well, dats a good job.

@ opensources,

Yes, but towards a better position for Nigerians, because production will escalate.

@walel - land of 12million naira will be sold for 120,000naira but the values equal each other. You will become no richer or no poorer, the things you could buy before you can still buy, it will initially just be a change in what you call the amount of money you have and spend.

@opensource - it will probably effect forex trading if that is what u are asking (but I am not sure how), the Nigerian market may be affected by consumer confidence and drop, alternatively the effect that this will have on increasing foreign investors should make the market rally. Banks will probably see gains either way I think. Nigerian companies listed overseas should see share prices increas as the world opens its eyes to Nigeria. Most economic policies affect the stock market and this is part of a major policy so i assume so.

This is just my opinion though, please don't start buying stocks cos of one person!

It seems it would be a lot less confusing for folks if they  just renamed the currency

If  a few people  in this forum are confused about it imagine the average man on the street

Imagine explaining your N100  today is worth  N1  August 2008

I think most people would get it if  they just said we going to have a new currency

N100 =  1 Wazobia

I guess similar to  what  the EU did when  countries converted to the Euro.

As for the impact  it should have little  to no impact  on the average nigerians standard of living or the value of there investments . We just  wont need a wheel barrow anymore to cart all that naira around plus the pleasure of of exchange parity with the dollar   1USD =  1.25 Wazobia something we havent enjoyed since the early eighties.

Initially I thought it is a good idea but when I looked at all the facts I don't see it as a good idea again and the reasons being:

1. Easy convertibility though it is a good idea to some extent in macro-economics term, it allows for finacial enterprenuers to come in, invest and crash your economy at will. Those kind of situation gets the vultures of financial enterprenuers in instead of product enterprenuers that should have come into the economy when the real value and not the so called "feel" good value is used. What we need now is development in the economy, all the growth we have been getting are in macro terms not micro. This is exactly what this new step is going to continue to do. I really don't see how this will help the local economy per se. Just wait for the chinese, europeans and american financial capitalist injecting money into Nigeria economy. They will speculate on the market and crash it at their whim. Our economy is not strong enough to withstand a stock market crash for now.

2. I believe this step will not help inflation at all. It will actually worsen it. People attitude about coins wont change overnight. You don't expect Agberos to start taking coins, they will prefer 50K note ( that is 50 naira in the old currency). I will also expect the police not to take 20K, they will also prefer 50K notes for obvious reasons. That mean overnight you experiencing a 150% in those part. On the issue of food and other things, Nigerians like to round up things. I expect things food that used to cost 125 naira (now 1.25 naira) to actually move to 1.50 without battling an eyelid, just because people abhor coins.

3. I am sure today people still dont use wallet to carry naira. I remember in the 80s govt came out with a campaign on that. It didnt work. On paper, this should look good but just like any policy in Nigeria, it is the people attitude that matters.

4. Can our economy withstand the tourmoil that was seen in the european and american economy this past week? what we are doing with this policy is exposing our economy to all these forces with only $40 B dollars to handle any shock. That to me is too small to deal with the eventualities!

ell77:

@walel - land of 12million naira will be sold for 120,000naira but the values equal each other. You will become no richer or no poorer, the things you could buy before you can still buy, it will initially just be a change in what you call the amount of money you have and spend.

We seem to be forgetting that Nigerian gvt. has little or no control over the price of goods and commodities. If my dad's land is valued at 120million naira, I can decide to sell it for 180,000naira as against 120,000naira. . . it's my father's land and you're free to buy or leave. If then you buy the land for 180,000naira, don't you see that you have lost 30,000(3million naira)?

I can assure you that market women will not convert the price of goods the way its being proposed. If you go to the market to buy garri or pepper, you can't tell them it should be 2.50k if they tell you it's 3.00naira.

Is govt. going to increase salaries? Because I also believe that Landlords have a right to rent out their apartments at any rate they choose to.

Currency re-denomination may be a very good idea for other countries, but I still believe the ordinary Nigerians stand to lose more when it's implemented in Nigeria because Nigerian gvt. has no means of regulating the price of goods sold in the market and Nigerians being greedy as they are, will capitalise on that and life (maybe for a short while) will be difficult for the not so-rich masses which is more than 50% of the population!

If at all,the only good thing I see for now is that it will put a total stop on spraying of money in parties,

I'm not doubting the good intentions behind this, i'm just not sure Nigerians are ready for this massive change hence the doubt and fears.
Let's wait and see,

What part of 'it has no effect on the value of what you own or the salary you are earning' don't you understand?

