Naira Redenomination Looms in January 2024: A Remedy to the Currency’s Fall
In a bid to address the ongoing economic challenges and stem the free fall of the Naira against the US Dollar, the Bola Tinubu administration is set to reintroduce Naira redenomination policy in the first week of January 2024.
What is the Naira redenomination policy?
This policy, which had been considered by the late President Umar Musa Yar’Adua in 2007, is being revisited as the nation grapples with economic turmoil.
The potential redenomination of the Naira is not without its critics, including former Minister of Finance and Secretary to the Federal Government, Oba Olu Falae, who believes this move alone won’t significantly impact the struggling Naira. He emphasizes that the government should focus on earning more foreign exchange to stabilize the currency.
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Numerous sources both within and outside the government have confirmed this development, with some stating that the policy’s implementation is almost inevitable in January, possibly on the second day of the new year. The planning for this policy has been ongoing since the inception of the current government in May.
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The redenomination policy aims to rescue the Naira from its persistent decline and stabilize the nation’s economic environment. In recent times, the Naira has experienced a significant depreciation against the US Dollar, as well as other international currencies like the British Pound Sterling and the Euro.
In 2007, the late President Yar’Adua granted approval for the Central Bank of Nigeria (CBN) to implement the currency redenomination, but it was later abandoned due to public opposition.
The CBN’s ‘Strategic Agenda for the Naira’ announced in 2007 included other elements such as economic resuscitation and inflation-tarconduct of monetary policy. The Naira was also considered as a reference currency in Africa, with plans for the adoption of inflation-tarconduct and monetary policy, as well as currency convertibility.
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However, not everyone is in favor of this move. Oba Falae argues that redenominating the currency will only reduce the volume of paper currency in circulation without significantly impacting its exchange value. He stresses that to enhance the Naira’s value, the government should focus on improving the economy and foreign exchange earnings.
Dr. Biodun Adedipe, an analyst, opposes the timing of the redenomination policy. He points out that three pre-conditions usually trigger such a move, including out-of-control inflation, extremely low currency value, and soaring costs for basic goods. Adedipe believes that the current situation in Nigeria does not meet these pre-conditions, and implementing the policy now could lead to future problems with high inflation and a weakened Naira.
The government’s decision to proceed with this policy will have substantial implications for the nation’s economic landscape. As January 2024 approaches, all eyes are on how this policy will affect the Naira’s value and the broader economic climate.
Credit: The New Telegraph
