, 5 Naira, 10 Naira, 20 Naira).

Even though I am in the Diaspora which means it would affect the quantity of money to be sent to my relatives, I’m not at all afraid of this restructure or whatever. That Soludo is not a politician has allayed my fear. I want to trust this guy because it seems he’s damn apt at his chosen career. And there’s nothing to fear other than fear itself. It’s not that restructure will eventually curb or eradicate poverty, at least it will make the naira look good either on paper or at hand. What is the advantage of 000? Hum, the billionaire now become millionaire and the millionaire now out of the race.

My fear of course is the implementation and logistics. Our policy-makers are known for their half or incomplete achievement. They are in the habit of starting an agenda without completing it. This has manifested in virtually every project embarked on. Operation Feed the Nation (OFN) in 1976 and Structural Adjustment Programme in (SAP) 1986 to cite two examples. Both agendas were meant to alleviate our sufferings but where did it lead us to? Nna, we just dey waste money anyhow. Hopefully Soludo’s project is quite different.

I really do not care much whether several countries in the world have undertaken currency re-denomination at various times or not. What concerns me is the seriousness and determination of Soludo, and the long-term effect of this whole process. For example, what are the necessary complements to the currency re-denomination? Is Soludo ready to die defending this agenda? Is he ready to resign if the agenda is politicized? My question is, why did he introduce #1000 note recently if he was planning re-denomination? This aspect confuses me.

For such re-denomination to be successful, part of the plan must include traders and not only elites. It must be beyond theory. Soludo must provide adequate and useful information to the market wo/man whose awareness is fundamental to the success of the agenda. She must know how it will affect her and her poor family. She must be properly educated on how practical it is for #1000 to suddenly become #10. She needs to know how on earth is it possible to spend #10 and get #1000 in value product. She just must know.

Perhaps we don’t even need to exercise fear over her. For if she could survive the tantrum of the military, especially Buhari’s inconsiderate currency colour change in April 1984, IBB’s SAP, and Obasanjo’s sadistic re-denomination, then she won’t find it that difficult to adjust to this simple and wonderful restructure of her currency. But she must be assured that, this one would be totally different from those agendas that had been used to oppress her. Believe me she needs assurance like never before, otherwise she will be forced to make it impractical.

Meanwhile I believe it is absurd to politicize the content and subject matter of Soludo’s idea of re-denomination. So far those who have expressed concern on the policy include the elders’ council of the Northern Union (NU), former CBN governor, Ola Vincent, president of the Institute of Chartered Accountants of Nigeria (ICAN), Adebajo Babington-Ashaye, the president of the Lagos Chamber of Commerce and Industry (LCCI), Ademola Ajayi, former secretary to the FG and Finance Minister, Olu Falae, and twice Nigeria’s Minister of Finance, Minister of National Planning as well as Transport, Kalu Idika Kalu.

The above mentioned names have urged the Federal Government to call Soludo to order which simply means they do not like this idea of re-denomination. And like a listening head of this administration, Umaru Yar’Adua has asked economic team to review Soludo’s policy. I am not sure if Yar’adua, a man who is fighting tooth and nail to solidify and stabilize his rule, is ready to take the bold move with Soludo. This is definitely not the right time for Obasanjo’s anointed son to gamble on agenda of this magnitude.

In contrast, the President of Chartered Institute of Bankers of Nigeria (CIBN), Mrs. Juliet Madubueze has thrown the institute’s weight behind Soludo’s strategic plan for the naira, saying it would strengthen Nigeria’s currency in line with one of the pre-conditions of the West African single common currency. Even foremost economist, Prof. Sam Aluko, applauded Soludo’s decision to shore up the value of the naira through redenomination. "Fixing of an exchange rate for the naira has more advantages than disadvantages to the Country’s economy," Aluko was quoted by the national newspapers.

All in all, "apart from destabilising the prices of goods and services, the policy meant no change of status to the naira and the economy," says Duro Kuteyi, President, Nigerian Association of Small Scale Industrialists. Until real development takes place in the economy through hard work on micro and macro economics, Naira woes may remain. Though I am not an economist, I consider Soludo's move as apt and brave. He should be given a chance.

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