Barring any unforeseen circumstances, the Bola Tinubu administration is set to redenominate the naira in the first week of January 2024. This is coming on the heels of the economic downturn and the need to urgently arrest the free fall of the currency against the dollar.
A reported gathered from a national daily indicates that the Federal Government has concluded plans to revisit the redenomination policy with its implementation scheduled for January 2024.
This move was however faulted by a former Minister of Finance and Secretary to the Federal Government, Oba Olu Falae, who said the move won’t do much to rejuvenate the battered Naira, while calling on the Federal Government to work towards earning more foreign exchange.
Various sources within and outside the gov- ernment confirmed the development to our correspondents during the week with one of them saying, “It’s a foregone conclusion by the Federal Government.”
When pressed further on the issue, the source who pleaded not to be named stated in categorical terms that “The policy will take off in January, possibly the second day of the new year.”
According to one of the sources: “This is one of the series of economic measures that President Tinubu is considering as part of his efforts to rejuvenate the economy.
I can tell you that he is serious about it and plans have been concluded for the take off early next year.” The source stated that a team for its implementation had been put in place immediately after the inauguration of the current gov- ernment in May and that the team had been working round the clock to put in place a workable document for its implementation.
Sources stated that the aim of redenomination policy forms part of the rescue measures to save the national currency from persistent slide and to stabilize the nation’s economic environment.
In recent times, the Naira has been facing its worst fall against the dollar and other international currencies like United Kingdom’s Pound Sterling and the Euro. Late President Yar’Adua had given the go-ahead to the CBN in 2007 to implement the policy which was later abandoned owing to public outcry.
According to information monitored on the CBN website, the ‘Strategic Agenda for the Naira’ announced by the Central Bank of Nigeria on August 14, 2007 generated a healthy national debate.
Apart from the currency redenomination, the other components of the Naira, economic resuscitation plan as announced by the CBN in a document tagged Naira the “Reference Currency in Africa” include the Adoption of Inflation-Tarconduct of monetary policy.
Others include 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 International Monetary Fund (IMF).
Oba Falae who is the current traditional ruler of Ilu Abo in Akure North Local Government of Ondo State maintained that the action won’t count much as it would only serve to reduce the volume of currency in circulation.
“Redenominating currency, all it does is to reduce the volume of paper currency in circulation. That’s all it does. If you have a situation where N10, 000 is redenominated to N100, it will have the same purchasing power as the 10, 000. It does not really affect the ex- change value of the currency,” the technocrat turned traditional ruler said. He added that “To enhance the value of the currency, you have to do something about the economy.
You have to do something about your ability to earn foreign exchange and reduce your commitments and your shortfalls. That is when the exchange value of the Naira will appreciate.”
Another analyst, Dr. Biodun Adedipe, expressed his opposition to the move by faulting the timing just as he maintained that three pre-conditions that usually trigger such a move do not currently exist. Adedipe stated this in Lagos, adding that the three pre-conditions that have to be present for a country to consider redenominating its currency include: out of control inflation, extremely low value of the local currency and the cost of a meal for a little child.
He stressed that if the government decides to carry through the action now, the country will, in a few years from now, return to addressing the same problem of high inflation and weak Naira that it is currently grappling with. “The preconditions for redenomination are first, when inflation is completely out of control. For countries that have redenominated, their inflation rates ran figures of 1,000,000%; 2,000,000% and above.
So out of control inflation is the first pre condition.” According to him, the second precondition is that the value of the currency is so low that the volume of the currency that the citizens of that country have to hold to purchase an item from the market becomes greater or bigger than the purchased goods. He said the third precondition was when the cost of a meal for a little child goes through the roof. He cited the case of Ghana when the West African country redenominated its currency after the price of ‘Kenkey’ (staple dish in Ghana) for a little boy rose to as high as 10,000 cedis.”