Abstract
The study investigated the impact of naira redesign on Nigeria economic development. The objectives of the study was to find out To find out the impact of redesigning naira on Nigeria economic development, to find out the influence of redesigning on inflation rate in Nigeria and to find out the impact cost of redesigning naira on Nigeria economic development. The research design employed by the researcher is ex post-facto research which aims at determining or establishing or measuring the relationship between one variable and another or the impact of one variable on another. The slope of – 1.081 shows that the relationship between redesigning naira and inflation is inversed but statistical significance. This means that at every unit increase in redesigning naira, inflation will drop by 1.081 units. This finding is in line with what is pragmatically obtainable. The result also revealed that redesigning naira has negative and significant effect on economic development. The study recommended government for more circulation of the new notes to avoid more inflation in the country.
Chapter done
Introduction
1.1Background of the study
The naira will undergo its 16th redesign or revision since 1959 when the Central Bank of Nigeria (CBN) implements the change by January 31 of this year. Both the notes and the coins will be affected by the suggested adjustment. It is asserted that every five to eight years, central banks are allowed to redesign, create, and circulate new local legal currency in accordance with international best practice. The naira last had a redesign 20 years ago. (https://thenationonlineng.net)
None of the modifications, however, have generated as much discussion and interest as the anticipated redesign of the naira in 2023. Some naira denominations will sport new looks, CBN Governor Godwin Emefiele stated on October 26. The N200, N500, and N1,000 notes are these. Emefiele stated that the apex bank was concerned about the handling of the current series of banknotes and cash in circulation, especially those not connected to Nigeria’s banking system. (https://thenationonlineng.net)
A major source of concern to the CBN is the escalation in scale and sophistication unscrupulous people have abused the naira, from hoarding to counterfeiting the notes. Emefiele said members of the public were hoarding banknotes “with statistics showing that over 85 per cent of currency in circulation are outside the vaults of our commercial banks. To be more specific, as at the end of September 2022, available data at the CBN indicated that N2.73 trillion out of the N3.23 trillion currency in circulation was outside the vault of commercial banks across the country and supposedly held by members of the public (https://thenationonlineng.net)
What many Nigerians do not know is that the shabby looks of the various naira notes have resulted in the negative perception of the CBN, which in turn has increased risks to financial stability. The credibility of the naira and the ability of the CBN to effectively manage the currency were further put at risk by “increasing ease and risk of counterfeiting evidenced by several security reports.” According to Emefiele, “recent development in photographic technology and advancements in printing devices have made counterfeiting relatively easier. In recent years, the CBN has recorded significantly higher rates of counterfeiting, especially at the higher denominations of N500 and N1,000 banknotes (https://thenationonlineng.net)
Aside from the attacks on the naira, the CBN said it was compelled to redesign the naira because of the prevailing level of security situation in the country, especially cases of terrorism and kidnapping with perpetrators holding on to what Emefiele described as “large volume of money outside the banking system used as source of funds for ransom.”
By giving the naira a makeover within the timeframe stipulated by the CBN and given the existing laws around depositing of cash in banks, unscrupulous individuals keeping naira notes will be forced to deposit these notes in the banks or forfeit their ill-gotten wealth.(thenationonlineng.net)
The redesign of the Nigerian currency will greatly boost the nation’s cash flow and is a win in the war against counterfeit money. Recently, the Central Bank of Nigeria (CBN) issued a statement that it has concluded plans to redesign the Naira. The CBN Governor cited money hoarding, inflation, and counterfeiting as major reasons for its unusual decision. Also, the Naira is not as secured as it ought to be, as it is easier to counterfeit theN500 and N1000 denominations (punchng.com)
This policy has elicited serious debate amongst Economists, Lawyers, and other policy experts. Many of them hold the view that this policy change holds no significant economic benefits for the people, and is a distraction in the midst of serious economic crises buffeting. The Minister of Finance, appearing before the National Assembly, disowned the policy and slammed it as valueless in fiscal and monetary terms. But, the President has reaffirmed his approval of the policy and its benefits, as a tool to control inflation and fight corruption. The question is whether this policy is the right policy at this time, considering its costs and benefits (punchng.com)
The CBN regulates monetary policy. It is a quintessential regulatory agency. The benchmark for regulatory decisions like it is proposing with regard to the redesigning of the currency, is that the regulator can only act if the benefits of the proposed policy are more than the costs. A good cost-benefit analysis will include social and political costs and benefits, not just financial and commercial costs and benefits.
