The Central Bank of Nigeria (CBN) on Tuesday disclosed that there was no plans to re-denominate the Naira as being peddled by currency racketeers in the county.
CBN said, it was concerned that after having been refuted severally, the narrative appears to be gaining traction with debates on the implication of such a policy for the Nigerian economy.
The apex bank said, the authors of the message, in their mischief, modified text eked from an old policy move by a previous CBN Governor in 2007 to make it appear recent.
Currency redenomination, according to CBN, “is the process where a new unit of money replaces the old unit with a certain ratio. It is achieved by removing zeros from a currency or moving some decimal points to the left, with the aim of correcting perceived misalignment in the currency and pricing structure, and enhancing the credibility of the local currency”.
It is by dropping two zeros from the currency or moving two decimal places to the left. The name of the national currency will still be the Naira. However, during the transition period, the existing Naira will be referred to as the “Old Naira”, and the new one to be called the “New Naira”. After the transition period, the word “New” may be dropped.
For proper understanding, old one naira will be 1 kobo coin when redenominate. N2 will be 2 kobo coin, N5 will be 5 kobo coin, N10 will be 10 kobo coin, N20 will be 20 kobo coin and so on.
Recall, in 2007, August 14 to be precise, the then CBN Governor, Prof. Charles Soludo made an attempt to redenominate the Naira, but that policy was not implemented.
During the period, the CBN undertook a nation-wide enlightenment programme to educate the public on the new policy, it generated healthy national debate, but was not implemented.
The CBN announced a 4- point agenda designed to make the Naira the “Reference Currency in Africa”, as part of the Financial System Strategy 2020 (FSS2020) and the elements of the agenda are: Currency Re-Denomination, Adoption of Inflation-Targeting Framework for the conduct of monetary policy, Sharing part of the Federation Account funds in US Dollars to Deepen the Forex Market and for Liquidity Management and Current Account liberalization/convertibility and accession to Article VIII of the IMF.
The benefits of redenomination, according to CBN then were:
“Making pricing more efficient. Given the level of prices and low purchasing power of the coins, prices generally adjust in discrete jumps of five or ten Naira, rather than in Kobo.
“Under the new regime, one kobo will have relative value. We can see the price of fuel go up from say, 70kobo to say, 71 or 72 kobo instead of the current jumps of N65 to N70 to N75, etc.
“Correcting this distortion in pricing structure can have enormous impact on the national economy, especially as we commit to low inflation.
“Cultivating the habit of using coins and reinforcing the on-going currency reforms.
“Promoting a more efficient payments system e.g. making ATMs part of our payment culture and de-congesting banking halls. Instead of withdrawing N50,000 from an ATM machine, N500 of the ‘new Naira’ will command exactly the same value.
“As we aspire for an international financial status and to become Africa’s financial hub by 2020, re-denomination will make for easy conversion to other currencies. As a ‘Reference Currency’, it will be easy for citizens of West Africa and other countries to convert to their national currencies and other currencies.
“Reducing the risks associated with carrying large physical cash as we eliminate large denominations with very little value.
“Discouraging currency substitution and addressing the perception that the domestic currency is weak despite its stability.
“Reducing the cost of printing, distribution and processing of currency.
“Discouraging the abuse of the Naira as each Naira note under the ‘new Naira’ will have relatively high value, and coins will dominate transactions at the lower end of the market”, it said.
On the whether the Naira re-denomination solve all of Nigeria’s economic problems, CBN said, “No. The new policy (as a package of 4-point agenda) will only deliver the things outlined at the beginning of this Note. Mr. President has outlined a 7- point agenda needed to create wealth and jobs, reduce poverty, and ensure security of lives and property.
“The new Naira policy will help to create the macroeconomic stability, efficient payments system and confidence, which constitute an important building block to enable Mr. President’s programme work well. All stakeholders in the Nigerian economy— public and private sector institutions and individuals— will have to do their respective parts under the able leadership of Mr. President for the Nigerian economy to boom and endure”
Meanwhile, the bank has clearly stated that there is no plans for that, according to the statement signed by the Director, Corporate Communications, Dr. Isa AbdulMumin on Tuesday.
He noted that whilst the Bank may be considering reforms, such are subject to laid down procedures in line with the provisions of the CBN Act, 2007.
“For the avoidance of doubt, there is currently no plan by the Bank to restructure and redenominate the naira. Whilst the Bank may be considering reforms, such are subject to laid down procedures in line with the provisions of the CBN Act, 2007.
“The public is hereby advised to ignore the news report, as it is speculative and calculated to cause panic in the polity”, the statement said.
