The Unintended Effects of Naira Redesign
By George Eze Emeghara
Apart from security issues, the big story in Nigeria today is the rate at which the Naira is crashing in the foreign exchange market following last Wednesday’ s announcement by the Central Bank Governor that the country’s currency will be changed.
The Pound is heading for the 1000 Naira to the Pound mark, having crossed 900 Naira, while the Dollar is approaching 800 Naira to the Dollar.
The calculation in some quarters is that when the cash hoarders finish changing their money into Dollars, the exchange rate will crash.
That remains to be seen.
In this country the Law that ” Whatever goes up must come down” has never applied to our exchange rate.
It has always been a case of ” Upwards ever, downwards never”
It is all so crazy.
Even more shocking was the disclosure by the Finance minister that her ministry did not know about the currency change exercise.
Apparently such a huge decision, with very far reaching consequences for the country a “family” matter involving only the Big Man, the head of the Mint who was appointed about three months ago and who is said to be the Big Man’s son-in- law and the CBN Governor.
And we thought we were in a democracy.
How could such a huge decision which is capable of causing huge difficulties and inconvenience for the citizens be taken without consulting and informing the representatives of the people and other stakeholders?
The year 2022 is very different from 1984.
First of all we are no longer under a military dictatorship. Or are we?
In 1984 everyone spent cash. There were no alternatives.
One could only withdraw or deposit money into his account through the few banks that existed at the time.
Yet the people the snare of currency change was set for managed to beat it.
The exercise then did not achieve its aims apart from putting currency
counterfeiters out of business temporarily.
The hardship the people were subjected to cancelled out whatever benefits they, or the economy, derived from that exercise.
Today, there are several deposit accepting and money transferring institutions, ranging from Community and Mortgage banks to Fintechs and conventional banks.
There are also the ubiquitous POS machine operators and products such as the ATM machines and their cards.
In case a cash hoarder does not want to go and scramble for FX, each of these institutions or operators is an avenue for a savvy money hoarder to defeat whatever the government is trying to achieve.
The hoarders could also buy up and stock up on a variety of fast moving, non perishable items or commodities from real estate, shares, vehicles and other equipment to building materials and wines and spirits which they can sell later at even higher prices.
At the end of the day, it is the ordinary Nigerian who can barely survive, and who certainly has no money to hoard, who continues to suffer.
This looks like yet another ill thought out policy which will compound whatever woes Nigerians are facing today.
Finally, it will be interesting to know the cost of this exercise to Nigeria’s already beleaguered economy. Will they tell us?