Naira: Soludo, Nigerians And The Zeros

Economists, we are told, think in terms of what can be proved as either true or false. In other words, they do not believe in what it ought to be, but rather, what it is. To them, what ought to be is a normative statement, while what it is represents a positive statement. Against this backdrop, one is tempted to question the rationale behind the recent pronouncement by the governor of Central Bank of Nigeria, Professor Charles Soludo, to the effect that from September 1 2008, the national currency of Nigeria, the Naira, will be re-denominated by removing the zeros from 100 to become 1. According to Soludo, the intention is “to restructure the entire currency.”

The problem here for laymen I understand is the quantity of the goods the naira can purchase against how much they part with to get what. The amount of money spent on a particular good is more important to the consumers than the economic jargons being thrown around by the head of the apex bank. Even then, the naira can not regain its value (either true or false) if other parameters in terms of dilapidated infrastructure like road, electricity, water supply and sundry facilities are not functioning properly. It costs a fortune to do business in Nigeria when the proprietors are forced to invest high percentage of their capital on virtually all the amenities that ensure profitable business ventures like power supply and telecommunication.

It is a mere wishful thinking to suggest that the economy will improve on fiscal measures alone, and overnight when other factors are not considered and put in proper perspective. I am sure Soludo and his lieutenants know about this, but they prefer to tell Nigerians and the world what they feel we like to hear. Already, some Nigerians are jubilating and giving all kinds of suggestions as to what should follow the announcement. On daily basis, we hear stories from those who think they know economics in and out, dishing out what they consider to be perfect for the Nigerian economy.

I think the re-denomination is aimed at achieving nothing but a psychological effect, and Soludo is using this strategy and probably the effect of hope more than any weapon in bringing about monetary and fiscal changes as envisaged in Nigerian economy. No amount of short-term fiscal changes can undo the damage done to the economy over the last two decades or so. Under the present condition in which Nigeria finds itself it is more appropriate to focus our attention more on the provision of basic infrastructure that would support the existing fiscal and monetary policies.

The present huge revenue from petroleum which is Nigeria’s main source of national income must have given us false impression about the state of health of the economy generally. But, since Nigeria can conveniently boast of experts in all fields of human endeavors including economics, it is not out of place to suggest that the economy problems that had bedeviled her for several years should not have defied solution for so long. Probably, what we lack generally is the will to redirect our priorities and channel available resources towards systematic provision of infrastructure, say electricity and good road network. We do not have to achieve these feats during the lifetime of an administration. They can be attained as a continuity of another regime since the objective is to serve the Nigerian people.

With all the talk about the re-denomination, and the apparent focus on effects on the economy, the issue of changes that follow on the IT sector can not be overemphasized. First of all, it is expected that the cost of putting in place appropriate software that comply with the changes will be heavy on the financial institutions. This will undoubtedly be passed over to the customers who inevitably hold the shorter end of the stick. The ordinary Nigerians on the street are interested in what happen to their purchasing power in an event of this nature, and they need to be educated in the language they understand.

Furthermore, all government agencies responsible for fiscal and monetary matters should be co-opted in any policy to bring them along. With the federal government’s directive that the policy should go back to the Economic Management Team for “fine-tuning”, it is doubtful if that is the case in this instance.