By Henry Olamiju
“A great nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world – no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the OPINION and DURESS of small groups of dominant men.” ~ [see below]
If I had seen this quote on the front page of any newspaper or even on a bulletin anywhere in the world, I would not have any doubt in my mind that the nation being referred to was none other than my beloved Nigeria. The statement accurately describes the current state of the nation in the grip of “a small group of dominant men”. Everywhere you go, in Nigeria, you cannot but feel the duress imposed on the masses by these men. It is there staring at you on the roads riddled with potholes, calling out to you from the generator fumes, singing to you at petrol stations and mocking you while you eat that slice of (cassava) bread etc. Oh yes! The Nigerian masses are in the grip of a few men.
Former US President Woodrow Wilson did not know how very spot-on his words, as quoted above, were as touching the country Nigeria.
I started out writing this article sometime last week to ascertain my position on the issue of the planned introduction of the N5000 note in Nigeria. It just happened that the president subsequently gave an order to suspend the process as the news media have reported.
In the light of the several discourses both in the print and electronic media, exposing the dangers of the CBN’s plan and also the insensitive and arrogant stance of the apex bank despite all the calls for a rethink, it seems the presidency has heeded the call by the people. To think that a man, one single man, can dare to go ahead and attempt to implement a policy he alone thinks is the best for Nigeria, even after several prominent and knowledgeable citizens have kicked against it, is a classical manifestation of pure megalomania.
The interesting thing however is that prior to the appointment of the present CBN governor there had been a plan that also generated a lot of heat in the polity concerning the Nigerian Naira: Redenomination. That plan was also buried at that time.
One would think that the policy of redenomination would be a better plan for the Nigerian currency than the introduction of a higher denomination. Because redomination seems to give the currency some ‘value’ rather the introduction of a higher note which would do otherwise.
This piece is intended to put a strong foot forwards on the issue of redenomination as opposed to higher denomination. Research findings indicated that redominations may not be the ever-elusive silver bullet for our currency woes. The foregoing will therefore advance just the basics of redenomination, merits and demerits as well a few opinions. I am no economist.
Redenomination is the process of changing the face value of bank notes and coins used in the circulation of a particular currency. In the process, a new unit would replace the old unit such that a fixed amount of the old units are exchanged for one new unit.
Why do economies redenominate currency?
Several countries have redenominated their currencies in the last century or so (including China, Russia, France, Ghana, South Africa etc) and some countries have done it multiple times. The most common reason is INFLATION (or hyperinflation). Inflation is simply put down to the presence of too much money in circulation. Supply outweighs demand and hence the value of the money falls and the purchasing power of the currency falls as well.
Another reason is formation of a monetary union. When economies want to merge to produce an economic union, the new currency of the union has to be harmonised with the existing currencies of the member states. Germany had to redenominate their currency in the wake of the Eurozone in 2002, as Belgium and Ireland did in the same year.
The other reason for which economies redominated their currency is for the sake of decimalisation of the then pound-shilling-pence structure that needed to be converted to decimals (£1 = 20 shillings = 240 pence). Australia and South Africa redenominated to dollar and rands respectively from their pound versions.
Which Countries Have Redenominated their Currencies?
When? (1960) Why? Inflation How? 1 French Franc = 100 Old franc
When? (1998) Why? Inflation How? 1 Russian Rouble = 1000 Rouble
When? (2005) Why? Inflation How? 1 Lev = 10,000 Romanian Lev
When? (2007) Why? Inflation How? 1 Ghanaian Cedi = 10,000 cedi
When? (2006,2008, 2009) Why? HYPERINFLATION How? 1 new unit = 10,000,000 units)
When? (1986,’89, ’90, ’93, ’94) Why? Inflation How? 1 new unit = 1,000 old unit
Should Nigeria Redenominate?
With inflation standing at 11.7% last month and purchasing power of the masses not increasing, existence may soon be out of the reach of the common man. Redenomination is an option. It mops up excess money in circulation which would greatly accelerate the cashless policy being implemented nationwide. Higher denomination can only facilitate more theft and allow corruption proceed better; moreso, knowing the Nigerian penchant for having and using high denominations in basic everyday transactions, there will just be more money in circulation and inflation rates may be affected.
The problem with redenomination, however, is that the effects are unpredictable especially in poorly-regulated economies like ours and then the need to redenominate will be there again, just like Brazil and Zimbabwe.
The other issue with it is a man-made one. An illustration would suffice, if Nigeria redenominates N100to become N1. A bottle of coke which currently sells for N70 will then become 70kobo. So when one buys coke, you should get 30kobo change, that will be coins which Nigerian don’t like. Within one year of the redenomination, the price of that bottle might become N1, a 30kobo, >40% rise! But that rise would be lost on the ‘psyche’ of the populace who will still be basking in the euphoria of buying coke relatively ‘cheap’.
The point eventually is that, redenomination of the naira, with other sound economic policies, has the potential to re-jig the nations economy. Knowing fully well that economy is dependent on market forces of demand and supply, policies that favour production of goods and services (reduced import levies on raw materials, tax-holidays, incentives, education, science and technology, secure business environment etc) are a sine qua none for sustainable development and must be taken seriously by the government of the day.
There is no singular action that builds a nation, it requires contributions from far and wide. These contributions, no matter how divergent must be accommodated and given fair hearing. Only then can we have cordial unsuspecting handshakes across the Niger, only then can we say… “We the people…”
P.S: I’d like to continue the discussion and learn from you on twitter: @holamiju