My own stand is that all these nominal changes are sort of unneccessary. I'll prefer policies that will help someone earning 20,000 naira a month to rise to 50,000 naira a month in REAL terms. Rounding off zeros and cancelling off zeros might make the life of CBN easier but how does it improve our real living standards?

I'll rather my real wage increase than be able to convert 1 Naira to 1 dollar but having to work 100x harder as a Nigerian for the 1 dollar than an American would which is actually the case currently. I want some policies that will increase our REAL productivity because this doesn't really excite me. I still have to work as hard as I currently I'm to exchange 124 naira to 1 dollar as I would to exchange 1 naira to 1 dollar in a year's time, where is the benefit to the average Nigerian?

What about inflations

they say it has no negative /positive impact so i guess it also means inflation wont be affected-no movement?
so what exactly is the point?

what is capital account transfer?

The negative impact will be: (1) the enormous confusion it would cause (2) the enormous cost of reprinting all our currency, including the polymer notes just created (3) The cost of updating financial records of all kinds.

financial records, annual statement of accounts, profit and loss projections and comparisons, stock taking, re-labelling and repricing - GSM cards, packaging of products, receipts, and so on.

the only benefit to this policy is the supposed reduced inflation because of the availability of smaller currency denominations. I don't even buy that argument. it is very difficult if not impossible for the government to properly influence such price rises when they happen since they are usually of necessity or by outright greed, in either case, lower denominations will not stop the increase in cost or the greedy man from being greedy.

the sheer confusion and rush on the banking system (which will be the point of exchange), the thousands of productive man hours spent lining up to change currencies without productive activity and the virtual grounding of all other useful banking activity during the period will also be costly

I wonder what reduction in GDP they are anticipating due to such a change - is that comparable to the so called benefits?

Fellow Nairalanders,
pls do not try to embibe or accept this idiotic financial policy that is practically blurred and theory- oriented.This will not work out anything!Soludo is just trying to remain relevant to this govt, so that Yar' Adua will not throw him out like the senile and docile Kpokolokun(abi na kpokoloko-ole).did he consider the market mentality of price imposition and how small increase of price in this kind of system will increase inflation?let him know now that from today till august,2008 ,he will render the nigerian economy stagnant and docile because investors will save their hard earned money that gamble with it now and productivity will be low.goods and services will not be patronised for now.Is such drastic economic policy noted betterly debated,canvassed and subjected to referendum?can Soludo claim to master this devaluation strategy that the US economic team that have refused to devalue amigst the growing strength of pound sterling and euro?this is our DOOM!have we forgotten the case of Argentina economy when a peso was equal to a dollar until the reality came on them?5 presidents in one week!when Soludo should be trying to combat economic realities with all explicit and implicit economic weapons rather he is busy dancing macabre to exhaustion!he has furthermore widened the gap between the rich and the poor.can someone just ask them to stop?!!!

I am not quite sure there is another set of people on this earth that are as blindly optimistic as Nigerians.
My Gawd!!! Some of us are already sounding as if anything that has worked in other countries has ever worked here.

When Babangida came up with SAP, Nigerian sang to high heavens that that was the panacea to all our economic problems. Today , how far?

Honestly this Soludo guy is beginning to register doubts on my mind about his much touted capabilities. Is he not the same CBN helmsman that introduced the 1000 naira note about a year ago or so. Why this sudden reversal of policy.

I just want somebody to tell me that this is the most important and most urgent of all our economic problems right now.
Please let somebody tell me that re-denominating the naira is far more important than providing basic amenities and infrastructures that even less endowed counties of Africa had since taken for granted.

May God help us

debosky:

the only benefit to this policy is the supposed reduced inflation because of the availability of smaller currency denominations. I don't even buy that argument. it is very difficult if not impossible for the government to properly influence such price rises when they happen since they are usually of necessity or by outright greed, in either case, lower denominations will not stop the increase in cost or the greedy man from being greedy.

That's the point, gvt. has no direct or indirect way of controling price of goods and services! Nigerians are too greedy and they are going to take undue advantage. . . meaning . . . the poor will get poorer and hungrier because they can't aford to buy food and pay for services at the new rate. . .watch it.

V.C.2007:

My Gawd!!! Some of us are already sounding as if anything that has worked in other countries has ever worked here.

exactly.

V.C.2007:

Is he not the same CBN helmsman that introduced the 1000 naira note about a year ago or so. Why this sudden reversal of policy.

If you ask me, I'll say it's greed. New policy new contracts and new means of making money.

