The path of the Ghanaian Cedi and lessons for Nigeria’s Naira
Poor Ghana: it made 1 Cedi = 1 USD in 2007 hoping that abracadabra magical algebra makes sense in global economics/currency (it was about 1 USD = 10,000 Cedi before the redenomination). But it is not just Ghana. Some Nigerian politicians promised to make 1 Naira = 1 USD. Thankfully, that hopeless policy was abandoned. Yes, since the Tang dynasty invented paper money in 7th century China, some countries have seen the value of money on the number printed on the paper. But the best among nations, think beyond that.
In June 2007, a redenomination of the cedi by the Bank of Ghana, led to the initiation of the new Ghana cedi. The value of the cedi relative to the dollar before the redenomination was in the range of ¢9,300 to ¢10,000. It became ¢0.93 – ¢1 to 1USD after the redenomination.
In the African Union, many have postulated that once Africa has one currency that all our problems will disappear. But look at the CFA Franc area and how it is being rattled. That is also a strong indication that currency union will not save Africa until we begin to win on innovation and productivity. You have no national positioning under a supranational central banking ordinance in a currency union within a heterogeneous market system. Indeed, if Africa goes ahead on a single currency and does nothing on economic output, welfare losses will be huge.
I have made that point before the African Union Congress – and I remain hopeful that we do not adopt the EU/euro playbook without considering that the EU’s economy is very homogenous, and shocks are relatively more manageable.
Back to Ghana: 1USD = 11 Cedi today. Sure, that old magic achieved something, if not 1 USD will be about 100,000 Cedi today. So, the magic saved people time from writing long digits. More so, it has reduced greenhouse emissions since cheque books, bank forms, etc may not need to be longer. How do you write $10,000,000 if 1 USD would have been 100,000 Cedi. On that, you commend the genius in Ghana.
People, Nigeria needs to have a national emergency on its currency. Do not tell me that it would stabilize without explaining how. Ghana promised the same… and that illusion continues to scale.
The strength of Nigerian Naira comes from warehouses and factories, and not from the Central Bank of Nigeria (CBN) headquarters. Those warehouses and factories include the old (the traditional firms like Innoson Motors, Dangote Cement) and the modern ones (like Paystack, Tomato Jos). Until the CBN can use its monetary tools to elevate them, it cannot win the fight for Naira.
As this election season begins, if you want to strengthen the Naira, vote for visionaries who understand the multifaceted global economic system, with defined roles on where Nigeria can play.
Anyone who tells you that he will make N1 = $1, via fiat, is a liar by default; only the factories have the real powers to determine those. So, the question is really: who can help us create better factories, the old and the modern?
People, Naira needs help right now.
Roadmap to the future
I wrote a lead paper for the African Union Congress as a banker and banking/finance doctoral student, and I disputed many of the illusions on the required prior convergence of our currencies before we could intra-trade, agnostic of currencies. Years later, I dropped this challenge: “build a truly pan-African digital remittance/transfer banking product which is agnostic of location or currency in Africa.”
In other words, you do not need a single currency to achieve this since technology can hide all the “regulations” and still achieve the same outcome. As Mr. President noted, it is time. Even the US dollars will benefit from it because Africa will grow to buy more from it.
