Soludo and the Naira

Maik Nwosu

Once more, the Central Bank of Nigeria under its present governor, Professor Charles Soludo, is about to reinvent the naira. From August 1, 2008, the CBN plans to re-denominate – or re-decimalise – the naira. According to the “strategic agenda for the naira” outlined by the CBN governor, “this policy would mean that the Naira/US dollar exchange rate would be around N1.25 to US$1 then. All Naira assets, prices and contracts will be re-denominated by dropping two zeroes or two decimal points to the left with effect from this date.” This is obviously an attempt to return the naira to its days of glory before the voodoo economics of former President Ibrahim Babangida unhinged its exchange value in 1986.
The proposed re-denomination has generated quite a ripple. Some news analysts have even described it with such accented adjectives as “unprecedented” and “earth-shattering.” But our earth is not about to shatter because the CBN has proposed that we reckon the naira differently. What is about to happen is comparable to the introduction of the naira as the Nigerian currency in 1973, with the consequent resetting of values that took place then. A currency is after all an invented measure of value, and its reinvention from time to time is one way of readjusting or simply reformatting the scale of values. In this instance, this readjustment will almost certainly lead to a recovery of language with the revaluation of such a word as “millionaire.” One of the biggest impacts of re-denomination is likely to be social, a return to old ways of reckoning, an attempt to return to a time when our world was somewhat saner.
Why then am I not excited by the CBN’s proposal? Because the CBN seems to be in daze – introducing the N1,000 note the day before, proposing re-denomination today, unilaterally positioning the naira to become the West African regional currency the day after. And re-denomination in itself does not go far enough in addressing our fundamental problem of mass poverty. It targets more the symptom than the disease. I am also not fascinated by the CBN’s fascination with achieving a seeming parity between the naira and the dollar. Not only is this seeming parity a grand illusion because the dollar will veritably remain stronger than the naira, but it is difficult to see how it advances our core economic interests. By what logic will re-denomination attract foreign investments to Nigeria or aid local production when the value of the naira will remain more or less the same and our basic infrastructures are still in an unbelievable state of disrepair? There are other considerations. Price readjustments, which must happen for the re-denomination to transit from the CBN governor’s dream world to the world of markets and kitchens, may not correspond to the CBN scale for converting the old naira to the new. An item currently on sale at N100 may end up being sold for two naira, instead of one naira, the sort of price distortion that could be significant depending on the scope.
Re-denomination is an artificial resetting of the clock, an attempt to go back in time in this case. But 2008 is almost half a generation away from 1986, and we are no longer as innocent – relatively – as we were back then. The sort of looting that took place during the regime of former President Shehu Shagari, which in part occasioned the Buhari-Idiagbon coup in 1983, now seems like folk theatre when compared to the sort of brigandage recently supervised by former President Olusegun Obasanjo. By re-denomination, the CBN seems to be lusting after the aura of the dollar without stressing the economic lessons that account for the strength and stability of the dollar. To achieve a strengthening of the naira or perhaps a market-based parity of the naira in relation to the dollar, which seems to be so important to the CBN, we need to seriously rethink our economy, encourage and diversify local production, rebuild basic infrastructures, check corruption.
Corruption is a key national problem because it has such unsettling, cover-all consequences. Corruption generates the sort of inflation that redefines currency value. Unless the Nigerian economy becomes truly competitive and disciplined, its artificial parity with the dollar will only be a passing myth. And, beyond rhetoric and flourishes, the present administration has so far not shown that it has the abiding energy and foresight to fight corruption and emphasise institution-building. Otherwise, what is the EFCC doing about the large-scale political corruption that marked the Obasanjo regime not just in Bayelsa State under Governor Diepreye Alamieyeseigha but in all the crevices of the nation? What sort of anti-corruption crusade allows President Umaru Yar’Adua to be both the Head of State and the minister of petroleum, the sole resource that accounts for most of our national wealth? Who does Minister Yar’Adua report to as the petroleum minister? If a President cannot build sustainable institutions that are larger than himself, he really has no business at the Presidential Villa.
To truly reinvent the naira, we need to reinvent ourselves – our ways of being and doing.
Editor's Note: This article was written before the government's suspension of the naira re-denomination exercise.