Nigerian Justice Minister Michael Aondoakaa on Friday froze a plan announced last week by the central bank to re-denominate the naira currency, saying the bank had violated the law.
Aondoakaa said Central Bank Governor Chukwuma Soludo should have sought President Umaru Yar’Adua’s written approval before announcing the plan, which involves removing two zeros from price tags from August 1 next year.
“I, as the chief law officer of the federation, hereby stop all actions on the re-denomination of the naira,” Aondoakaa told reporters at the presidential villa just after a meeting with Yar’Adua.
Festus Odoko, the central bank’s chief spokesperson, said it would discuss the issue with the justice minister. “It is certainly not true that the bank did not consult with the president about the re-denomination,” Odoko said.
Aondoakaa cited section 19 of the Central Bank of Nigeria Act 2007, which states among other provisions: “Currency notes and coins issued by the bank shall be … in such denominations of the naira or fractions thereof as shall be approved by the president on the recommendation of the board.”
The justice minister gave no indication of whether Yar’Adua might still consider giving his approval.
Aondoakaa’s statement is a public humiliation for Soludo, who announced the naira re-denomination on August 14 at the central bank’s main auditorium to an audience of hundreds, including state governors, ministers, diplomats and journalists.
Soludo said at the time that the aims of the re-denomination included better to anchor inflationary expectations, strengthen public confidence in the naira, make for easier conversion to other currencies and promote usage of coins.
“The knee-jerk reaction of the market to this news is going to be a weaker naira,” said Razia Khan, regional head of research for Africa at Standard Chartered Bank in London.
“Offshore investors in particular will have been anticipating aggressive appreciation on the basis of plans for re-denomination,” she said, adding that in the long-term she still expected the naira to appreciate.
The naira depreciated on Friday to 126,41 to the dollar from 126,38 on Thursday, dealers in Lagos said, but they added it was not in response to the announcement. “If the market reacts, it will be later and not immediate,” one of them said. — Reuters
Additional reporting by Estelle Shirbon in Abuja and Oludare Mayowa in Lagos