In the short term the redomination would definitely cause inflation.
The cost of changing accounting records to reflect the new policy must be passed on to somebody. If I have to adjust my accountinmg package to reflect the redomination then I will have to employ consultant / programmers whose cost I will definitely reflect in my price.
The cost of even enlightening the masses would be huge.
Most companies would have to reconstruct their shares because at the present 50kobo redenomination would make them worth half kobo which does not presently exist. These cost would have to pushed somewhere.
Imagine a banker earning N4m p.a would all of a sudden start earning N40K.
Omo the implementation hazards are too huge to even contemplate.
This one go hard Soludo.

[size=14pt]Nigeria set to free its currency[/size]

Analysts think the move will help strengthen Nigeria's currency
Nigeria's central bank has said it will make the country's currency, the naira, convertible by 2009.

Until now, the central bank has limited how much foreign currency can circulate by selling it through auctions. It has also set the exchange rate.

The change should help increase flows of money into the banking system and encourage investment into Nigeria.

The government will also redenominate its currency from August 2008, so that 100 old naira will become 1 naira.

This should help make the pricing of goods easier, as well as conversion into other currencies.

Gradual withdrawal

The naira has been appreciating against the dollar this year, thanks to Nigeria's high oil revenues.

Analysts think the naira will be further strengthened following the latest currency changes.

"This is very positive. I agree fully with all the initiatives," said Tony Elumelu of Nigerian bank UBA.

The central bank's governor Chukwuma Soludo said the bank would "gradually withdraw from the weekly auction system [of foreign currency] and only intervene in the market as may be required to achieve defined policy objectives."

The currency changes apply to commitments Nigeria has made under International Monetary Fund (IMF) rules regarding currency transfers.

http://news.bbc.co.uk/2/hi/business/6946604.stm

My Speculations have been clarified. A new currency will be introduced, and the initiative should naturally increase investments in the country.

Foreign investments into Nigeria stands at $140bn, making it Nigeria's 2nd largest Investment hub, and with the redomination the figure should increase.

Voodoo Economics has finally arrived in Nigeria.

Forget about improving Nigeria's non-existent electricity supply so that local industries can compete with foreign ones in order to strengthen the Naira against major world currencies  by addressing the current trade imbalance.  

Forget about overhauling Nigerias pock-marked roads so that industry and commerce are empowered with a safe and reliable transportation network.

Forget about industrialising the Niger Delta to provide jobs and comfortable income to all those who reside atop Nigeria's oil deposits, such that they in turn will have no further motivation to sabotage oil pipelines and hemorrhage Nigeria's income into the swamps.

Forget about creating a Nigerian Police Force that focuses on battling bandits rather than extorting money from civilians.

Naw, who needs all those half-measures and the piecemeal results they will engender, when the Naira can be transformed from a 65-pound weakling into a 250-pound competition body-builder with the stroke of a pen that simply conjures away two zeros from the exchange rate to ABRA-CADABRA the naira's value into becoming equal to one US dollar.

I have been so inspired by this magic wand economic theory that I went ahead and inked in a few zeros behind my puny bank balance, to force my bank manager into accepting that I have become a self-made zillionaire overnight.

@topic; would sit back relax & watch d outcome 2 this _{good i hope}

The only thing I hate about all this changes to the currency, is the fact that the Naira is changing. I haven't been in Naija in a while, and the Naira is a symbol of my past. It's been changing, so in essence, a part of me is been destroyed.


Apart from that, Kudos to Soludo.

""I'm always amazed at the position of some people shooting down ideas before it starts. Some people believe that nothing good can come out of a policy formulated by a Nigerian.

I guess we need to correct this mentality. Soludo knows what he's contending against, the international communities, and I believe he's not a rookie in this area he is navigating. The guy is brilliant , and you should know that he must have raised some of the "fears" being raised on this forum with his team. I remember when he was talking about capitalization of the banks, a lot of people on this forum shot down the idea and gave it no chance. If that area is not 100% perfect now, at least we could still score him more than 80% now. There's a surge in the belief we have in our banks these days.

While I will not say we shouldnt raise our "fears", we should try as much as possible to take a more optimistic stand and strongly hope it's going to bring out the desired result. This guy and his teams are not fools as some think, and I strongly consider this present action as a step in the right direction!. He must have his logistics to make it work and you should also remember that he's putting his integrity and career on the line here for the betterment of Nigeria.

He deserves to be encouraged! ""



i quite agree with u,its is a Gud idea and will be very nice if it wrks so lets jst hope for the best,and we shud know dat it has be carefully planed.

