Kehinde is an employee of one of the leading telecommunications companies in Nigeria. His annual salary is N8,000,000 amongst other benefits. He is not doing badly for a middle manager. He knows his work well, has savings worth about N2,000,00 and is quite focused. His father is a civil servant, a director in one of the ministries, and his mother is a principal in one of the good schools in Ibadan, where they both live. Their annual salaries put together is less than N2,000,000. They also have life going on well for them, they have done well for their children, and they are reaping the satisfaction of knowing that their children are doing well in Lagos.
Kehinde wakes up at 5:20am to prepare for work. He goes through the normal routine like he was preprogrammed, a man has to work. He has many projects ahead of him, he needs money badly…or at least, more money. He jets out of the house at quarter to 6. He needs to beat third mainland early morning hold up. As he drives through the wee hours of the morning, he tunes on his radio, what is happening in town. He needs to at least catch up with the current events about all these funny financial policies that have become the topic of debates for the past 1yr. He hits the seek button on his Toyota stereo..93.7..94.5..96.9.. he finally gets a channel that mentioned something about the Naira, dollar conversion..yeah that’s it…
Things have changed drastically over the past one year. The Big banks have bought insurance companies and secruities companies. Stock broking firms are on a race to meet up with the 1 Billion naira capitalization. He had tried to approach a stock broking firm the other day to invest in shares… he had been shocked when he was told that the minimum they take is 10M. What did he expect, the big bank boys own it all, so anything that is less than 10M should be put into savings in the bank… so that at least THEY can use their money – OPM. Today is the day the long talked about conversion happens…$1 equals N1.25! Not because of Naira appreciation though… it’s a game of semantics.
His 2,000,000 Naira savings is converted to N20,000 for him in the new Naira regime. His annual salary is converted to N80,000. Nothing has really changed, but now he has to talk in thousands now if he was talking in millions, and in 10s if he’s been talking in thousands. The decimal points have been moved forward by two spaces, moving his ego with it…lol. He had some shares in GTbank, the current value of those shares were N65 yesterday, today, they are 65k. But will the price of coke become 40k, will the price of goods take on a two decimal point shift… or will people approximate to favor them?
He listens on as hears various views about the impacts of the change. They are all good changes for the rich and well positioned, but what effect will they have on the little people. Well the say a war early announced doesn’t kill a wise leper. If your eyes are well sunken, you should begin to cry from a distance. Will he really be able to buy a dollar for N1.25? What will be the price of the stock he bought at 50k per share… will it be 0.05k? or will it appreciate to 0.1k. Would he have been better positioned if he had more of his money outside Nigeria… or same naa ni? lol
Change happens to us all, some position themselves and get the best of it, some lament the change as unnecessary and keep lamenting until their real lamentation starts. Some listen, watch and understand the implications and position themselves properly. I’m not one to say a policy is good or bad. I simply understand that every policy no matter how well defined has two sides, one for the good of some, and the other for the ill of the others. If the price of bread is forced up, bread sellers will be happy, and bread eaters will be sad. One thing I am however sure of is that the years of abundance are followed closely by the years of lack and want. Wise ants think winter all summer. Are you wise?
41 thoughts on “1st August, 2008… Sneak Preview”
The only constant thing in life is change. This is well expounded in “Who moved my cheese?”.
We should strive to be like the children of Isacchar who had understanding of the times to know what Isreal ought to do.
It’s important to be proactive and anticipatory enough to adapt to our ever changing world. Nice piece deolu.
PLS WAT SHD WISE PPLE DO THEN ?
A word is enough for the wise! Please be wise!!
LOL!
Be informed. Be prepared.
http://www.guardiannewsngr.com/news/article01
Yeah, more questions as I also espoused in my blog.
now, that’s creative writing. is the guy an ibo man? 🙂
but how does one practically prepare for this kind of policy knowing that he or she will be at the receiving end (or won’t he or she?)
August 1st 2008 is almost here – might seem like 12 months but experience has taught us otherwise. Meanwhile, some people have been confusing themselves instead of recognizing the fact that whatever money they have is just going to be divided by 100 – nothing spoil. I think what matters most is to plan and see how to make the best out of it. One might also need to analyze which currency will be best to keep before Aug 2008 – Dollar, Naira or pounds?
