he realistic value of the naira and its equivalent purchasing power are the foremost nostalgia of the Nigeria before September 1986. In as much as re-denomination of the naira may be desirable, the measure to address the gross under valuation, auction, unrealistic exchange rate and non-conversion in the foreign exchanges are pre-eminent.

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In many countries today, financial measure transcends political interests. It should be understood that there is a world of difference between financial policy and economic policy of a nation. While financial policy dwells generally on the fund in hand, the use of fund and anticipated fund, economic policy is generally about the measure to create wealth.

Economic policy can be heavily tainted by politics for the interest and re-election of the political party of the Government of the day. Financial policy is taken first and foremost for the interest of the country. It has no political colouring. Central in these is the state of the currency of the nation. This is the reason why many countries of the world today give the initiative and prerogative on financial measure that is termed Monetary Autonomy to their Central Banks.

In the effort to re-denominate and revalue the naira, ignorance, conservatism, suitable policy reversal, the unnecessary maintaining of status quo that have hindered the progress of the country for so long should not be brought into play. Re-denomination and revaluation do not in any form alter the make up of the present kobo and naira. As there was no specific law that was required to auction, devalue the naira, altered its exchange rate and made it inconvertible over the years, there is no specific law that is required to re-denominate, revalue and makes it convertible in the foreign exchanges as before.

The initiative to re-denominate and revalue the naira is the right and prerogative of the Central Bank of Nigeria. But the bulk stops at the desk of the Federal Government of the day. However, monetary or financial policy implementation is about what is good for the country and not for a particular political party, section of the country or a class of people in society.

Where the associated cost of currency can be positively absorb, denomination may be immaterial. The Japanese and their yen are notable example. But the Japanese yen is a convertible currency in the foreign exchanges. It has a reasonable purchasing power both at home and abroad. For many years, the Minimum Lending Rate (MLR) in Japan has consistently be between zero and two per cent. Japan is among the largest five economies in the world.

With their yen salary, the same category of workers in Japan has the same, near or above equilibrium purchasing power as the same category of workers in the United State of America with their dollar salary. The only difference is the denomination. That is, the large quantity of yen you carry at a time versus the small quantity of dollar of the same amount. Both maintain the essential qualities of a good currency such as the right value, purchasing power and conversion in the foreign exchanges. Here denomination differential is irrelevant.

We must agree that the naira is grossly under valued. It has very poor purchasing power. It is not convertible in the foreign exchanges. The Minimum Lending Rate (MLR) in Nigeria has over the years been consistently and comparably very high. Inflation has also been consistently very high. Looking at these shortcomings of the naira in every angle, the proposed re-denomination should be carried out simultaneously with revaluation and conversion in the foreign exchanges.

The proposed measure to re-denominate the naira is by the move of two zeros to the left or the shift of the decimal point two places to the left. This means, for example, the current N1,000 shall become N10. This pattern of adjustment shall follow in every present naira holding, prices and costs in the country. That the new money shall be introduced in 1, 2, 5, 10, and 20, kobo in coins and 50kobo, 1, 5, 10, and 20naira in notes. However, this form of the measure to re-denominate is nothing more than arithmetical and cost reduction conveniency. It has neither any value added nor improved purchasing power of the currency.

With this, nothing would change in relation to the current value of the naira in your pocket and its related purchasing power. What would change for you is that you will now be able to carry less quantity but more amount of naira in your pocket. The Central Bank at this stage is merely concerned about the cost of the present denomination of the naira. The two zeros shift would not only maintained the status quo but would entail additional cost to society, as revaluation and realistic exchange rate are not considered.

In the proposed re-denomination, although cost reduction is essential, the realistic value, purchasing power and conversion of the naira in the foreign exchanges are paramount. Whatever arguments that may have surrounded the re-denomination, what is not in dispute is that the naira has since 1986 been grossly under valued, nonetheless, its inconvertibility in the foreign exchanges. For Nigeria to come out from economic woods with her Government policies, the naira needs to have its realistic value and be convertible in the foreign exchanges. We should, therefore, take this opportunity to address all the self-made problems that are associated with the naira, which have lingered far too long.

The auction foreign exchange rate of N125 or the proposed denomination rate of N1.25 to the dollar, everyone knows, is not the realistic foreign exchange rate of the naira even if it were convertible. Today, what is the realistic foreign exchange value of the naira? The realistic value of a currency in the foreign exchanges can be determined by the internationally acceptable criteria. These are the nature of the economy, foreign reserve and trade of a nation. The criteria are well known and there is no country that can manipulate or subvert them for own advantage. However, a country can choose to set the exchange rate of her currency at any amount that neither over nor under value the currency.

On using these criteria, in relation to our present situation, the realistic foreign exchange value of the naira can be found between N1.50 and N2 to the USA dollar. In this piece, let us accept the average of N1.75 to the dollar as the realistic foreign exchange rate. As all along there is nothing wrong with the naira, this in effect means that over the years our successive Governments for their self-interests have traded away the currency in unnecessary auction and its non-conversion in the foreign exchanges.

To complete the process, we need to restore the value of the domesticated naira. That is the naira in circulation at home. The proposed re-denomination by the shift of two zeros to the left does nothing to remedy the unrealistic value and the poor purchasing power of the currency. To arrive at the realistic value of the naira that have been domesticated since 1986, we only need to re-denominate by the shift of one zero to the left. This would bring about the realistic value. It would mean that the present N1,000 shall hence become N100. Therefore, every present naira holding, price and cost shall be adjusted accordingly. This would to a greater extent bring the domesticated naira and the realistic exchange rate of N1.75 to the USA dollar to equivalent value and near to pre-1986 purchasing power.

