What is currency redenomination?.............................. Currency redenomination is the process where a new unit of money replaces the old unit with a certain ratio.
It is achieved by removing zeros from a currency or moving some decimal points to the left, with the aim of correcting perceived misalignment in the currency and pricing structure, and enhancing the credibility of the local currency.
How will the Naira be redenominated?........................... It is by dropping two zeros from the currency or moving two decimal places to the left. The name of the national currency will still be the Naira.
Read More Link On Right
However, during the transition period, the existing Naira will be referred to as the “Old Naira”, and the new one to be called the “New Naira”. After the transition period, the word “New” may be dropped. For example, the following equivalents will obtain as we re-denominate:
What are the Benefits of the Re-denomination?........................The medium and long-term benefits can only be appreciated when redenomination is seen in the context of the other three policy initiatives.
The specific benefits of re-denomination include:
•Making pricing more efficient. Given the level of prices and low purchasing power of the coins, prices generally adjust in discrete jumps of five or ten Naira, rather than in Kobo. Under the new regime, one kobo will have relative value. We can see the price of fuel go up from say, 70kobo to say, 71 or 72 kobo instead of the current jumps of N65 to N70 to N75, etc. Correcting this distortion in pricing structure can have enormous impact on the national economy, especially as we commit to low inflation.
•cultivating the habit of using coins and reinforcing the on-going currency reforms.
•Promoting a more efficient payments system e.g. making ATMs part of our payment culture and de-congesting banking halls. Instead of withdrawing N50,000 from an ATM machine, N500 of the ‘new Naira’ will command exactly the same value.
•As we aspire for an international financial status and to become Africa’s financial hub by 2020, re-denomination will make for easy conversion to other currencies. As a ‘Reference Currency’, it will be easy for citizens of West Africa and other countries to convert to their national currencies and other currencies
•Reducing the risks associated with carrying large physical cash as we eliminate large denominations with very little value
•Discouraging currency substitution and addressing the perception that the domestic currency is weak despite its stability.
•Reducing the cost of printing, distribution and processing of currency
•Discouraging the abuse of the Naira as each Naira note under the ‘new Naira’ will have relatively high value, and coins will dominate transactions at the lower end of the market.
[bluedog] done tells a little bit of how and why