FG Asks Economic Team to Review New Naira Policy

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FG Asks Economic Team to Review New Naira Policy

This Day
Josephine Lohor
16 August 2007

The Federal Executive Council (FEC) yesterday directed that the strategic plan of the Central Bank of Nigeria (CBN) on the redenomination of the naira be sent before the Economic Management Team for "fine-tuning".

The Minister of Finance, Dr. Shamsudeen Usman, who disclosed this while briefing State House Correspondents, however said the action of the CBN "is within the purview of the Act of the CBN since it is dealing with policy monetary issues. It is their prerogative to take decisions on these issues. The autonomy of the CBN is not in question and it is acting absolutely within the law".

However, the Governor of the CBN, Professor Chukwuma Soludo, has told THISDAY that there was nothing to fear over the planned redenomination of the naira as he threw more light on the new policy.

He had announced on Tuesday that as part of a major policy shift on Nigeria 's currency, from August 1, 2008 the naira would be redenominated to knock off two zeros to the left, while the exchange rate would be N1.25 Kobo to $1, N20 would be the highest denomination and state allocations would be shared in dollars.

Usman, who stated that a major part of yesterday's Council meeting was taken up by the briefing of the CBN Governor on the new policy, revealed that the "FEC listened extensively and asked questions which were clarified by the CBN Governor".

The finance minister, had, while disclosing the latest decision by FEC on the CBN's policy, stated that "President Yar'Adua has asked that some of the issues be, however, clarified by the Economic Management Team and all decisions taken by the team will be advisory. The CBN Act does not require government to approve actions of this nature".

Also speaking on the CBN policy, the Minister of Information and Communications, Chief John Odey, stated that "the Ministry of Finance is a member of the board of the CBN. There are benefits in terms of redenomination of naira and micro economic stability. All these we will get professional advice from the Economic Team. The CBN plan for the redenomination is not something that will come up today. They will come up with a position to Council for approval. They will brief the National Assembly and other stakeholders".

Soludo, in his exclusive interview with THISDAY, explained that under the new policy, nothing would change in "nominal terms". "Everything remains basically unchanged. We haven't lost any value. Nobody loses any value but over time, because we will pin down inflation expectation, everybody gains so the guy who is earning 50,000 today will start going home with 500.

"The bus fare that used to be 15 naira will now be 15 kobo. He will still enter the same bus, instead of the 15 naira when he was earning 50,000 now he pays 15 kobo out of his 500 naira salary. It will be the same two decimal points to the left; everything, all prices will be affected.

"On that particular date (August 1, 2008), all the monies we have in the bank will go two decimals backwards. The old money you have is going to drop. If you give the bank 50,000 naira, they are going to give you back 500 Naira. Because it will be a totally new currency everybody will go through it.

So what it means is that the value in nominal terms everything will just come down that way because everybody will go to the bank to exchange the old notes. Your old 50 Naira, 100, 200, 500 and 1000 are out," he said. Briefing on other decisions taken by the FEC, Odey, stated that the Ecological Fund Office, funding of which constitutes 2 per cent of the Federation Account, remains in the Ministry of Environment, Housing and Urban Develo-pment.

He also disclosed that following the submission of the report by the committee constituted on the "home" of the Bureau of Public Service Reforms in the office of the Head of Service of the Federation or that of the Secretary to the Government of the Federation (SGF), FEC approved that the Bureau be domiciled in the office of the SGF.

"You will also recall that the council constituted a committee on the domicile of the Bureau of Public Service reforms with the mandate to examine and make appropriate recommendation as to the desirability of domiciling the Bureau in the Office of the Head of Service of the federation or to establish the Bureau as a separate entity supported by an act of the National Assembly.

"The cabinet committee submitted its report today (yesterday) for the Federal Executive Council to give approval. The Council approved that the BPSR be domiciled in the office of the SGF", Odey added.

The Information Minister also said that Council had after going through three options on the management of the Nigerian Communication Satellite Ltd (NigComSat) submitted by the Ministry of Science of Technology, approved that the Ministry of Science and Technology to get the Bureau of Public Enterprises (BPE) to privatize the NigComSat but with due regard to due process.

