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Saving the Stress on Nigerian Currency

Published March 2nd, 2017

The naira was first introduced as an official tender in Nigeria by the General Yakubu Gowon led military administration in 1973. Nigeria adopted a national currency in replacement of the one with colonial British origin, hence naira and kobo were introduced in place of pound and shilling. Nigerian currency came in coins and notes including half kobo, 1 kobo, 10 kobo and 25 kobo, and they were token coins with immense purchasing power, while the currency notes were 50 kobo, 1 naira, 5 naira, and 10 naira being the highest then. With the oil boom of the late 70's, the military leaders and civilian apologists painted a picture of an economy that was in geometric growth and introduced the 20 naira note in 1977. However, with the devaluation of naira in 1991, some denominations phased out and the 50 naira was unveiled, which was targeted at the increased monetary supply and devaluation of currency to encourage demand for home made goods as prescribed by the Structural Adjustment Program (SAP).

Agreed that SAP was a potent economic stimulus, but due to little or no efforts towards export promotion and import substitution, the policy crashed. Much later, between 1999 and 2000, 2001 and 2005, 100 naira, 200 naira, 500 naira and 1000 naira were introduced due to weak purchasing command of previous denominations, policy somersault and failure, inflation and low public confidence in low currency. While many past and present administrations have charged the Central Bank of Nigeria (CBN) to fashion out a template for the strengthening and revival of the naira, much of the expectations had not been met ostensibly because of inadequate fiscal compliment from government end.

It saddens the heart that all the token coins reintroduced under Professor Chukwuma Charles Soludo has returned to the antiquity in peoples offices, homes, art galleries, wallets and currency museums of the CBN. Nigerians rejected them, even though they are still legal tenders with no value. The message here is that regardless of money being backed by government legislation, acceptability is the key attribute the authorities have to consider. At present, some denominations are now in polymer notes (5 naira, 10 naira, 20 naira and 50 naira). Their cost of production is quite high and approaching their face values, as the purchasing power of most of them is next to zero.In the same vein, the paper money such as 100 naira, 200 naira, 500 naira and 1000 naira have lost over 75% of their market value from the initial date of production. It is common knowledge that the value of 1 naira in 1973 is more than 1000 naira today. While United States dollars equaled 63 kobo in 1973, today it is about 315 naira at interbank rate and more than 500 naira at the parallel market. Besides, what 1 naira could buy in 1973, 1000 naira cannot buy in 2017, and this implies that more than 100% of its value is gone, using 2007as base year. It is worrisome to compare price of a bag of rice, a litre of petrol or kerosene, a tin of milk, a pair of shoes, a cup of garri and many more in 2007 to what their prices are today.

The nation can come out of this economic crisis if it diversifies the economy, improve on infrastructure especially power supply and review the multi-exchange rate and import substitution. All of these solutions are important and achievable where there is political will and less emphasis on political solutions over and above real economic imperatives. Therefore re-denominating the currency isvery germane now before it is too late. While admitting that this may not directly affect the Gross Domestic Product (GDP) figure, it will help reduce some pressure on the naira. Also, it will induce GDP growth, better inflation expectations, strengthen public confidence in the naira and make for easy conversion to other major currencies as well as eliminate higher denomination notes which has lower purchasing power and equally reduce cost of production. The time to act it now so as to save naira from

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