Re: USA Africa Dialogue Series - Naira Is Set For Yet Another Round of Devaluation?

I'm preparing a programme on this topic, so these are genuine questions which I ask because as there seem to be so many leaps in the arguments against the proposed new currency denominations that I am simply unable to follow.

I would be interested to know if Mr Adujie has seen anything sold in the US for one cent or in the UK for one penny. By what do we measure the strength or respect of Ghana & Jamaica's currencies compared to ours? Nigerian banks issue Naira Visa and Master cards which can be used anywhere in the world. Would this happen if our currency had no value anywhere in the world?

I believe that when Ghana redenominated its currency in 2007 (and this, after a bout of hyper-inflation of a type that we in Nigeria have not seen), they knocked off four decimal points, so that half a million cedis became fifty cedis and 10,000 old cedis became 1 new cedi. After that redenomination, a cedi was worth about a dollar. In the five years since then, I believe things have advanced to a stage where today, you need almost two cedis to get one dollar. I'm happy to be corrected on this: the last time I was in Ghana was surely not more than three or four years ago, but I remember the Ghanaians were so happy to let one know that the cedi was practically the same as a dollar. But in any case, has the Naira lost half its value relative to the dollar since 2007? My - possibly faulty memory is that it has been hovering between 140-160 Naira to one dollar for quite a long time. Now, that may be 'fecal matter' to someone coming from overseas, but after the plummeting in relative value that followed the SAP era of the 1980s & 90s, can we say that it still merits such a derisive description?

The question is, does redenomination per se influence exchange rates? What then explains the situation with regard to the new (internationally respected) cedi? A US dollar is worth about 80 Japanese Yen. Does it matter that it is 80, rather than 8 yen? And if we are not redenominating but merely issuing new denominations and converting some notes to coins, will that ipso facto lead to devaluation?

When Ghana lost four zeros in 2007, I guess nobody complained about what they couldn't buy with one pesewa but even now, I would have thought that the issue is not what one can buy with one redenominated pesewa - the equivalent now of half a US cent - but its importance in the accuracy of transactions. Or is there some other significance behind our vanished coins?

I agree that it may be more respectable, as a Ghanaian, to carry a small number of notes around in place of the briquettes of notes that we Nigerians have to cart here and there, but as that would be one of the things a N5k note would begin to remedy, I don't imagine that that is what Mr Adujie means by 'international respect'. So, back to my original questions, I suppose. Any answers anyone?

Ayo
I invite you to follow me on Twitter @naijama

On 9 Sep 2012, at 12:47, "Paul I. Adujie" <lawcareer@gmail.com> wrote:

> Naira Is Set For Yet Another Round of Devaluation?
> Written by Paul I. Adujie Esq.
>
> The introduction of Five Thousand Naira as a single currency note,
> will exacerbate already existing pressures on Nigeria's long
> beleaguered national currency.
>
> It is sadly the case that Ghana, Haiti and Jamaica national
> currencies have better strength and international respect compared to
> the Naira. And this is not because Ghana, Haiti and Jamaica are more
> productive nor do they possess a more robust export base in comparison
> with Nigeria. Ghana, Haiti and Jamaica do have comparative
> disadvantage in terms of market size or population, Gross Domestic
> Product and export base in comparison to Nigeria.
>
>
> The value of Nigeria's national currency has been close to the value
> of fecal matter since September 1986 and it has worsened since the
> onset of the so-called Structural Adjustment Program or SAP.
>
> National currencies of Ghana, Haiti and Jamaica, have better parity
> with the American Dollar in comparison with Naira parity with the US
> Dollar and other major international currencies. Nigeria sorely need
> better monetary and fiscal policies.
>
> If stimulating the Nigerian economy through growth in the export
> sector to enhance national growth was the predicate or foundational
> rationale for devaluation of the Naira, then, this has yet to occur
> even after over 26 years of devaluations since 1986.
>
> Devaluations of the Naira for whatever purpose or rationale have been
> a abysmal, dismal and a woeful failure, Nigeria's monetary and fiscal
> policies contributed to our foreign debt overhang which lingered for
> so long. Devaluations of the Naira led to its downward spiral and has
> kept the Nigerian economy on its knees, then comatose and now in
> supine fetal position!
>
> China and some other nations possess huge and enormous export base.
> Nations with large export base may as such manipulate or devalue their
> national currencies to facilitate export upsurge and to encourage
> imports from such nations by other nations. And as such currency
> manipulations or devaluations serve to reduce cost of imports by
> consumers abroad.
>
> This phenomenon has created trade arguments, trade wars etc, as
> nations with export base may attain balance of payments and trade
> surplus. While on the other hand, importing nations may endure
> deficits and trade imbalance similar to current trade relations.
>
> Trade relations between America and China, has been fractious and
> fraught with bickering, in which America complains about China's a
> series of policy of incentives which have created very robust export
> base and lowly valued Yuan or Renminbi, which have combined to put
> America at trade imbalance, advantage China, particularly given
> America's appetite for cheap imports from China, which have skewed
> trade relations in favor of China. China is America's creditor as she
> helps or supports America deficit financing or public debt.
>
> Nigeria on the other hand, does not have an export base outside crude
> petroleum oil in barrels and Nigeria's net export is made miniscule
> through the importation of refine fuel oil and pretty much everything
> else, including matches, toothpicks and paper napkins or other big and
> small things! There is indices which to measure the poor state of
> Nigerian economy since the onset of the devaluation of the Naira.
>
> The stress on the Naira which was brought about by the devaluations
> regimens include the disappearance coins and the fact that coins, and
> lower denominations Naira currency buys nothing these days in Nigeria.
> Five Naira, Ten Naira and Twenty Naira notes are almost useless. I
> have not found any Nigerian newspaper selling for less than One
> hundred and fifty Naira!
>
> I have been in Nigeria since January 24, 2012 and I have not seen and
> I am yet to see a Nigerian coin and I have not found anything sold for
> 1 Kobo, 5 Kobo, 10 Kobo, 25 kobo 50 Kobo and One Naira. Devaluation of
> the Naira have killed 1 Kobo, 5 Kobo, 10 Kobo, 25 kobo 50 Kobo and
> One Naira denominations. The introduction of Five Thousand Naira Notes
> will also kill Five Naira and Ten Naira notes.
>
> The introduction of Five Thousand Naira currency note will be another
> badger and burdening of the Naira, Nigeria's national currency. Such
> high denomination in single unit currency, will ensure the early grave
> and financial irrelevance of lower denominations of the Naira.
>
> The proposed introduction of Five Thousand Naira note is particularly
> irksome and as an egregious financial or fiscal policy, in the face of
> an existing campaign which was mounted by the Central Bank of Nigeria
> to promote a so-called "Cashless-Society" in Nigeria.
>
> The introduction of the proposed Five Thousand Naira notes will make
> it easier and more convenient to carry wads of Naira around in cash.
> Five Thousand Naira notes will actually fuel a "Cash-Only" society!
>
> It will be easier to hoard billions of Naira, it will be easier to
> bribe in the billions, it will be easier to smuggle Naira in the
> billions, it will be easier to launder money and it will be easier and
> more convenient to for those with the inclination, to engage in
> transferring physical cash for every sundry illicit transactions
> imaginable.
>
> Furthermore, the introduction of the proposed Five Thousand Naira note
> will exacerbate multiple variables of pressures on the already
> over-devalued Nigerian national currency, the Naira. The introduction
> of this new note, will add accelerants to inflationary pressures onto
> the Naira.
>
> It is the case that devaluations of the Naira have decimated the
> Nigerian economy for decades. And this is particularly so, as
> everything imported into Nigeria is measured in foreign currency,
> mostly the American Dollar and the British Pound and this has
> translated.
>
> Those in charge of Nigeria's monetary and fiscal policies ought to be
> sleep deprived or sleepless, as a result of the parlous state of the
> Naira! Naira's miserable exchange rate has negative impact on the
> lives of every Nigeria and dire consequences on growth of the Nigerian
> economy.
>
> At the very barest minimum, those in charge of Nigerian monetary and
> fiscal policies should do all they can to effectively manage the
> Nigerian economy, failing that, they should at least observe or follow
> the medical axiom, which says, "First, Do No Harm.
>
> And it is widely held view, that the proposed introduction Five
> Thousand Naira note will do harm! Calculable harm! And every Nigerian
> who loves Nigeria ought act to prevent avoidable harm to our way of
> life which is measured by the value of the our national currency, the
> Naira, every nanosecond!
>
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