Business

Against the backdrop of sustained rumors about the introduction of the Naira re-denomination by the current government, economy analysts and corporate chieftains have painted a discomforting picture of what the policy may entrench on the economy if carried out.

In the past month, there have been many insinuations from several quarters that the Central Bank of Nigeria, CBN, is planning to onboard the measure as part of its overall monetary policy package from the new team at the apex bank.

Re-denomination is often used to describe a process in which a country adjusts its currency by changing the nominal value which changes the actual purchasing power of the currency.

Though the CBN had denied the rumor many sources hinted that the apex bank has already consulted officially for the policy roll out and may have slated January next year for commencement.

Some experts who spoke to Saturday Vanguard also believe that it is either the apex bank is flying a kite to sample public opinion or they are actually about to announce the policy because ‘‘there is not smoke without fire’’.

Giving insight into the policy measure some of them, however, told Vanguard that it can improve price stability by making transactions more manageable and reducing the likelihood of hyperinflation.

But they also said it’s essential to caution that Naira re-denomination alone won’t directly impact inflation rates positively.

Some also noted that the talks about redenomination may be part of the struggle by the current administration to gain the acceptance of the people, but also explained that the success or otherwise of re-denomination as an economy booster depends on its implementation and the complementary measures taken to address underlying economic issues, particularly in the areas of price stability, foreign investment, and engagement with key stakeholders.

There could be elements of truth with persistence of the rumor – Adonri

In his own comments, David Adonri, Financial Analyst and Executive Vice Chairman, at Highcap Securities Limited, said: “The re-denomination of the Naira was first muted by Charles Soludo’s Central Bank of Nigeria, CBN, leadership but CBN did not implement the plan. It has resurfaced again after Godwin Emefiele shelved it. When rumours persist for long, there could be elements of truth in them.

“However, since CBN has dispelled the rumor, we shall take their word for it but remain alert.

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“On the surface, such a policy will match the foreign exchange rate with new value of the re-denominated Naira.

“However, the reality may not be the case. It is not likely to enhance price stability because Nigeria’s inflation is scarcity derived amidst severe shortage of hard currencies. The huge supply gap will make the program unsustainable.

“Under present economic conditions, re-denomination will be an exercise in futility. It could further weaken the Naira and reduce the purchasing power of consumers as producers will lash on the opportunity to increase prices.”

It would amount to further macroeconomic instability — Olayinka

Reacting to the alleged plan by the CBN to redenominate the Naira, Tajudeen Olayinka, CEO, Wyoming Capital and Partners said: “Since CBN has continually denied the plan to embark on such a program, I also don’t find the rumor credible.

“However, should they eventually decide to embark on that journey now, I will advise they delay such a decision till a more auspicious time.

“And the reasons are simple: You cannot embark on currency redenomination when you are still grappling with the difficulty of stabilizing the macroeconomic environment. Doing so means that you will have to repeat the program multiple times in a short period, as the effort would amount to further macroeconomic instability in the short term.

“The essence of currency redenomination is to strengthen the new lower denominations as the medium of exchange, store of value and unit of account, by improving on pricing mechanism in the economy, where rounding up of asset prices could be possibly avoided to stabilize the general price level.

“Doing it at the wrong time, when the economy is in a prolonged state of disequilibrium could be counter-productive, as instability may soon return.

“With the current poor state of Nigeria’s foreign reserves and multiple emergency foreign borrowings coming up to create dollar liquidity, it could send a wrong signal to foreign investors that Nigeria is in an emergency situation, and that proper forecast of future exchange rate might be difficult.
“As mentioned earlier, currency redenomination is good for an economy that is currently enjoying a semblance of macroeconomic stability, so that its timely adoption could promote further stability. Doing it at a wrong time will not be helpful to effective exchange rate post-redenomination.

