•Soludo Photo: Sun News Publishing

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As part of plans by the Central Bank of Nigeria (CBN) to realign the denomination of the naira and ensure its stability, N20 will now be the highest denomination of notes, while 20 kobo will be the highest denomination of coins from August 1, 2008.

Addressing governors, deputy governors, legislators and media executives on Tuesday in Abuja on the new focus of the bank, the Governor of CBN, Professor Chukwuma Soludo, listed the proposed currency as one kobo, two kobo, five kobo, 10 kobo and 20 kobo coins, while notes will now begin from 50 kobo to one naira, five naira, N10 and N20.

This currency arrangement, he said, would restore the value of the naira close to what it was in 1985 before the Structural Adjustment Programme (SAP) in 1986.
According to Soludo, the apex bank was encouraged to embark on the currency restructuring following the progress so far made with other reforms and the enabling condition in the economy, adding that the policy would put the naira around N1.25 to US$1.

"We intend to restructure the entire currency by dropping two zeroes or moving two decimal points to the left from the currency exchange and phasing out all the existing denominations from August 1, 2008. Effectively, at the current exchange rate, this policy would mean that the naira/US dollar exchange rate would be around N1.25 to US$1 then," he said, noting that from then, all naira assets, prices and contracts will be re-denominated by dropping two zeroes or two decimal points to the left, with effect from August 1, 2008.

Beside stabilizing the naira, another object of the restructuring, Soludo said, include redesigning the currencies after 23 years, driving down the cost of currency printing and experimenting with the polymer substrate.
"Our objectives are largely achieved and we have learnt a lot from the exercise. However, in the light of the new mandate by the CBN Act (2007) to ensure monetary and price stability as well as the vision articulated under the FSS 2020, it has become imperative for us to evolve a more comprehensive strategy for the naira as a reference currency," he said.

He, however, cited other countries, which have undertaken the currency re-denominations at various times and for different reasons. The countries include, Afghanistan (2002); Germany (1923, 1948); Argentina (1970; 1983; 1985; 1992); Bolivia (1963, 1987); Brazil (1967, 1967, 1970, 1986, 1989, 1990, 1993, 1994); China (1955); South Korea (1962); Mexico (1993, 1996); Ghana (2007); Israel (1948, 1960, 1980, 1985); Turkey (2005); Angola (1995, 1999).

He explained that many countries had undertaken the re-denominations more than once, saying that Nigeria may not have to undergo this more than once, having learnt from the experiences of other countries.
The CBN chief used the opportunity to announce the granting of Nigeria the right to host the headquarters of the African Central Bank when the common currency in Africa materializes, stating that Nigeria must therefore, lead the way in terms of properly aligned currency structure and sound monetary policy framework.

It will be recalled that Soludo had shocked the nation in 2005, when he announced the banking consolidation programme, which compressed about 90 deposit taking banks into 25 banks.
The objective of the programme, according to the CBN, was to create a stronger and more robust financial system that could be internationally competitive.

However, recent developments in the sector seem to have lent credence to the fact that the successful implementation of the recapitalization programme, has effectively positioned Nigerian banks to handle large ticket transactions, in several sectors of the economy. It has also enlarged the scope and range of services available to the business community, than was available at any time in the history of the industry.