Other than the psychological effect of spending fewer note, the recently announced redenomination of the Naira doesn't mean anything. The question we should be asking is how we got here in the first place. Pre 1985, the Naira to dollar exchange rate was 1:1. It wasn't a redenomination that depreciated the Naira to this level. Our inability to generate employment, our status as a net importer of goods and services, low level of technological advancement, underinvestment in infrastructure, low level of productivity and other economic failures got us here.
If we don't address the fundamentals, we will find ourselves going back to the N125:$1 regime pretty quickly. Redenomination can't help Zimbabwe on the path to economic recovery for example. Admittedly the exchange rate has been stable over the last two or three years, but this needs to be sustained by concerted macro-economic policies.
Honestly, I don't know if this tonic will get us where we are going. If we do all the right things, the exchange rate will appreciate by itself. Don't economic experts tell us that exchange rates are determined by market forces and not executive fiat?!
Posts
No comments:
Post a Comment