My question to Mr. Soludo will be why he did not see this coming before investing a lot of money into producing new currencies. our country will grow in leaps and bounds when we have men at the helm who can see the future and plan very well. Whatever happens – I know say no shaking – baba is on control and I dey shine my eye too.
Mr. Akinyemi, your satire was good and I can feel boys getting worried that their tags of 8M par annum will be eroded – but wait, won’t we be the better for it knowing that our currency is actually competing with the dollar?
I also feel that the economic team should be able to work towards 100 naira to 1 dollar before August 2008. It is a tall order but it is achievable.
Finally, after this policy – I am waiting for practical solutions to turning our economy around and fighting institutionalized corruption. Improving health care deliveries and other social infrastructures. We will get there!
Well done, Ogun agbo tele ki npa aro.
Deolu,please try and organise a strategic session for guys to know how to take position,as a year notice is good enough from the CBN governor.
@ Bukunmi,
wetin dey now, don’t fashi your guy,how your end?
Nice writing Deolu.
I’ve been stretching and shrinking at this news all day. Thinking of the opportunities it will bring and the disadvantages it will have for some. Surely the coming months are going to be unpredictable ones.
Interesting …
@ All
Does anybody remember Fela’s song about his friend that wanted to buy a fan? If by the time your down lines circle out of club freedom the dollar is 1 to 1.25 to the naira will the effort be worth stress ?
@ Moha…
I think you need to understand the change better… $6000/N7500 will still buy 12,000 units of GTBank shares at N65k per share. Nothing changes…
@ Deolu
I will like you to start talking about solutions to what is going to be faced in the months to come.
My parents collect between 30k and 50k per month now as teachers in ibadan, Now will govts increase salaries now to reflect what they shld collect later, abi that means they will be collecting 300 naira per month by that time , truly will prices come down at the same rate of naira division .
If capital flight starts would it pay the person , by august 2007, if he took $3000 and makes thrice tha amount by august 2008.
he would have only $9k x 1.25 = 11,250 naira, but he spent $3k x 125 = 375000 naira. Capital flight or investment out of the country on a short term will be ok maybe till May next year and you repatriate your money back to purchase shares and physical assets for your self .
@All
Bros / Sis
I believe Deolu could organise a summit for us to talk and see the pluses and minuses of these policy direction on us all, If the Chairman is willing as always , this is a knowledge economy that we are in , lets have insights to how we can go about what is coming ,
the Soludorisation of naira , might be what we need to stem the tide of corruption in Nigeria ????
Lets use our comments to ask thorough questions and also build scenarios which i think enlightened guys on this blog will answer to.
Thanks
Olusola isiade
08032008955
@All,
Nothing is really going to change. If your salary is presently N100,000 per month, it will change to N1,000. However, what you used to buy for N100,000 will also change price to N1,000. It’s just a play around with figures. The only thing being achieved is the elimination of 2 zeros … nothing else is going to change
@Sola, He will have N11,250 which will be able to buy what was previously sold for N1,125,000 so in essence nothing will change.
The only thing that might happen is that there’ll be a lot of currency movement in/out of the country and hoarding due to lack of understanding and this might invariably have an effect on the economy either good or bad. I think those trends are what to watch out for.
i am not an economist but i think within the 1 year gap, there will be influx of dollar into the economy and this will further strengthen the Naira. This will mean more foreign direct investemt because it’s better to have your money in Naira now than in dollars.
but my fear is this, if a comodity is worth 125 naira today normally it suppose to worth 1.25K by aug 2008 , i guess it might jump to 1.50 and not 1.25. This might cause inflation ( i am engineer not an economist) because the face value of this item in 2007 rate would have increased by 25 naira.
Imagine a good worth 50 kobo by 2008 suppose to worth 0.5kobo, i guess this share value will be difficult to transact with, hence it might just move to 1 kobo. This is inflation
I think what we should be thinking on here is Re-positioning as Mr. Deolu had rightly wrote in his article. This reduction in the dollar value will meet some prepared while to some, lack of foresight will cause their dooms. For some of us, I pray that we shall go forward with giant strides like the sons of Issachar, as we go ahead to learn from the Ants!
