IMPACT OF NAIRA REDESIGN ON NIGERIA ECONOMIC DEVELOPMENT
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
IMPACT OF NAIRA REDESIGN ON NIGERIA ECONOMIC DEVELOPMENT
Chapter completed
Introduction
1.1 Background of the Study
The naira will undergo its 16th redesign or revision since 1959 when the Central Bank of Nigeria (CBN) executes the adjustment on January 31 of this year. The suggested modification will effect both the notes and the coins.
It is said that every five to eight years, central banks are permitted to develop, produce, and circulate new local legal currency in conformity with worldwide best practices. The naira last had a redesign 20 years ago. (https://thenationonlineng.net)
None of the changes, however, have sparked as much debate and attention as the upcoming redesign of the naira in 2023. Some naira denominations will get new designs, CBN Governor Godwin Emefiele announced on October 26.
These are the N200, 500, and 1000 notes. Emefiele noted that the central bank was concerned about the management of the current series of banknotes and cash in circulation, particularly those that were not connected to Nigeria’s banking system. (https://thenationonlineng.net)
The CBN is particularly concerned about the scale and complexity with which unscrupulous persons have misused the naira, from hoarding to forging notes. Emefiele stated that members of the public were hoarding cash, citing statistics indicating that more than 85% of currency in circulation is outside the vaults of our commercial banks.
To be more exact, as of the end of September 2022, available data at the CBN indicated that N2.73 trillion of the N3.23 trillion cash in circulation was outside the vaults of commercial banks across the country and allegedly owned by members of the public (https://thenationonlineng.net).
Many Nigerians are unaware that the shabby appearance of the various naira notes has resulted in a bad opinion of the CBN, increasing financial stability risks.
The credibility of the naira and the CBN’s ability to successfully control the currency were further jeopardised by “increasing ease and risk of counterfeiting as evidenced by several security reports.”
According to Emefiele, “recent advances in photographic technology and printing devices have made counterfeiting relatively easy.” In recent years, the CBN has observed much increasing rates of counterfeiting, notably for the higher denominations of N500 and N1,000 banknotes (https://thenationonlineng.net).
Aside from the naira attacks, the CBN stated that it was compelled to redesign the naira due to the country’s current level of security, particularly cases of terrorism and kidnapping, with perpetrators holding on to what Emefiele described as “large volumes of money outside the banking system used as a source of funds for ransom.”
Unscrupulous persons who hoard naira notes will be obliged to deposit these notes in banks or forfeit their ill-gotten money if the naira is modernised within the timeframe specified by the CBN and given the present regulations governing cash deposits in banks.(thenationonlineng.net)
The redesign of the Nigerian currency will significantly increase the country’s cash flow and represent a victory in the fight against counterfeit money. The Central Bank of Nigeria (CBN) has announced that it has completed plans to redesign the naira.
The CBN Governor cited money hoarding, inflation, and counterfeiting as important reasons for his unexpected decision. Furthermore, the Naira is not as secure as it should be, as it is easier to counterfeit the N500 and N1000 denominations (punchng.com).
This idea has sparked intense debate among economists, lawyers, and other policy professionals. Many of them believe that this policy move provides no significant economic benefits to the people and is a distraction in the midst of severe economic challenges.
The Minister of Finance, speaking before the National Assembly, denounced the policy and condemned it as worthless in fiscal and monetary terms.
However, the President has reaffirmed his support for the strategy and its benefits as a weapon for reducing inflation and combating corruption. The question is whether this policy is the proper policy at the moment, considering its costs and advantages. (punchng.com)
The CBN oversees monetary policy. It is a typical regulatory agency. The baseline for regulatory choices, such as the proposed currency redesign, is that the regulator can only intervene if the benefits outweigh the costs.
A good cost-benefit analysis will take into account social and political costs and advantages, as well as financial and commercial costs.
We should mention that money is quite important in a country’s economy. It sets general price levels, aggregate national income, output and productivity, labour and capital employment levels, and exchange rates. And the balance of payments (www.thisdaylive.com)
It is agreed that redesigning banknotes could reduce counterfeiting, particularly where the old design is worn and security can be readily circumvented. It is also true that developing and printing new currency will cost billions of Naira in public funds.
CBN should provide verifiable figures on the percentage of counterfeit Nairas to justify the design and production of new Nairas (www.thisdaylive.com).
According to the CBN’s most recent report, the 2020 Currency Report, 67,265 pieces of counterfeit notes with a nominal value of N56.83 million were confiscated in 2020, representing a 20.80% decrease in volume and a 12.18% decrease in value, compared to 84,934 pieces valued at N64.71 million in 2019.
The global guideline for counterfeits per million is 100. In 2020, the ratio of counterfeit notes to the volume of banknotes in circulation was 13 pieces per million, down from 20 pieces per million in 2019. This demonstrates that the issue of currency counterfeiting is not so widespread as to necessitate a currency redesign.
Need help with a related project topic or New topic? Send Us Your Topic