Monday, 27 August 2007

The shabby handling of the Naira redenomination

The rotten announcement

Reading about the news of the suspension of the Naira Redenomination exercise by the “Chief Law Officer” of Nigeria Mr. Michael Aondoakaaon (SAN) Chxta’s World brought cold comfort.

Someone then left a comment that included a link to that announcement and disappointment was not the only thing that registered in my countenance as I watched what would definitely end up being a rotten farce.


Click to see the video

Real life re-denomination

Now, I am no economist or monetarist as to be able to determine in any way the likeable success of redenominating the same currency in order to make it appreciate in value. However, I was witness to the Netherland Guilder to the Euro transition and I can say that the only thing that seemed to appreciate in value was the cost of goods and services.

In some instances, retailers simply struck off the Guilder sign and stuck on the Euro sign without changing the numerals, even when the exchange rate was 2.20371 NLG to 1 Euro. Much as the government tried to gloss over the situation by saying there was no widespread price inflation, the man in the street stridently differed.

If the knock off 2 zeros ploy were to work in Nigeria where logistics, documentation and market research would be hardly as advanced as in the West, I would wonder how this would stem inflation from a monitored perspective, it probably would have been better to introduce an entirely new currency and severely restrict the time of exchange.

Many developing countries have redenominated their currencies, so it is no new exercise; in fact, Layna Mosley presented a peer-reviewed working paper titled Dropping Zeros, Gaining Credibility? Currency Redenomination in Developing Nations [PDF] in 2005 which in some cases shows that redenomination does not necessarily arrest inflation or garner confidence in monetary policy - See Page 4.

Disgraceful, immature nitpicking

However, that is not the point I am interested in, rather, I am quite taken aback by the onslaught of a toady Attorney General who somehow brought to the President’s attention provisions of Section 19 in the Central Bank Act (2007 as amended, which I could not find) which presumably the Governor of the Central Bank of Nigeria had forgotten to adhere to.

The said provisions of Section 19 which deals with the Denomination and form of currency notes and coins which appears below from the Act of 1999 should not be radically different and it does require presidential approval of the board’s recommendation, but definitely not all this political bluster.

Section 19 - Central Bank of Nigeria Act 1999

Now, in any setting where civility, respect and maturity thrives, one would have expected that the dynamics of government to have Attorney General make overtures to the Governor about what might have been an oversight and arranged for the so-called written endorsement of the President in closed diplomatic circles.

Schism between Presidency and monetary policy

I cannot believe that such a radical re-alignment of monetary policy which is clearly the mandate of the Central Bank of Nigeria can have been announced without the knowledge of the President – however, given the possibility that this was not the case because the Governor was having “maverick” tendencies, embarrassing him and undermining his remit in this way does more damage to confidence in the Nigerian economic policy internally and internationally, it is a myopic and demeaning posture that borders on disgraceful.

The so-called “Chief Law Officer” who also happens to hold the coveted Senior Advocate of Nigeria designation leaves me wondering if this title has become so devalued that once people attain political office they lose all civility, decorum, respect and dignity in the pursuit of wielding more influence rather than serving the purpose of their offices.

This definitely exposes serious team-dynamic issues within the Federal Government of Nigeria, and the sooner we have all the personnel including the President recognise the authority and demeanour of their offices which should be above the murky waters of village politics, the sooner we can get to solving problems in Nigeria.

Nigeria - a technocrat’s nemesis?

Beyond this, is the subject of technocrats in Nigerian politics, one does begin to wonder if they have any place in serving the country when like Ngozi Okonjo-Iweala, they are systematically undermined and frustrated into resigning as a last resort to retain their honour and dignity, regardless of their principled stances.

The President cannot summarily sack the Governor, it requires the approval of the Senate, just as the appointment of a new Governor – so the easier way to create change is to frustrate the incumbent with nitpicking public announcements that challenge his professional judgement and conduct.

As usual, what would happen is some father of a vested interest would come into the fray to mediate in some exclusive mansion and help settle what is comparable to dogs marking territory and all would be forgiven or forgotten, however, if the Governor would stand for anymore of this nonsense is left to be seen.

Shame on the President and his cohorts on this matter, they could have shown more integrity and maturity in handling their discontent with the Naira redenomination exercise, but they could not rise to that standard of civility.

References

A Brief on the Central Bank of Nigeria {CBN} Act, 2007

Central Bank of Nigeria

Central Bank of Nigeria - Decree No. 24 of 1991 - Decree No. 41 of 1999 (Amended)

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