ECONOMIC IMPLICATIONS OF NAIRA REDESIGN AND CASHLESS POLICIES ON HOUSEHOLDS
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ECONOMIC IMPLICATIONS OF NAIRA REDESIGN AND CASHLESS POLICIES ON HOUSEHOLDS
Chapter one
INTRODUCTION
Background for the Study
The Nigerian economy has seen considerable modifications throughout the years, owing to numerous policies aimed at promoting economic stability and growth (Abubakar, 2016; Ovat, 2020).
The Central Bank of Nigeria (CBN) has recently implemented cashless policy and redesigned the Naira currency. These policy reforms were implemented as part of larger attempts to modernise Nigeria’s financial system, eliminate cash-related crimes, and create a more efficient and transparent economy (Morphy, 2023).
The redesign of the Naira currency represented a substantial shift in Nigeria’s monetary landscape (Abubakar, 2016). It included significant modifications to the physical design of currency notes and coins, as well as the addition of new security elements (Central Bank of Nigeria, 2022; Chukwu, 2020).
The purpose for this decision was to improve money security by making it more difficult for counterfeiters to create phoney notes (Central Bank of Nigeria, 2016; Iyatse, 2021). However, the transformation intended to improve the currency system’s overall efficiency by aligning it with global best practices (Nwanma, 2023).
Simultaneously, the CBN implemented a cashless policy, indicating a shift towards a more digital and less cash-dependent economy (Ovat, 2020).
This programme sought to reduce the number of physical currency transactions in the Nigerian economy by encouraging electronic payment systems and digital financial services (Central Bank of Nigeria, 2021a).
The CBN aimed to achieve numerous aims by boosting the use of electronic transactions, including greater financial inclusion, increased transparency, and a reduction in cash-related crimes (Nweze, 2022; Okoye, 2023).
However, the implementation of these policies elicited conflicting reactions from numerous stakeholders, including households, which are an important part of the Nigerian economy (Abubakar & Wuam, 2021; Ndujihe, 2023).
Some applauded the reforms, viewing them as a step towards a more safe and efficient financial system (Central Bank of Nigeria, 2021b; Ochei, 2022).
The redesign of the Naira currency, with its better security measures, brought reassurance to many in a country where counterfeit cash was a problem (Iyatse, 2021).
On the other hand, the implementation of cashless policies created concerns and issues for households (Nweze, 2022). One of the primary worries was the impact on transaction costs for consumers and enterprises (Adegboyega, 2022).
With electronic transactions sometimes accompanied by fees, households faced higher expenses in their daily financial activities (Ochei, 2022).
This presents a special challenge for low-income households, who may not have simple access to digital financial services or cannot afford the accompanying fees (Ovat, 2020).
Furthermore, the transition to a cashless economy caused obstacles for financial inclusion (Ndujihe, 2023). While the strategy aimed to increase financial access, some households, particularly those in distant or disadvantaged areas, struggled to adopt digital financial services due to infrastructure restrictions (Adegboyega, 2022).
This sparked concerns about whether the regulations had unintentionally barred sectors of the public from the official financial system (Okoye, 2023).
Furthermore, the redesign of the Naira currency and the promotion of digital payments impacted Nigeria’s informal sector (Nwaoba, 2020). Cash has long been the backbone of the informal sector, with many companies and transactions reliant on actual currency (Nwanma, 2023).
The transition to a cashless economy presented hurdles for informal firms and workers who struggled to adapt to electronic payment methods (Morphy, 2023). This transition emphasised the need for tailored strategies to help the informal economy integrate into the formal financial system (Nwaoba 2020).
As a result, the Central Bank of Nigeria’s redesign of the Naira and introduction of cashless policies were key achievements in the attempt to modernise Nigeria’s financial system.
These policies sought to improve security, prevent cash-related crimes, and increase efficiency and transparency. However, its impact on households, which are the foundation of the Nigerian economy, was uneven.
While the redesigned currency increased security features, the shift to a cashless economy sparked worries about transaction costs, financial inclusion, and the issues confronting the informal economy.
To maximise the benefits of these policies and promote fair economic growth, policymakers must address these difficulties while taking into account the various needs and circumstances of Nigerian households.
Statement of the Problem
The problem statement is an important part of every research project because it identifies and clarifies the specific concerns or obstacles that the research will solve.
Several serious challenges must be addressed in relation to the economic ramifications of Naira redesign and paperless policy for Nigerian households.
One of the most pressing issues is the financial burden placed on households as a result of increasing transaction fees connected with electronic payments (Adegboyega, 2022).
As the Central Bank of Nigeria (CBN) promotes a cashless economy, households may be charged additional fees for electronic transactions, which can be especially difficult for low-income families (Ovat, 2020). This generates a financial challenge that must be examined.
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