Naira is Set for Yet Another Round of Devaluation? – By Paul I. Adujie Esq.

Posted by admin Articles, CBN (Central Bank of Nigeria), Columnists, NNP Columnists, Paul I. Adujie Saturday, September 15th, 2012

By Paul I. Adujie | New York, USA | Sept. 15, 2012 –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!wp_posts