“The government should continue to run its ongoing adjustment program, with the appropriate policy framework, to a point of restoring external equilibrium, before embarking on currency redenomination, in order to have a stable effective exchange rate, post-redenomination.

“Good and careful planning of currency redenomination program, with timely implementation, could herald a new beginning for macroeconomic stability, especially, a new era of a very low or near absence of inflation, due to improved pricing mechanism in the economy.”

Re-denomination can aid price stability, but … — Adebija

For Gbenga Adebija, Chief Executive Officer, Business in Nigeria/ Former Director-General of the Nigeria-German Chamber of Commerce, the talks about redenomination may be part of the struggle by the current administration to gain the acceptance of the people.

He also explained that the success or otherwise of re-denomination as an economy booster depends on its implementation and the complementary measures taken to address underlying economic issues, particularly in the areas of price stability, foreign investment, and engagement with key stakeholders.

He stated: “The Tinubu administration is evidently working to establish trust and credibility with the public. Therefore, it is crucial to grant them the benefit of the doubt on this matter until proven otherwise’’.

However, he gave further insight on what should happen in the event of embarking on such policy.

He stated: “Re-denomination, in isolation, does not impact the exchange rate because it doesn’t alter the actual value of the currency relative to other currencies.

“Consequently, the exchange rate of the (Naira) re-denominated currency with others should remain relatively stable.

‘‘Re-denomination can, however, contribute to price stability by simplifying price calculations and accounting which are usually impacted by high inflation rates.

“Re-denomination, by itself, does not influence the true value of the currency or the economic fundamentals of the country. It primarily alters the way prices are expressed and how people interact with the currency.

“Often, it serves as a prelude to broader economic and monetary reforms, such as addressing inflation or introducing a new, more stable currency.

‘‘Therefore, the success of Naira re-denomination as an economy booster depends on its implementation and the complementary measures taken by the Government and Central Bank to address underlying economic issues, particularly in the areas of price stability, foreign investment, and engagement with key stakeholders.”

Enabling environment should come before re-denomination — Azeez

Also speaking to Saturday Vanguard on the Naira re-denomination kite, Olowu Babs Azeez, National Treasurer of the Association of Mobile Money and Banks Agents of Nigeria (AMMBAN), noted that since CBN has not said it would embark on the policy it is not necessary to appraise the policy.

However, Azeez who is also the Chief Executive Officer of Obat Global Investment Limited, stated: “If such should happen, the government should first do the needful by providing enabling environment for business to thrive which would encourage foreign investors, promote small scale businesses and sizeable numbers of entrepreneur.

“This has to do with good roads, adequate electricity supply, business-friendly government policy, tax reduction, avoid unnecessary levels on business establishment, reduce export duty and import duty on raw materials but increase import duty on products that can be manufactured or produced in Nigeria in other to promote local production.

“I believe with this, the economy has lot to benefit and it will strengthen our currency.”

Focus should be on comprehensive economic reforms – Oyelaja

Abiodun Oyelaja, Chief Executive Officer Motion Yield Nigeria Ltd, said Naira re-denomination does not affect the exchange rate.
He explained thus, “The term “redenomination” is often used to describe a process in which a country adjusts its currency by changing the nominal value of its currency without changing its real value or the actual purchasing power of the currency.

“This is different from devaluation or revaluation, which involves changing the real exchange rate of a currency.

“Redenomination alone doesn’t directly affect the exchange rate. It’s mostly a psychological change, as the real value of the currency remains the same.

“Exchange rates are determined by various economic factors, including supply and demand, interest rates, and the overall health of the economy. It can however improve price stability by making transactions more manageable and reducing the likelihood of hyperinflation.

“However, it’s essential to caution that redenomination

The 36 states and the Federal Capital Territory generated N1.925 trillion as Internally Generated Revenue in 2022.

The National Bureau of Statistics disclosed this in its Internally Generated Revenue State Level report on Monday.

