Soludo, Naira Revaluation and the Implications for you.

Proshare

August 16, 2007/Concerned Nigerian

 

 

I am worried about the naira revaluation. I believe that there other steps that should be taken prior to the revaluation. First, I do not believe that the CBN presently has firm control over the credit system in Nigeria.

 

This same policy has been tried in other countries and they failed.

 

Brazil has done it more than any country in the world and the results have been total failure.  However, can you peg naira to dollars, and what manufacturing base will  support the pegged value. Nigeria is not a manufacturing based society, since most products that are used in Nigeria are imported. We are constantly buying the raw materials we need from abroad to support our manufacturing base.  The primary item we sell to foreign countries is crude oil, and if the price of crude falls and our foreign reserve falls, then the value of our currency to the dollar will definitely fall.

 

We must be careful about this revaluation process. For example, an individual that has N1 million naira today, will now have N10,000 after the revaluation. A person whose house is worth N100 million today, will be worth N1 million after the revaluation.  Will Nigerians accept this reality. Will a market woman who bought her fish inventory for N100 a week before the revaluation agree to sell it to you at N1 after revaluation.

 

 

Finally, after the revaluation, if the naira depreciates due to bad policies (i.e., higher interest rates, inflation, etc), the people whose naira were previously revalued will lose, but the property owners will just raise the values of their properties accordingly to reflect inflationary pressures.

 

 

My fellow investors, we have to be very careful about this policy. Mr. Soludo has done very well for the economy, but this current plan for the naira will be his toughest challenge yet.

 

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