The Nigerian economy which used to be a powerhouse in Africa is currently facing what might be its greatest threat yet, and the managers appear to be clueless about the measures to take. For an import-driven economy that has failed to make any audacious move on economic diversification, it is only natural that the pressure on the Dollar remains high thus moving its value upwards while the local currency flounders. This has been the case for the past decade and current managers of the economy don’t seem to possess any iota of sincerity toward pulling the country out of the quagmire and saving her from reaching the precipice she is fast reaching. If they did have sincerity and the willpower to make things work, they wouldn’t be suggesting a redesigning of the Naira as the way out, given the peculiar nature of the problems Nigeria is facing.
Today, Nigeria faces huge and devastating economic challenges. Approximately two-thirds of her citizens currently live in extreme poverty, her economy suffers from low productivity caused by a criminal craving for petrodollars, an uneven climate for trade, and investment, and lately, an imploding security situation.
Thanks to the 90 percent devaluation of the Naira over the last eight years, Nigeria stands on the doorstep of economic disaster and a likely monetary apocalypse. The nation’s economic potential is constrained by many structural issues, including inadequate infrastructure, tariff and non-tariff barriers to trade, obstacles to investment, lack of confidence in currency valuation, and limited foreign exchange capacity. All these issues have compounded her fate and set her on a dangerous path with analysts calling for drastic steps and disruptive solutions.
Of all the considerations thus far, one of the solutions that the current managers of the Nigerian monetary policies headed by the Governor of the CBN, Godwin Emefiele haven’t quite considered is a total redecimalisation of the currency.
For the purpose of clarification, redecimalisation means removing one or two zeros from the left of Nigeria’s currency. What this means is that, when redecimalisation is done, N100, N200, 500, and N1000 currency denominations will become N10, N20, N50, and N100 respectively. This is a move that can move Nigeria out of the woods if handled with tact and precision. Of course, it shouldn’t be undertaken by the current managers of the CBN.
Redecimalisation will introduce a totally new currency structure that will draw a fresh line. It will make an instant impact in the sense that it will anchor inflationary expectations better, make a conversion to other currencies much easier and less devastating, the reverse the tendency for currency substitution. However, this will strengthen public confidence in the Naira, completely discard higher denomination notes with minimal value rate, reduce the cost of production, distribution, and processing of currency, and ultimately lay the foundation to make the naira the ‘Reference currency’ in Africa.
This bold move has been suggested by several economic experts, with the most recent being the current Governor of Anambra State, Prof. Charles Chukwuma Soludo when he held sway as the Governor of the CBN. He had at that point postulated that a complete redecimalisation of the currency will effectively restore the value of the Naira (in the short-term) taking it to what it was in 1985 before the commencement of the Structural Adjustment Programme (SAP) in 1986. Today, the situation has grown far worse, but it isn’t too late because the managers of the Nigerian economy can still take the bull by the horn and restore parity to the early 2000s.
It is without a doubt that there are other measures the CBN can be encouraged to explore far ahead of its clueless redesign. Floating the Naira and collapsing the exchange rates to have a unified rate is one, criminalising the indiscriminate opening and operation of Dollar accounts could be another. However, none of these moves will have the level of impact redecimalisation will have on the economy at least in the short term.
There is an urgent need to restore parity in the system and this is why the redecimalisation option must be explored. The Naira is today very close to exchanging for N1000 to $1 USD in the parallel market and it is fast becoming a trend that appears irreversible. At this point, all hell has let loose, and the only way out is a hard reset.
The redesigning of the Naira will not solve the monetary crisis. The announcement has already forced members of the elite class who ab initio had Naira stashed away, to begin chasing Dollars with Naira, further piling up the pressure. Food, drugs, and supplies prices have already hit the roof and the clueless CBN just sits there watching. What a shame!
The apex bank needs to be reminded that the economic situation of the country today is creating more hopelessness, which will ultimately breed more poverty, unemployment, criminality, and insecurity and eventually drive the economy down the abyss faster than they imagined.
Redecimalisation of the Nigerian Naira will help in no small measures in the import and export sector. Nearly everything used in Nigeria is imported; from household materials to office equipment, building materials, clothing, raw materials for production, and so on.
The Federal Government must not only minimise importation but must inform the citizens of its benefit to the growth of the Nigerian economy. All these must happen at the same time, and this appears to be the only way out, at least for now.
The CBN cannot just sit back and watch the Nigerian economy throw the country into unprecedented anarchy and chaos. They must act now to save the Naira. Putting up a currency redesign policy on the eve of an election when you don’t have powerful institutions to checkmate powerful individuals will surely be counterproductive and only leave regrets later. The Nigerian populace has been pauperised enough. The CBN must go for the hard reset now, and that is redecimalisation. Yes, redecimalisation isn’t without its risks, but the risks cannot be as injurious as a redesign of the Naira that has no strong basis in economics. The time to act is now.