The states generated the revenue from Pay As You Earn tax, PAYE, Direct Assessment, Road Taxes, Stamp duties, Capital gain tax, Withholding taxes, other taxes and Local Government Areas revenue.

The figure represented 1.57 per cent higher than the N1.895 trillion recorded in 2021.

The leading states in total IGR during the year were Lagos, Rivers, and the FCT, with N651 billion, N172 billion, and N124 billion, respectively.

Conversely, the lowest three performing states during the year were Kebbi, Taraba and Yobe, with N9,146 billion, N10,238 billion and N10,456 billion, respectively.

The Standards Organisation of Nigeria (SON), yesterday, destroyed fake and substandard products worth several billions of naira in Lagos.

Products destroyed are engine oil, electrical cables and substandard tyres.

However, speaking during the destruction of the products seized by the organisation, the director general of SON, Mallam Farouk Salim, disclosed that the organisation was reviewing its Act to ensure importers of life threatening materials are jailed and not fined.

According to Salim, peddlers of these items are economic saboteurs and their activities sabotage our industry, people and cause loss for individuals who are innocently buying these products.

“This is one of the reasons why in the last National Assembly, we went to them to review our act to make sure that importers of life threatening materials are jailed not just fined. Thankfully they passed the law but unfortunately when the government was settling down, they did not get the opportunity for the president to sign the law.”

“So it is back in the national assembly for concurrence and hopefully very soon it will be with the president and I am sure the president will sign that amendment and those individuals selling threatening items will be jailed immediately they are caught,” he said.

The SON boss noted that some of the products to be destroyed today had gotten a court order to that effect.

On the seized tyres, he said that some of them are new tyres but unfortunately when the importer brought them in, other tyres were stuffed inside them.

“Due to this, these tyres lose their integrity and they become dangerous to society. The ones looking new are used tyres, they are pressed and polished to look new.

“The fakers of the motor oil lubricants intercepted in Calabar, use popular products so our Nigerian lubricant manufacturers that are successful have to deal with individuals trying to copy their product.

“Nobody copies a product that is not successful, the only problem is the copying is a bad one. The product you are seeing behind does not belong to that popular company, it was being copied and they have been taken to court, convicted and the court gave us the permission to confiscate the product and destroy them,” he said.

Salim pointed out that the Nigerian cable industry is successful and good and they key into associations to help identify these fake ones.

He noted that SON sometimes used their intelligence to fish these people out because their activities were affecting the economy of the country. Due to the policy on local content, we need to make sure that our indigenous companies are protected.

“These cables are supposed to be copper but they are either iron or copper coated, when used in a building, it gets hot and this leads to fire,” he said.

On the value of these products, the SON director general said that it ran into billions of naira, adding that they would keep seizing the products to force the perpetrators to stop.

“To your eyes these products don’t look nice but an unscrupulous person can take these, clean it up and send it to the market and make billions of naira from it.

“As regards this environment, the seized items are safe here as the place is twenty-four hours monitored by police, civil defence,” he said.

Nigeria’s external reserves fell by $841.75m between July and September, figures obtained from the Central Bank of Nigeria revealed.

The CBN revealed in its report on the movement of external reserves that the reserves, which stood at $34.07bn as of July 7, 2023, fell to $33.23bn as of October 5, 2023.

External reserves fell by $2.85bn in the first half of 2023 due to external debt finance among other challenges, figures obtained from the CBN showed.

The CBN had earlier revealed that the reserves which commenced January 3, 2023, at $37.07bn fell to $34.22bn as of the end of June 26, 2023.

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According to personal statements released by the CBN by Monetary Policy Committee members, as of July, accretion to external reserves remained weak while foreign exchange demand pressures persisted.

Former acting Governor, CBN, Folashodun Shonubi, had stated that, “Eventual stability of the foreign exchange market over the medium-term, will further help to achieve price stability.

“Besides, the recent removal of subsidy could have a favourable effect on price stability as increased crude oil receipts by the government will bolster reserves, engender exchange rate stability, and help to moderate inflation.”

