How Buhari could make 1 Nigerian naira equal to 1 US dollar
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Posted by Felix Okoli on Wednesday December 16, 2015 at 15:5:46:
One of the promises the media reported that the current Nigerian President, Muhammadu Buhari made during his campaing rally in 2015 was a promise to make the Nigerian Naira to become equal to the US dollar. What that basically means is that we would be able to exchange 1 Naira for 1 US dollar. Is this really possible? Well, it's one of the promises he was said to have made along with a lot of other fabulous promises that helped bring the All Progressive Congress(APC) to power.It's a bit tasking to brainstorm on how this promise could be achieved and well as how it would affect the majority of Nigerians who voted him and his party to power. Would Nigerians prefer a stronger Naira? Would a stronger Naira be good for the economy? Who really stands to gain if the exchange rate becomes equal to the US dollar?Well, I've been thinking about this issue and found out that it's actually possible but they could be some consequences. Already, in the news, foreign investors have been making their opinion known the the Ministry of Finance on the need to devalue to Naira so as to attract more foreign investment and they are already pulling out because of the cosmetic exchange rate which is basically operating on a fixed mode. Investors want a floating exchange rate system which is dictated by the forces of demand and supply rather than on government intervention and it's something the US also claims China is doing.Yes, it's actually possible to make one Nigerian Naira equal to one US dollar but this has never been the case since Nigeria's independence as the local currency has kept on falling against foreign ones because it relies more on imports than exports. When a nation runs a country by being dependent on oil as it's major export without encouraging manufacturing, it tends to rely more on imports and it's currency suffers.One way I know that Buhari can achieve this feat is by using the method called Naira redenomination suggested by former CBN governor Charles Soludo but was rejected by the government of the day as well as the National Assembly. Soludo's method basically involved removing some digits from the extreme left of the exchange rate such that if US dollar was originally N180, removing 2 digits from it would make it now N1.80 rather than the N180 it was originally at. It's an easy method and the CBN can do it If the law allows them. By the time it has been redenominated, it would really be closer to N1 and they can take more fiscal and monetary steps to make the Naira stronger and hence equal to the US dollar.A second way through which the Buhari administration can equate one Naira to one US dollar is by simply fixing the rate in advance. The government can make a policy to increase the value of the Naira immediately or at a future time and it becomes official just like that. Doing that could mean that the bulk of Nigeria's foreign reserve could also lose value and may not be sufficient in executing projects or paying salaries in Nigeria as it used to do.A third method would be to simply hands off controlling the Naira's exchange rate and allowing it to fall till it reaches N1000 for one US dollar and then use the Naira redenomination method to make it at par to the dollar after removing 3 zeros. This could mean more suffering for the masses as they would demand for higher salaries and it could also lead to sever austerity.Any of the above methods would probably require that new notes and coins are printed and that would also cost more money for the nation.If Buhari really did make a promise to make one Naira equal to one dollar, I'm not sure it is something he would be able to fulfil without incurring the wrath of Nigerians. What do you think?
Comments:
Re: How Buhari could make 1 Nigerian naira equal to 1 US dollar Posted by Debola on Monday December 21, 2015 at 10:48:56: I read a newspaper publication where Buhari himself even denied the report that he made the statement. He said he never promised to make 1 naira to equal 1 dollar and such news report can only come from the enemy camp. You can watch the speech he made at Owerri on Channels TV Youtube channel. Anyone who claims he made the promise should provide evidence. I don't think any Nigerian president can make the 2 currencies equal unless they want to use black magic or something like Naira redenomination
Re: How Buhari could make 1 Nigerian naira equal to 1 US dollar Posted by lexis on Thursday January 7, 2016 at 5:36:6: i like your blog... you make sense, i personally would rather we had the strongest currency in the world...
One of the promises the media reported that the current Nigerian President, Muhammadu Buhari made during his campaing rally in 2015 was a promise to make the Nigerian Naira to become equal to the US dollar. What that basically means is that we would be able to exchange 1 Naira for 1 US dollar. Is this really possible? Well, it's one of the promises he was said to have made along with a lot of other fabulous promises that helped bring the All Progressive Congress(APC) to power.It's a bit tasking to brainstorm on how this promise could be achieved and well as how it would affect the majority of Nigerians who voted him and his party to power. Would Nigerians prefer a stronger Naira? Would a stronger Naira be good for the economy? Who really stands to gain if the exchange rate becomes equal to the US dollar?Well, I've been thinking about this issue and found out that it's actually possible but they could be some consequences. Already, in the news, foreign investors have been making their opinion known the the Ministry of Finance on the need to devalue to Naira so as to attract more foreign investment and they are already pulling out because of the cosmetic exchange rate which is basically operating on a fixed mode. Investors want a floating exchange rate system which is dictated by the forces of demand and supply rather than on government intervention and it's something the US also claims China is doing.Yes, it's actually possible to make one Nigerian Naira equal to one US dollar but this has never been the case since Nigeria's independence as the local currency has kept on falling against foreign ones because it relies more on imports than exports. When a nation runs a country by being dependent on oil as it's major export without encouraging manufacturing, it tends to rely more on imports and it's currency suffers.One way I know that Buhari can achieve this feat is by using the method called Naira redenomination suggested by former CBN governor Charles Soludo but was rejected by the government of the day as well as the National Assembly. Soludo's method basically involved removing some digits from the extreme left of the exchange rate such that if US dollar was originally N180, removing 2 digits from it would make it now N1.80 rather than the N180 it was originally at. It's an easy method and the CBN can do it If the law allows them. By the time it has been redenominated, it would really be closer to N1 and they can take more fiscal and monetary steps to make the Naira stronger and hence equal to the US dollar.A second way through which the Buhari administration can equate one Naira to one US dollar is by simply fixing the rate in advance. The government can make a policy to increase the value of the Naira immediately or at a future time and it becomes official just like that. Doing that could mean that the bulk of Nigeria's foreign reserve could also lose value and may not be sufficient in executing projects or paying salaries in Nigeria as it used to do.A third method would be to simply hands off controlling the Naira's exchange rate and allowing it to fall till it reaches N1000 for one US dollar and then use the Naira redenomination method to make it at par to the dollar after removing 3 zeros. This could mean more suffering for the masses as they would demand for higher salaries and it could also lead to sever austerity.Any of the above methods would probably require that new notes and coins are printed and that would also cost more money for the nation.If Buhari really did make a promise to make one Naira equal to one dollar, I'm not sure it is something he would be able to fulfil without incurring the wrath of Nigerians. What do you think?
Comments:
Re: How Buhari could make 1 Nigerian naira equal to 1 US dollar Posted by Debola on Monday December 21, 2015 at 10:48:56: I read a newspaper publication where Buhari himself even denied the report that he made the statement. He said he never promised to make 1 naira to equal 1 dollar and such news report can only come from the enemy camp. You can watch the speech he made at Owerri on Channels TV Youtube channel. Anyone who claims he made the promise should provide evidence. I don't think any Nigerian president can make the 2 currencies equal unless they want to use black magic or something like Naira redenomination
Re: How Buhari could make 1 Nigerian naira equal to 1 US dollar Posted by lexis on Thursday January 7, 2016 at 5:36:6: i like your blog... you make sense, i personally would rather we had the strongest currency in the world...