The changes might not have any serious impact on the formal sector of the economy. My worry is the informal sector of the economy. Around 70% of the Nigerian economy is in the hand of the informal sector. How do you convince the market women selling oranges, break, tomorrow to follow the conversion. We need expert advise on this matter
The issue of ‘the dot’! Hmm! What can I contribute here? Well, some of us are already happy to join the millionaire’s club and others are really dreaming for that elite membership. Now the road has been stretched beyond limit and the journey will become really interesting. The billionaires will wake up to see the ‘b’ turned to ‘m’, the millionaires will fall back to the realm of the faceless, nameless average class. And if they must return to their former class, then the movement must be swift, daring and brave. But what is in a title when it has no value? Honorary chieftancy cannot be placed beside the traditional chieftancy because of the cherished value attached to the latter. If the value of my future position as a ‘thousandnaire’ meets or surpasses my present position as a millionaire, who am i to ponder on ‘the dot’. Talk about value of shares and assets shrinking? well, let’s look at this from another angle. Definitely one would love to buy car at N10,000 instead of N1,000,000, build or buy a house for N75000 instead of N7.5M. It sounds good only if everything shrinks in value equally just like the economists will say, all things being equal. $1 to N1.25 is not an issue to me, it will be one for the international forex traders who would be battling with this sudden transformation in value of the naira, without knowing the ‘koko’ behind it (that is if naira makes it to the elite pairs of currencies) . Anyway it goes, I have survived more crazier things in this country, and i can only move forward, unshaken by this utopian idea from a Charles. The major challenge will be orientation of the peasants, traders, the uneducated, and the ‘millionaire’ addicts to see a greater value in a smaller figure. God Bless Nigeria
Deolu,
Since I came here to criticize you on e-cash prices, i must also come back to show my gratitude from helping me resolve my clubfreedom wahala. Your soothing voice was good enough during the whole drama. Don’t be bothered jaare! ‘the dots’ can not devalue a gem!
all the best!
I think there is sanity in the two decimal removal from our currency denomination.The young billonaires may not give us fobia anylonger.Let us be realistic life was worthwhile pre 1986 era.Money had value and no beggars on the streets unlike this billonaire era with flirt of beggars both in social and spiritual arenas.
My advice is that Government should educate the people and put machinery in place to curb excesses of the financial sector and also to check inflation and peg down prices.
This may be the long awaited dream for Nigerians.I hope more articles will unvail as the policy is being examined by the economists.Thanks for your update.Keep it up Deolu and Godbless.
We all seem to have overlooked Tayo’s comment but it was extremely relevant. Nothing is really changing per say, like he/she said “If your salary is presently N100,000 per month, it will change to N1,000. However, what you used to buy for N100,000 will also change price to N1,000.”
Just a play aroud with figures and its a great thing the naira is stronger. Nigeria will be just fine. Our government just needs to use this opportunity to boost the economy and breach the gap between the poor and the rich for good.
This is a positive move for the country as the naira will be comparable other stronger currencies such as the dollar. But the more important fact is that unless we curb what causes inflation, this re-denomination or decimalisation will not work, we might find ourselves exchanging N100 = $1 in future, As Brazil, they’ve got tales of many re-denominations done in the past.
So the idea is to build a strong economy first. Another fact that can cause inflation is how sellers judge their wares. There’s no benchmark or a Government agency that fixes the prices of commodities such as our pure-water, toilet roll, tailor fees, mechanic fees, etc. We should not expect that these people will follow the division to the letter. So while it might work easily in the regulated sector, it’s going to be a tug of war in the unregulated sector.
So the fact still remains that there’s no substitute for a stable economy. What was Soludo thinking when he introduced N1000 notes after he was advised about 2years ago about re-denomination of the currency, his new baby?
We need to study the advantages and the dis-advantages of this move. Can the promised gains actually be realised? Can we learn from countries that have implemented it already. How the whole matter is handled will determine the results and how we position ourselves will determine how this change affects us.
Hmmmmm………. this seems to me like the story of rapture.
I agree with the others that we need a seminar on the implications of this on us and how to better prepare for it.
People with the present plan on the re-denomination. Based on what Deolu has stated it means that it is up to each and everyone of us to decide if one is going to be in the group of the loosing pack or amongst the achievers.
That is something sha.
I see this thing from a different angle and i hope I won’t turn things upside down.Though I am not an economits but from my own view,Its a good policy.