We should note that, money plays a crucial role in a country’s economy. It determines such things as the general price levels, aggregate national income, production and productivity, labour and capital employment levels, exchange rates. and the balance of payments (www.thisdaylive.com)
It is agreed that redesigning currencies could curb counterfeiting, especially where the existing design is very worn and its security can be easily bypassed. It is also a fact that, redesigning and printing of new currencies will cost billions of Naira of public funds. CBN should show through credible statistics, the percentage of counterfeit to each Naira, to warrant this design and printing of new Naira (www.thisdaylive.com). The CBN in its most recent report, 2020 Currency Report, states that a total of 67,265 pieces of counterfeit notes with a nominal value of N56.83 million was confiscated in 2020, indicating a 20.80% decrease in volume and 12.18% decrease in value, compared with 84,934 pieces valued at N64.71 million in 2019. The Global standard for number of counterfeits per million, is 100. The ratio of counterfeit notes to volume of banknotes in circulation was 13 pieces per million in 2020, compared to 20 pieces per million banknotes in 2019. This shows that the issue of currency counterfeit, is not as rampant as to warrant a currency redesign(thisdaylive.com)
The CBN claims that it is also redesigning the Naira, due to hoarding. This claim should be scrutinised because, currently, Naira-Dollar devaluation is so high CBN has to employ artificial valuation. Between 2021 and 2022, Naira has been devalued at least three times, and with the look of things, there is a likelihood of further devaluation, coupled with an increasing inflation rate, which means that the purchasing power of Naira is weakened. It makes little economic logic that a currency whose value is highly decreasing is being massively hoarded, as claimed by CBN. Those who have the capacity to hoard such huge amounts are the political class, and would also have had the capacity to convert it to Dollars. The conversion argument further makes the claim of the CBN Governor, that a redesign in currency will hamper ransom payment, not altogether convincing. Naira redesign in itself will not remedy rising inflation in this country, especially given the fact that this policy has no way to appreciate the value of Naira in the real sense. It could actually increase inflation, as those with loads of Naira unlawfully acquired could launder them through luxury purchases, or forex transactions that could inflate the (thisdaylive.com). based on this background the researcher wants to investigate the impact of naira redesign on Nigeria economic development
Statement of the problem
Because of increased eNaira production, the Central Bank of Nigeria feels that the redesign of the currency will further our efforts to establish a paperless society. This will strengthen the banking system’s control over outside currency, improving the effectiveness of monetary policy. Furthermore, Nigeria is heavily dependent on imports, which gradually weakens the naira’s position against other currencies. Additionally, maintaining price and exchange rate stability is a key duty of central banks. Nigeria, meanwhile, hasn’t done well in this area. Once more, it is necessary to assess critically the Central Bank of Nigeria’s initiative to reform its currency. Currency redesigning was seen as a means by which government attempt to reassert monetary sovereignty. In other words, if citizens lose confidence in the national currency, they may begin to use foreign currencies. The World Bank has warned the newly redesigned naira which went into circulation last week may have negative effect on economic activity especially poor Nigerians due to its timing and short transition period. Against this backdrop, the study attempts to examine the implication of this redesigning naira on economic development
Objective of the study
The aim of the study is to investigate the impact of naira redesign on Nigeria economic development. The specific objectives are;
- To find out the impact of redesigning naira on Nigeria economic development
- To find out the influence of redesigning on inflation rate in Nigeria.
- To find out the impact cost of redesigning naira on Nigeria economic development
Research Hypotheses
The following research hypotheses are formulated to guide the study;
H0: There is no significant impact of redesigning naira on Nigeria economic development
H1: There is significant impact of redesigning naira on Nigeria economic development
H0: There is no influence of redesigning on inflation rate in Nigeria.
H2: There is influence of redesigning on inflation rate in Nigeria
H0: There is no significant impact cost of redesigning naira on Nigeria economic development
H3: There is significant impact cost of redesigning naira on Nigeria economic development
Significance of the study
The findings of the study will be beneficial to students, lecturers, Government of Nigeria and policy makers. The findings will educate Nigerians on the negative and positive impact of redesigning naira notes. The findings will consider the impact of it on inflation in Nigeria. The study will also serve as a reference to other researchers that will embark on the related topic
Scope of the study
The scope of the study will covers impact of naira redesigning on Nigeria economic development. The information of the study will be gotten from central bank of Nigeria.
Definition of terms
Naira redesign: Currency redesign is generally aimed at achieving specific objectives such as improving security of banknotes, mitigating counterfeiting, preserving the collective national heritage, controlling currency in circulation and reducing the overall cost of currency management.
Economic development:
Economic Development is programs, policies or activities that seek to improve the economic well-being and quality of life for a community. What “economic development” means to you will depend on the community you live in. Each community has its own opportunities, challenges, and priorities.
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