The Nigerian central bank said on Tuesday it will drop two zeros from Nits currency, the naira, to make money cheaper to produce and easier to handle.
The reforms, which aim at working towards full convertibility and decreasing reliance on the United States dollar, will take effect August 1 2008, a statement from the bank said.
”All naira assets, prices and contracts will be re-denominated by dropping two zeros or two decimal points to the left with effect from this date,” the bank said.
”This will entail a total currency exchange and phasing out of the existing denominations from August 1 2008,” the statement continued.
”At the current exchange rate, this policy would mean that the Naira/US dollar exchange rate would be around N1,25 to US1,” Central bank Governor Chukuma Soludo said in the statement, adding that the reform would help make the naira the currency of reference in Africa.
One dollar currently buys about 128 naira.
Cheques and credit cards are seldom used in Nigeria. Consequently transactions involving large sums are often carried out in US dollars.
An apparent shortage of small denomination notes also means that bills, notably in shops, are often rounded up or down to the nearest 50 or 100 naira.
Another component of the currency restructuring will be the introduction of low-denomination coins.
The central bank said the re-denomination and new currency structure, in conjunction with other reforms, are destined to ”better anchor inflation expectations, make for easier conversion to other currencies [and] reverse the tendency for currency substitution”. — Sapa-AFP