My 2007 Posts On Professor Soludo's Currency Acrobatics

The Central Bank of Nigeria (CBN), through its Governor Charles soludo has decided that from August 2008, it will revalue / re-decimalize / re-denominate the Nigerian Naira by removing two decimal points from behind, whereby the old N100 becomes a new N1. In the same vein, a USA dollar (US$) which is currently N125 will become N1.25 in terms of the new Naira currency.

For those who agree that this re-denomination will generally have little or no effect, I would like you to consider the billions of Naira notes in circulation today and realise that to convert each to a redenominated polymer note will cost $2 per note.

Therefore, it will cost us $12 billion (our total Federation Account) to print 6 billion new Naira notes.

So why should we spend more than $12 billion on a project that will have little or no direct effect and even possibly, could have negative effects?

What is wrong with soludo? After minting billions of coins that nobody uses with our hard earned money, and after spending billions of dollars printing new N5, N10, N20 and N50 only recently, he wants to give out another contract for minting and printing so soon?

Abeg, we should use what we have till 2010 how can a country be printing new denomination of money every year?

To devalue currency is the easiest thing in the world compared to revaluing. It will most likely fail and even if it succeeds, it will make rubbish of our exports, make us more import dependent and obliterate our trade surplus.


Then there is the issue that we will be unconsciously experiencing massive inflation. After revaluing N1.26 to $1, by the time the currency depreciates a little to N2 per $1, we will not realise that what just happened is that exchange rate just went from N126 per $1 to N200 per $1 in terms of the old currency.


If a plot of land is N12 million and the new re-valuation converts it to N120,000. As a smart Nigerian, who will stop "omonile" (land-owner) from selling that plot land for N125,000 (if you convert to the old rate: N12.5 million)
that's in fact 4% inflation immediately.

So revaluing the currency is actually devaluing our assets and in essence, unwittingly reducing the quality of our lives. Not to forget that Nigerian bankers are about the smartest in the world when it comes to looking for loopholes in government policies that can be used to rip people or the government off legally.

Then what happens with the N25 billion capital base of the Banks? Will they settle with N250 million or will they start pursuing the new N25 billion all over again?

So please soludo should leave our currency alone. Japanese Yen is almost equivalent to the Naira yet they have not died. In fact they are doing very well. Indeed they are doing absolutely exceeding well.

This may just be an attempt to please the ignorant masses that complain everyday that our currency has no value, so Nigeria is bad.

Look at all the plenty, plenty grammar just to say we want to remove two zeros? That's when you know something is amiss.

We are currently using $40 billion to maintain the exchange rate of the Naira to the Dollar at N126.
Soludo should suspect that we would need a foreign reserve of $4,000 billion (4 trillion dollars) to maintain an exchange rate of Naira to Dollar at 1.25. As of now, we don't have that kind of foreign reserve.

Instead of just printing money and removing 2 zeros, we should rather keep the old currency and add 2 zeros to our foreign reserves. China uses more than $1 trillion foreign reserves to keep their currency at 7 yuan per $1.

So rather than spending more than $10 billion printing new currency at $2 per note, we should add that $10 billion to our foreign reserves and look for more money to build up our foreign reserves till it gets to $4 trillion so that we can then strengthen this current Naira to even $1 to N1.

What soludo needs to do is RE-DECIMALIZE OUR FOREIGN RESERVES BY ADDING TWO ZEROES BEHIND IT.

And please Elumelu and soludo should stop touting stories that the Naira has made gains on the dollar due to high earnings from Crude Oil. The Pound that made gains too, is it due to their high earning from crude oil? Every currency in the world has made gains against the dollar in the past 6 months, even the CFA, due to poor economic policies in the US.

And now, we're hearing examples of other countries that have revalued their currencies. The fact that Bolivia, Ghana, Angola and Afghanistan did something crazy, we too should meddle into it.

Look at his mention of Germany and you will realise it was after World War I and World War II that Germany revalued their currency. Afghanistan and Angola too, after Wars, South Korea was after War.

Argentina that tried it during peacetime, all the revaluation led to total economic collapse, Ghana he mentioned just revalued their currency this year and we're yet to have enough time to see the benefits or effects.

Brazil is the only stable country that revalued its currency during periods of stability and has continually revalued and will continue to revalue.

This man should not throw us into chaos. And waste billions of Naira printing fancy notes. In fact, I suggest that the company printing Nigerian currency should be investigated and even changed because this regular printing of money backed up by big big grammar is getting really suspicious.

