08/10/2023
*BREAKING NEWS*
The new ‘Strategic Agenda for the Naira’ was announced by the Central Bank of Nigeria, generating a healthy national debate. Before we undertake a nationwide enlightenment program (beginning November 2) to educate the public on the new policy, it is important to clarify some of the issues/questions that are emerging.
Needless to emphasize that to appreciate the full impact of the new policy on the Naira/national economy, we need to take the 4-point agenda as a package. As a package, the new agenda will:
better anchor inflation expectations,
strengthen public confidence in the Naira,
make for easier conversion to other major currencies,
reverse tendency for currency substitution,
eliminate higher denomination notes with lower purchasing power,
reduce the cost of production, distribution, and processing of currency,
promote the usage of coins and thus a more efficient pricing and payments system,
promote the availability of cleaner notes,
deepen the Forex market,
ensure more effective liquidity management and monetary policy,
convertibility of the Naira and hence greater confidence in the national economy and lead to greater inflow of foreign investment
position the Naira to become the ‘Reference currency’ in Africa.
However, most of the questions so far pertain to only one aspect of the agenda, i.e., currency Re-denomination. We have monitored the reactions so far, and note that the concerns/questions raised so far are similar to the ones raised in all the countries that have undertaken re-denomination, including Ghana that is still implementing it now. We clarify some of the concerns as follows:
𝐖𝐡𝐚𝐭 𝐢𝐬 𝐜𝐮𝐫𝐫𝐞𝐧𝐜𝐲 𝐫𝐞𝐝𝐞𝐧𝐨𝐦𝐢𝐧𝐚𝐭𝐢𝐨𝐧?
Currency redenomination 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 en