He added that "the Council has just directed the Ministry to commence action through the BPE for its privatization. If it is privatized, thereafter, the company can now request for license and they may be granted to run other services. The privatization will not leave government with majority shares".

Giving insight into the options made available, Odey stated that "the memo sought Council approval to approve that, NigComSat should be allowed to go as a limited liability company for two years under the supervision of the Ministry of Science after which the project would be privatized. The second option is that Government should hold some percentage shares in the company in line with the original plan and allow private sector to invest in the balance. The third proposition is for the project to be placed for investment by the BPE under Public /Private Partnership".

He added that "Council also affirmed that the monetisation policy has recorded some results and emphasised on strict adherence to policy. Council approved the dedication of official vehicles each to the following officers during working hours only and they are the Office of the Chief of Staff; Deputy Chief of staff, Ministers, Special Advisers and Permanent secretaries."

Copyright © 2007 This Day

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admin · Redenomination - CBN, Yar'Adua Commended

Redenomination - CBN, Yar'Adua Commended

This Day
Yinka Kolawole
17 August 2007

A coss-section of Nigerians yesterday expressed satisfaction with the new monetary policy announced by the Central Bank of Nigeria (CBN), saying it was a good omen for the country's economic and social stability. Speaking with THISDAY in Osogbo, Nigerians said the new policy, would put an end to inflation in the country.They commended Central Bank Governor, Charles Soludo, over the policy and lauded him for his sense of responsibility.

A Professor of Technical Education, and Pro-chancellor, Igbinedon University, Okada, Professor Olu Aina, while commenting on the policy, said the CBN and the Federal Government would through the policy, stem inflation. Aina said there would be general price stability and reduction in inflation rate.He said "this physical measure is to stem inflation, and by this, commodities will be sold at affordable prices."He said the policy would strengthen the naira, adding that the idea was a desirable one.

"Government must always be involved in economic planning. That is what the present administration is doing at the National level. Government in advanced countries were the ones determining market and the same thing is now happening in Nigeria, so I think President Umaru Yar'Adua and Soludo deserve kudos for doing well."

While harping on the need for people to co-operate with government, he said success of the new policy lies squarely in the hands of the people. In his comments an economist, Mr Oludare Aborisade said the policy was a positive development in the country, and commended Yar'Adua and Soludo for it.

Copyright © 2007 This Day

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Ghana Congratulates Country As It Starts Re-Denomination of Naira

Ghanaian Chronicle
Joseph Coomson
16 August 2007

The Bank of Ghana (BoG) has congratulated the Central Bank of Nigeria for going the Ghana way by also deciding to re-denominate the Naira from August 1, 2008 and adopting an inflation targeting Monetary Policy Framework from January 2009. The Deputy Governor of Bank of Ghana, Dr. Mahamudu Bawumia said these decisions would serve to enhance the ECOWAS Monetary Cooperation Programme.

The Nigerian central bank said on Tuesday it will drop two zeros from its currency, the Naira, to make money cheaper to produce and easier to handle. The reforms, which are aimed at working towards full convertibility and decreasing reliance on the United States dollar, will take effect August 1 2008, a statement from the bank said.

"All Naira assets, prices and contracts will be re-denominated by dropping two zeros or two decimal points to the left with effect from this date," the bank said. "This will entail a total currency exchange and phasing out of the existing denominations from August 1 2008," the statement continued.

"At the current exchange rate, this policy would mean that the Naira/US dollar exchange rate would be around N1, 25 to US1," Central bank Governor Chukuma Soludo said in the statement, adding that the reform would help make the Naira the currency of reference in Africa. One dollar currently buys 128 Naira.

Cheques and credit cards are seldom used in Nigeria. Consequently transactions involving large sums are often carried out in US dollars. An apparent shortage of small denomination notes also means that bills, notably in shops, are often rounded up or down to the nearest 50 or 100 Naira. Another component of the currency restructuring will be the introduction of low-denomination coins.

The central bank said the re-denomination and new currency structure, in conjunction with other reforms, are destined to "better anchor inflation expectations, make for easier conversion to other currencies [and] reverse the tendency for currency substitution".

The bank of Ghana initiated the re-denomination of the cedi and inflation targeting policies last year and they have all been implemented successfully.

Copyright © 2007 Ghanaian Chronicle

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