But of course I support the CBN withdrawing from forex trading so that banks can stop roundtripping and start making money by giving out loans.

generally, I believe Soludo knows more about economics than myself but on some specific issues such as the recent minting of N2 coins?!! Please! I said it from the first day that it was rubbish. How many times has the average Nigerian transacted business with a N2 coin? Even beggars are rejecting it.

Imagine that this project which will cause massive suffering and waste billions of dollars is just to boost confidence, psychology and bring back that nostalgic feeling of shopping sprees of the 1980s when Nigerians could travel to the UK with N20,000 and do so much. It's absolute rubbish.

I just confirmed my thoughts that this redenomination antic is going to encourage cash transaction and reduce cashless or ecommerce transactions. Because it is going to make cash easier to carry. If cash becomes easier to carry, most people would prefer to collect new N40,000 (the current N4.5 million) during a car sale than use come bank transfer that will charge an interest.

If I can take N20 safely and conveniently to a fast food joint with my little cousins, why use an InterSwitch card?

This plan is evil. Let us not sit and watch it pass into law. The older generation that sat back while the Naira was being devalued are responsible for our 20 years of suffering. Let us not be responsible for another 20 years of suffering.

This plan is straight off the table of one of those crazy schemers at the IMF. The same people that brought us almighty SAP. Nigerians Learn, Learn, Learn!

We must resist this sham actively. We cannot continue to sit down and watch IMF use one man to ruin the lives of 140,000,000 Nigerians. Russia kicked IMF out before their economy started growing, South Korea kicked IMF out before their economy started growing. The only people that carried IMF matter on their head, consistently following every step over 20 years was Argentina and their economy collapsed.

Please, if it is their $18 billion that they used to buy a controlling stake in the Nigerian economy so that they can crumble it, please, let us pay them their 18 billion back and let them go.

This Soludo guy, where has he hard of a country that spends billions of dollars printing new currency designs every single year? Are we mad? Or is it because of the back-slash he gets for every contract he gives out. The printing and minting company that handles Nigerian currency will soon get tired of us. EVERY SINGLE YEAR?!!

Some say Soludo is a genius, end of story! Is Alan Greenspan not a genius? That he used his low interest rates in the USA to cause all the current Stock Market woes in the world today and gradual death of the dollar as a stable legal tender?

Also, I have come across a gang-of-thought that says the cosmetic strengthening of the Naira will bring in Foreign Investors, boost Export, increase productivity, thereby creating more jobs and also improve standard of living and reduce Poverty. I refuse to refer to these people as a school of thought because I don't believe they went to school.

A STRONG CURRENCY HURTS EXPORTS AND FAVOURS IMPORTS. A WEAK CURRENCY DOES THE OPPOSITE.

Or why would all the producers in the UK and USA run away to China? And the BBC had the audacity to start spinning hare-brained tales about how this will make us the China of Africa. How can we become the China of Africa by doing exactly the opposite of what China does, which is, consciously keep their currency weak. Anyway, our ancestors said it: "when your enemy begins to sing your praises, your downfall will be fatal".

I advice all Nigerians to actively resist this move. If we fail, the system fails. All we have suffered under Obasanjo will be a waste, our future a woeful tale.

However, for those of you who strongly believe in this move, God help you.

I'm going to build my own foreign reserve over the next 3 years. Every N100,000 I make from now to August 2008, I will convert to Chinese Yuan and save in a bank in China. From August 2008 every N1,000 I make in terms of the new Naira notes, I will immediately convert to US Dollars and save in a bank in Europe, ready for conversion to the Euro.
Then when the system collapses, we will see who will lose and who will gain.

This is not a matter of National Pride and Nostalgia of how great it would be to go on a shopping spree with N200, it is about crumbling an entire country with fantastic-looking IMF ideas designed to keep poor countries poor, and rich countries rich forever.

Where are people like Professor Abhulimen Anao when you need them to talk now?


REVALUATION OF NAIRA THAT WILL COMPLETELY DEVALUE THE LIVES OF NIGERIANS.

NO TO COUNTERFEITING AND FORGERY BY THE CBN!

NO TO CURRENCY AND EXCHANGE RATE ILLUSIONS!!

LONG LIVE NIGERIA!!!



http://www.nairaland.com/72551/naira-redenomination-opinion#1393690
http://www.nairaland.com/72368/naira-re-denominated/2#1393913
http://www.nairaland.com/72368/naira-re-denominated/1#1393773