The only problem is will it be implemented by FG.We have good technocrats in this country but will there initiative be allowed.
I still feel the big boys who control the Nigeria eceomoy/market would do everything within there powers to subdue this policy.They feel it wont benefit them.
Recent finding indicates that these big boys are the ones forcing the so called “Miracle money companies”to close shops.Its not that they are not making money but the fear is that everybody will be in there status within a short period of time.
FG has constituted a comittee to look/review the policy as it claims not aware of the whole idea.
1st August 2008 is just tomorrow.We will all see how the players will play on the field.
This is sad.
An apparent appreciation of the naria,
A mere cosmetic quick fix.Have we ever asked ourselves what caused the naira to depreciate in the frist place? Maybe an honest answer to the question will offer real solution.who says after the 1st of August 2008 the depreciation will still not continue?
I think we should deal with the root cause and not dwell on the surface.
@ all
You know, on a funnier note, it just occured to me that okada will cost about 2 – 5 kobo for a drop!!! Here come the coins man!!!
Check this
Fill your tank with N30
Buy Aso Ebi for N60
Get a haircut with N1
Do lunch @ Mama Cass for N6
Catch a movie for N15
Buy a toks for N15,000
Annual salary Entry level N18,000
do I continue?
The change will be psychological AND financial. I would really love to see someone dare to predict an outcome for this change – everyone will have to live on their feet. I think I just saw Job Security get massacred.
Personally, I think I’d rather be a seller than a buyer when the waves come.
As Deolu has rightly pointed out, the issue here is not wether the policy is good or not OR wether the policy will work or not OR even wether they policy is rightly timed or not. At our level, our contibution may not be sought and even if it is sought, may not be used for any thing.
Therefore the issue here is how can we position ourselves to see the “Big Bang” as an opportunity and how can we take advantage of the opportunity.
I am in for any braistorming !
Deolu, thank you.
Plainly speaking, the naira re-denomination is simply a game of numbers. However, it will have far reaching effects…no doubt. Like Deolu, I am not interested in categorizing the new policy as either good or bad. It all depends on a lot of factors that bothers on HOW well it is implemented.
For one, it does have its advantage in strategically positioning the naira as a preferred common currency on the continent. Thats ok. Inflation. This is a major area the CBN claims to be fighting a strategic war. Like ‘Laanu said there will be a tug of war in the unregulated sector. This is where I see the greatest danger for the general Nigerian populace too. If the policy is not well managed among the unregulated market forces like the markets, shops, etc, I may be wrong but inflation may increase rather than decrease. I am very much interested in how the CBN will manage and prepare for this sector. It goes a long way.
For us here who are in this game of financial freedom (notice I referred to it as a game), I think my advise will be for us to take a cue from Spencer Johnson, MD in his book, “Who moved my Cheese?”. The book offers an intelligent way to deal with change in the workplace and our everyday life. Its not expensive, takes about an hour or less to read but the lessons are invaluable for life. Contact me (dapbanks@yahoo.com) if you need a copy.
Lets not be caught napping regarding this impending change. For now, I forsee more hardship (again on the masses) and a dwindling FDI. Take for instance, the PMS (petrol) we buy for N65/litre today. Its projected cost will be 65k/litre. That tells me you and I may need to spend more coins when buying fuel. Will these sellers have “change”? If they won’t (as usual), you may end up paying 70k(informally though) which implies more cash outflow from you. Take a minute and apply this to every other area of your everyday life. You’ll see that more upward rounding up of numbers will occur and since most people are coin averse, it is not likely going to be an encouraging situation.
However, you’ll notice that an advantage seems to be on the side of the provider of service or products in the above scenario. They are going to be at the receiving end. On which side are you today? where would you rather be in order to take advantage of the change?
I’ll advise; if you have things to buy, now is the time. If you have money for investments, now is the time(I won’t zero in on any industry – thats a discussion for another day), if you will rather start your own biz, why not now? And if you need a loan, why not take it now?
I am not an economist or finance person but the above is my submission.