In view of these, for the coins to be economical to mint and handled, they should be mint in denomination of 1, 2, 5, 10, 20, 50kobo and N1 respectively. For the notes to be economical to print and handled they should be printed in denomination of 5, 10, 20 and 50Naria respectively. In this respect, we could, in the interim, be able to retain some of the current notes in these denominations that are in crisp and enhance their qualities in replacement.

What do the re-denomination of the shift of one zero to the left and the realistic exchange rate of N1.75 to the dollar means to you? The domesticated naira is restored to its realistic value and purchasing power. The inflationary revenue from the auction of the currency that were never backed up by productivity will be replaced by non-inflationary revenue that are backed up by productivity, earning from foreign exchange and remittance transactions. This would give the scope for Minimum Lending Rate (MLR) to be set below five per cent.

With the realistic foreign exchange rate, imported goods will be cheaper. Initially, stock of goods with the cost or price before the re-denomination will have the same cost or price effect in relation to the new denomination. When these stock of goods are sold off and the full new foreign exchange regime commenced, the new stock of goods will have a considerable cost or price reduction. This would means cheaper and affordable prices at home for imported goods.

The price at home, nevertheless, will reflect the proportion of cost in relation to domestic and import costs. Initially, cost or price will be in three groups.

• One, there will be establishments that would have only domestic cost or price with only one zero shift to the left and no any foreign exchange or import cost. On commencement, these establishments would find it difficult to compete and would make less business.

• Two, there will be establishments that would have only foreign exchange or import cost or price and no domestic one zero shift to the left cost or price. On commencement, these establishments would be able to sell at very low prices, will be highly competitive and would make good business.

• Three, there will be establishments that would have proportionate domestic and foreign exchange or import cost or price. They would price and sell at equilibrium or market prices from on set, and would continue with steady business.

As time goes on, the mixed of these two costs will equilibrate and result in considerable lower prices. As cheaper imports of the realistic exchange rate start to fitter into the country and dilute domestic costs of one zero shift to the left, there will generally be low prices. The people will have more naira in their pocket either to spend or save in the banks.

In our one zero re-denomination and the realistic exchange rate, anyone who is currently earning N1,000,000 p.a. will now earn N100,000 p.a. The present stock of an imported brand new car that is sold for N2,500,000 ($20,000) (at N125 to$1), on re-denomination will now sell for N250,000. When new stock of the same car is imported at the same selling price of $20,000, on the assumption there is no further domestic cost, it will now sell at home for N35,000 (at N1.75 to $1) All the imported goods that are without further domestic or significant domestic cost will follow the same pattern of very low prices.

However, where in the above example there are significant mixed domestic cost of one zero shift to the left and the new foreign exchange cost, the price will be proportionate to the respective costs. Whichever direction, the price will be considerably lower than N250,000 and higher than N35,000. Here, with adjustment for domestic cost of one zero shift to the left differential, fairness and less greed, we may have a price that is not more than N80,000 for this type of car. As the car market depends heavily on importation, this alone could decongest the country of over aged cars that are common features. For realistic lower prices of the new regime to be sustainable, the Government shall engage in very intensive price policing.

We should re-denomination, revalue and make the naira a convertible currency in the foreign exchanges simultaneously. With our current financial position, moreover as a significant foreign debt free nation, we are in a very good position to restore the naira at its realistic value and as a convertible currency in the foreign exchanges. A convertible naira in the foreign exchanges with its realistic value has tremendous advantages for us. For example there would be confidence in our economy and currency notwithstanding the new financial trade and foreign capital the measures would attract into the country.

Moreover, a re-denominated, revalue and convertible naira in the foreign exchanges would neither stop nor change the business of those that are currently engaged in financial trading not least the bureau de changes or black marketers. Every business will still maintain at least its current margin or rate of profitability.

On conversion, however, the foreign exchange system we should adopt should preferably be a managed float. Based on the current economic and financial situation of the country, the realistic foreign exchange rate of the naira of N1.75 to the USA dollar as above should be adopted with reasonable parameter to float freely before the Central Bank may intervene. This is how the major economies of the world manage their currencies although they don't make noises about the method. We should remember that there is no country that would leave her currency at the foreign exchanges unattended for the market forces to devour.

The conversion of the naira in the foreign exchanges would necessitate the normal exchange control. Every major economy has exchange control. We have already established some of the procedure for this control. Over the years, we have the limited amount of foreign exchange we released daily to the auction market. This should be the benchmark of the demand and allowable periodical remittances out of the country only for the approved transactions. Moreover, the use of new technology would facilitate the process.

The poor value and purchasing power of the naira more than any other issue are the principal reasons for the continued and large number of brain drain in the country, where our talents emigrate in search for hard currency. The auction and inconvertible naira all along encouraged and facilitated the massive, unauthorised, capital flight we experience in the country.

A convertible naira in the foreign exchanges and the related exchange control would redirect all financial transactions through the normal banking system. The rejuvenated naira and its purchasing power would keep our brains at home to serve for the prosperity, posterity of the country and their own needs. Those that are abroad who are today merely comfortable but with limited scope for advancement would return home en masse.

As the naira is a critical factor in our national affairs, as we have the skills and resources to implement the revival policy with utmost efficiency, we hope the Federal Government would neither evade nor abdicate its responsibility to ensure a fit and proper naira in the country. Therefore, this golden opportunity that is with us now to re-denominate, revalue, restore the naira as a convertible currency in the foreign exchanges and to its pre-September 1986 eminence should be embraced.