The Senate has confirmed the nomination of Dr Olayemi Cardoso as governor of the Central Bank of Nigeria (CBN).

Cardoso’s confirmation was announced after his screening by the Senate on Tuesday, September 27.

Cardoso was screened alongside four nominees for the positions of CBN Deputy Governors, to steer affairs of the apex bank in the next five years.

The deputy governors include: Mrs. Emem Nnana Usoro, Mr. Muhammad Sani Abdullahi Dattijo, Mr. Philip Ikeazor, and Dr. Bala M. Bello.

It would be recall that last week, Cardoso resumed as the CBN governor in an acting capacity pending his screening and expected confirmation by the Senate.

Dangote Group has denied claims making the round of reducing the price of Cement to N2,700 per 50-kilogramme bag from N5,500.

Anthony Chiejine, Spokesperson for Dangote Group, disclosed this on Monday.

Chiejine described the claim as fake news.

“It is fake news”, he said in a terse reply.

His reaction comes amid speculation that the Dangote group crashed the cement price by 50 per cent with effect from October 1st, 2023.

Earlier, Bahir Ahmad, media aide to former president Muhammadu Buhari, had commented that the report was fake.

Ahmad made this known through his official X handle on Sunday.

“The Dangote Group has denied the trending reports that it has reduced the price of cement from N5,500 to N2,700 effective October 1st”, he wrote.

The price of a 50kg bag of cement is sold between N4,600 to N6,000 in Lagos, Ogun, Ondo and Abuja.

However, barely two weeks ago, BUA Cement had hinted at plans to reduce the price of a 50kg bag of cement to between N3,000 and N3,500.

BUA chairman, Abdul Samad Rabiu disclosed this after meeting with President Bola Ahmed Tinubu.

The Central Bank of Nigeria (CBN) has postponed the 293rd meeting of the Monetary Policy Committee (MPC).

No reason was given by the apex bank which made the announcement in a release by the CBN spokesman, Abdulmumin Isa.

Isa said a new date will be communicated.

The MPC, which was scheduled for Monday and Tuesday next week, would have afforded the committee to opportunity to review the hawkwish interest rate position of the CBN amidst growing inflation concern.

Analyst expect the meeting to also serve as a validation session as President Bola Tinubu has named new governor and deputy governors for the bank, awaiting confirmation by the Senate.

It is unclear if the leadership change at the bank is the cause of the postponement.

Last week Tinubu named Yemi Cardoso as the new CBN governor and Sani Ahmad Dattijo, Mrs. Emem Nnana Usoro, Mr. Philip Ikeazor, and Dr. Bala M. Bello as deputy governors.

President Bola Ahmed Tinubu, on the sideline of the G-20 summit in India, met with German Chancellor Olaf Scholz to boost Nigeria’s car manufacturing sector.

Ajuri Ngelale, Special Adviser on Media and Publicity to the President, disclosed this in a statement on Sunday.

Tinubu noted that expanding Nigeria’s economic partnership is vital to his administration.

He called on the German government to explore new incentives for foreign investments in Nigeria.

“It is not, for us, only a matter of designing the financial architecture for an expanded economic partnership. It is also about the practicality of aligning the perspectives of your large-scale manufacturers, such as Volkswagen and others, with the reality of the new incentives my government is putting in place for them to come and prosper across multiple value chains and sectors inside our country”.

German Chancellor Olaf Scholz acknowledged the mutually beneficial nature of an escalation in the scale of economic ties with Nigeria.

“Thank you for this important discussion, Mr. President. I appreciate this opportunity to advance our economic relations. Your market is unique, and our companies have a history in Nigeria. We acknowledge the business-friendly reforms you have put in place. I am happy to inform you of my desire to visit you in Nigeria in October, which will allow us to carry forward these initiatives,” the German leader stated.