I think it will be a great idea. And i see people focusing more on consolidating their investments in naira now and this will help to increase the supply of the dollar in the mkt and eventually help to reduce its price. My worry is that we still import too many things and i really do not know how Mr Soludo will tackle that problem
this re-denomination sucks…plain and simple, i dont need an astro-physicist to tell me this… one wanders, who are the pple who come up with all these crappy ideas which in the long term impoverish the masses ?, are they nigerian, do they understnd nigeria, and do they really care what really happens to the nigerian on the street…?
well gents…i am off to ikorodu to go and buy land with my money bwana !, no banker punk is going to enjoy re-denominating my own money !
I tell you the word millioniare or billionaire is over rated if you are able to buy the same thing you bought for 1m for N10,000 and some one who could spent only N20 now spends 0.20K, then nothing has changed. As regards poeple being averse to coins, you better start getting used to it because coins will be the order of the day. those of us who begin to accept that fact will be richer for it.
It is a Nigerian thing for us to think that policies will not work and then we get hit in the face when it does. Take transition to the new notes everybody kept shouting that they will have to extend but they didnt.
All this negative reactions is only strengthing goverments resolve to make it work. So please go with the flow to make it easier on you. i can assure you that by december the price of the dollar would have crashed anybody planing to travel abroad the begining of next year will be an appropraite time to plan towards.
Long live Nigeria!!!!!
The redenonomination is a good thing. Soludo should be commended for his initiative, at least he’d be taking a step to give Naira more value…better than before.
But my questions are
1. What’s is the fate of the poor, who have just about N20, 000 as savings?
2. When the redonomination takes place, will marketers not take the advantage to horde goods?
3. What is the fate of shareholders?
4. Will fixed properties (such as land, et al) reduce in price?
5. Does it mean schools will be less expensive?
6.How will the rich be able to adjust to the change? (Someone who’s been used to talking millions like Kehinde and suddenly wakes up to start talking thousands); hope it won’t lead to something else like frustration, robbery, fraud, etc?
The redenomination would bring about the convergence of the Social value of Naira and the Economic value of the Naira. It will bring us to the reality of actual worth. Just think of it – a hundred naira actually meets the need of one naira. However, a hundred sounds better or richer if you like.
I believe this “decimalisation” of the naira is good for our polity. It would make us sit up and realise that inspite of the progress we have made in the financial sector, we are only just beginning.
The Naira re-domination is a good Idea but it sucks. How on earth would a man who we all repect for what he did to the Banking sector came up with an idea so good but at the wrong time.
I’m not an Economist but then the little I’ve read about it has been helpful. I know fully well that Money does not drive the Economy but the Economy drives the Money. So, many sector is not functional but the Bank is very functional which does not say other sector will be because they’re.
The fact is, thing we import will be more expensive and other sector will still remain dead because they are not ready. Since merger how many sector as changed… I don’t know, I think NON because PHCN is still down, Communication is not good enough and even sold refineries are yet to start working that if they ever work
But if the sector that drive the Economy of any country start working apart from the Naira then CBN will not need to re-dominate because the exchange rate will drop without forcing it…
Not all Professors are that good so and we need to work on our education sector because everybody seem to share the same idea. We all sleep and wake up in the same direction. So how do we know when we’re in trouble or danger.
Someone should tell CBN not to use thier Autonomy to blackmail us o.
What will be the fate of Prof.Soludo now? will he stay as the governor and swallow his pride and apologize to the president or Nigerians for breaching protocol or will he trow in the towel? with the cancellation or suspension of the redenomination of the Naira.
Are some people trying to play politrick with the Naira or do they have genuine love for the Dollar? Where ever the pendulum swings let’s work on the fundamentals that will make our economy strong and competitive in the world.
I am a student and my research work topic is ”EFFECT OF RE-DENOMINATION ON NAIRA” Its a bit con fusion i wish i can lay my hand good literature on this.
How come i’ve never read this piece ever since..This is all history now as there’s no redenomination again… I think Zimbabwe needs to remove up to 10 digits…lol
God help our Leaders and we,fellow Nigerians to be wise.
as interesting as this post may sound it calls for a rethink and re appropriation of prospects. the average worker must learn to strategize carefully to increase his market value. change has come to stay with us and we must embrace it fully.
thits very important for one to understand that there must be the rainny days in a man’s life so he must learnt to plan for it when it comes. i am not saying someone should wait for doom but what i am saying is that a person should understant that there are two outcomes in life and whichever you meet at any point in life shouldnt make you to retire.