After Ghana, now Nigeria! The ECOWAS giant drops zeroes from its currency
Nigeria, West Africa’s economic powerhouse has decided to follow Ghana in bringing its currency in line with international standards. Yesterday, the county's central bank announced that it would make the country's currency, the Naira, convertible by 2009. But first, the Naira has to be redenominated. From August 2008, the 100 old Naira becomes 1 Naira.
Just as in Ghana, it’s being argued that the redenomination would help make the pricing of goods easier, as well as conversion into other currencies.
Until now, the Nigerian central bank has limited how much foreign currency can circulate by selling it through auctions. It has also set the exchange rate.
The change should help increase flows of money into the banking system and encourage investment into the country.
The Naira has been appreciating against the dollar this year, thanks to Nigeria's high oil revenues.
Analysts said the naira will be further strengthened following the latest currency changes.
"This is very positive. I agree fully with all the initiatives," said Tony Elumelu of Nigerian bank UBA.
The central bank's governor Chukwuma Soludo said the bank would "gradually withdraw from the weekly auction system [of foreign currency] and only intervene in the market as may be required to achieve defined policy objectives.”
The currency changes apply to commitments Nigeria has made under International Monetary Fund (IMF) rules regarding currency transfers.
Nigeria is the second country to redenominate its currency in West Africa, after Ghana.
The Bank of Ghana redenominated the current cedi on July 1 2007 by setting ten thousand cedis to one new Ghana Cedi (GH¢), which is equivalent to one hundred Ghana Pessewas (Gp).
The Ghana Cedi was redenominated by removing four (4) zeros from the old Cedi but Nigeria’s redenomination of the Naira will cancel two (2) zeros from the current Naira. This was because Ghana’s cedi was denominated in the thousands whiles Naira was denominated in the hundreds.
Ghana’s redenomination is in its second month and reports indicate that the public has accepted it warmly, as most people are acquainted with the new currency and prefer to transact business with it.
It is the coins that are taking some getting used to because the coin spending culture was dealt a deathly blow by inflation when the cedi started acquiring its zeroes. Many people, especially and rather surprisingly, market women, have taken the education on the conversion seriously and are now very adept at juggling the old and new cedis.
The Ghana cedi has overcome the psychological barrier and is actually treated with as much reverence as the US dollar. If Ghana’s economy continues on its positive trends, the cedi may sooner also become convertible.
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