To members and Chiefs of the house, I say well done. I have read lots of expert opinion on this thread. They were all educative. This topic is far from political discussion where sentiments prevail. The policy of Naira re-decimation should not be viewed as a Soludo thing. The policy is part of the Economic policy of the government of the day. Let us leave politics out of this discussion. My humble contibution in this piece is to explain the effect of this policy to a layman who have no knowlege of Economic theories. At the end of it all we shall be able to know the effect of what the policy is all about.
1.  N100 of today which equal $1 will  equal #1.25kobo  as from August 2008. What this means is that all things being equal, a loaf of bread which sell for #100 today will still sell for #1 as from the time specified above. What your salary can buy today will still be what your salary will buy. If you export 50 liters of palm oil today at $50 0r 50Lt x N125 = N6,250.00. As at next year when the policy commence, you will export at the same $50 and receive N62.50kobo. In general trem, the nominal value of Naira changed but the real value of Naira remain same. The nominal value of what a road side vulcanizer earn for inflating your vehilce tyre reduced 100 fold in nominal value, but what he will use the money he received as at next year still remain same.
2. Nigerians will gain more if household productivity increase by way of employment. Standard of living will incrrase if there is increase in the earning power of the citizen. increase in  salary and wages will be meaningless if there is general increase in the price level.
3.  Governemnet must subsidise agricultural imputs to boost Agriculture. Corruption must be reduced to the bearest minimum. Pump price of oil products must be kept constant, if possible subsedice them.
4. If there is not fiscal and monetray discipline on the part of the government, inflation will rubbish what ever gain we wnaty to achieve from the new polcy.

edeone:

""I'm always amazed at the position of some people shooting down ideas before it starts. Some people believe that nothing good can come out of a policy formulated by a Nigerian.

I guess we need to correct this mentality. Soludo knows what he's contending against, the international communities, and I believe he's not a rookie in this area he is navigating. The guy is brilliant , and you should know that he must have raised some of the "fears" being raised on this forum with his team. I remember when he was talking about capitalization of the banks, a lot of people on this forum shot down the idea and gave it no chance. If that area is not 100% perfect now, at least we could still score him more than 80% now. There's a surge in the belief we have in our banks these days.

While I will not say we shouldnt raise our "fears", we should try as much as possible to take a more optimistic stand and strongly hope it's going to bring out the desired result. This guy and his teams are not fools as some think, and I strongly consider this present action as a step in the right direction!. He must have his logistics to make it work and you should also remember that he's putting his integrity and career on the line here for the betterment of Nigeria.

He deserves to be encouraged! ""



i quite agree with u,its is a Gud idea and will be very nice if it wrks so lets jst hope for the best,and we should know that it has be carefully planed.

Finally someone with a Brain.

Very good, now the corrupt politicians who dug ground and hid our money will be exposed when trying to bring out. They won’t know how to bring it out. I know they are the target because there are spies monitoring them now.

Another thing, don’t you think that all these restaurant dealers may feel you are cheating them, giving you a plate of their food for just 50K? Ha, they may fight you. You know some of them are greedy and they may not understand the devaluation procedure.

My only fear here is that, some Nigerians knows how to increase prices in any slight thing. This may have a great effect on the salary earners at long run. Example, a Bus Driver who suppose collect #1 as transport fare may increase it to #2 because of more passengers or slight fuel increase of 1-kobo without knowing the value of the money he added.

When recapitalization came up all the scholars (we decieve ourselves we are) made all the noise in the world but today they’ve been forced to swallow their words, why treat an issue like this from a logical point of view? Its not LOGIC, its not ENGLISH, its ECONOMICS

There are hopes and dashed hopes now, but, we will experiment it and see how it will work.

i think Soludo should apologize to Nigerians!

I think you should apologize to Nigerians.

This is an opportunity to make money from those corrupt Politicians, that is for those who are close to them or their big friends making money from them. As I said earlier, those Politicians that dug ground and hid their money will now negotiate with people and part of the money given out to help them change it. They cannot do it by themselves hence EFCC will ask them how manage. So, when they give you the money to change, then you do part of the money as occasion offers – pocket some and handover the rest. No wahala.

This seems to be a field for economist or financial technocrats, both of which I am not. However, going through post, I can understand fears and appraisals of this new development.

On on hand i think Capital account convertibility would be achieved which is not so bad. Personally i also like the fact that exchange rates would be more friendly.

On the other hand i dont think we are just set for this kind of transition. Our foreign base - which i don't support - can not withstand huge changes to the Economy in the event of failure. We are not expert in logistics and I hate to think what would happen when this is implemented.

Again why spend so much in introducing new currencies only to burn them up again?

I think instead of implementing this in a year, more time should be giving for rethinking and re-evaluating. What we need now is infrastructural developments, Dependable Energy, Quality Education, Safer Aviation system, Security of life and property, Standard Health sector . . . only to mention but a few.

How would this drastic step aid these seriously pressing issues. I wonder

Not now Soludo, stick to balancing out that budget and check rates of our current currency.

Thank you.