The Economic Implications of Naira Redesign and Cashless Policies on Households
CHAPTER ONE
Objectives of the Study
The objectives of this study, which have already been achieved, were to:
- Assess the impact of the redesigned Naira currency on household financial behaviour.
- Analyze the economic implications of cashless policies on household transaction costs.
- Evaluate the effects of Naira redesign and cashless policies on financial inclusion and the informal economy among households.
CHAPTER TWO
LITERATURE REVIEW
Conceptual Review
Naira Redesign
The historical evolution of the Nigerian currency, known as the Naira, has been a subject of considerable interest and significance (Abubakar, 2016; Bello, 2007). Over the years, the Naira has undergone various transformations, but one of the most significant milestones in its history was the Naira redesign. This redesign marked a pivotal moment in the evolution of the currency, encompassing changes in its physical appearance, security features, and overall functionality (Abubakar, 2016; Chukwu, 2010).
The Naira’s historical journey dates back to its introduction in 1973, replacing the Pound Sterling as the official currency of Nigeria (Abubakar, 2016). Since then, it has undergone several denominational changes and redesigns, reflecting the evolving economic and political landscape of Nigeria (Bello, 2007). Understanding this historical context is crucial for grasping the motivations behind the recent Naira redesign.
The objectives and motivations behind the Naira redesign were multifaceted (Central Bank of Nigeria, 2022). One primary goal was to enhance the security features of the currency, making it more resistant to counterfeiting and fraud (Iyatse, 2021). The redesign aimed to align the Naira with global best practices in currency design and technology (Nwanma, 2023). Additionally, it sought to improve the overall efficiency of currency management and transactions in Nigeria (Central Bank of Nigeria, 2023).
The Naira redesign introduced key features and security enhancements that significantly bolstered the currency’s integrity (Central Bank of Nigeria, 2022). These included advanced anti-counterfeiting measures, such as the incorporation of security threads, holograms, and improved watermarking techniques (Iyatse, 2021). Additionally, new denominations and designs were introduced, contributing to better differentiation between currency values (Central Bank of Nigeria, 2022). These security enhancements aimed to instil confidence in the Naira, reduce counterfeiting concerns, and facilitate secure financial transactions (Iyatse, 2021).
Public perception and trust in the redesigned Naira were critical aspects of its implementation (Central Bank of Nigeria, 2023). The success of the redesign hinged on the Nigerian population’s confidence in the new currency (Iyatse, 2021). Positive public perception would facilitate its widespread adoption and use in day-to-day transactions. Therefore, assessing how the general public received and perceived the redesigned Naira was crucial in understanding its impact on the economy (Central Bank of Nigeria, 2023).
In summary, the Naira redesign represented a significant historical milestone in the evolution of the Nigerian currency. It was driven by objectives related to enhancing security, aligning with global currency standards, and improving overall efficiency. The redesign introduced key features and security enhancements aimed at instilling trust in the Naira. Public perception and trust were vital components of its success, influencing its adoption and impact on the Nigerian economy.
CHAPTER THREE
METHODOLOGY
Introduction
The methodology chapter is a critical component of research that outlines the framework and approach employed in conducting the study. In this chapter, the research design, population of the study, sampling technique, sources and methods of data collection, data analysis methods, validity and reliability assessment, and ethical considerations will be discussed.
Research Design
The research design is a fundamental aspect of any study, as it determines the approach taken to collect and analyze data. For this research, a quantitative survey research design was chosen. This design involves the collection of numerical data through structured questionnaires (Saunders, Lewis, & Thornhill, 2019). The choice of a quantitative survey design is justified by the need to gather specific data on the economic implications of the Naira redesign and cashless policies on households. This approach allows for the collection of structured and standardized data that can be statistically analyzed to draw meaningful conclusions.
Population of the Study
The target population for this study comprises households in Nigeria. Given the vastness and diversity of the Nigerian population, selecting a specific population size is essential to ensure a manageable and representative sample. Therefore, a target population of 1,200 respondents was chosen based on practical considerations and the need for a sufficient sample size to draw reliable conclusions (Saunders et al., 2019). The selection of this population size is justified by the study’s scope and resources available for data collection and analysis.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION
Data Presentation
Table 4.1 presents the distribution of the questionnaires administered for the study. Out of the total 120 questionnaires distributed, 104 were returned and completed, representing a response rate of 86.7%. Meanwhile, 16 questionnaires were not returned or remained incomplete, accounting for the remaining 13.3% of the distributed questionnaires. This response rate of 86.7% suggests a relatively high level of participation and engagement among the study’s target respondents. Such a high response rate enhances the validity and reliability of the collected data, as it implies that a substantial portion of the intended sample size actively contributed to the study. It indicates a keen interest and willingness among respondents to share their perspectives on the research questions, reflecting the relevance and importance of the study’s objectives to them.
The high response rate can be attributed to various factors, including effective communication and engagement strategies during the data collection process. Additionally, the research team’s commitment to ensuring respondents’ comfort and privacy may have played a role. These results justify the adequacy of the sample size (N = 120) for the study, as it provides a robust dataset for meaningful analysis and interpretation of the research objectives. The high response rate enhances the generalizability of findings to the broader population under investigation, strengthening the study’s overall validity and reliability. However, the 13.3% non-response rate should also be considered when interpreting the results, as it may introduce some degree of non-response bias that needs to be addressed in the data analysis and findings.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
Summary of Findings
The study aimed to investigate the impact of the redesign of the Naira currency and the implementation of cashless policies by the Central Bank of Nigeria (CBN) on households in Nigeria. The research encompassed a comprehensive examination of various aspects of these policy initiatives, ranging from their effects on financial behaviour to transaction costs, financial inclusion, and the informal economy. The findings provide valuable insights into how these policies have influenced the economic landscape and the financial well-being of ordinary Nigerians.
One of the key findings of the study is that the redesign of the Naira currency has significantly influenced the financial behaviour of households in Nigeria. A substantial majority of respondents agreed that the redesigned currency had influenced their financial behaviour, favouring electronic transactions over cash. This shift towards electronic transactions may have positive implications for financial transparency, as digital transactions leave a more comprehensive and traceable record compared to cash. Additionally, the redesigned Naira currency has instilled greater confidence in its usage among respondents, which could foster trust in the national currency and contribute to its stability.
Furthermore, the implementation of cashless policies in Nigeria has led to changes in transaction costs experienced by households. A significant number of respondents agreed that these policies had resulted in changes in transaction costs, with a preference for lower transaction costs associated with digital payments. Reduced transaction costs can stimulate economic activity and promote a more efficient financial system. However, it’s important to acknowledge that a segment of respondents expressed uncertainty or disagreement, indicating variations in the impact of cashless policies on transaction costs.
Conclusion
In conclusion, the findings from the hypotheses testing in this study provide valuable insights into the effects of currency redesign and cashless policies on households in Nigeria. These hypotheses were designed to assess specific aspects of the impact of these policies, and the results offer significant implications for both policymakers and the general population.
Firstly, the study found that the redesign of the Naira currency has indeed led to a notable shift in household financial behaviour, favouring electronic transactions over cash. This shift signifies a positive response from households towards embracing digital payment methods, which aligns with the broader objectives of enhancing financial transparency and efficiency. The increased confidence in using the redesigned Naira currency further strengthens the argument that currency redesign can positively influence financial behaviour.
Secondly, the results revealed that cashless policies have significantly reduced transaction costs experienced by households, with a consensus among respondents favouring lower transaction costs associated with digital payments. This outcome suggests that cashless policies have the potential to contribute to cost savings for households, ultimately fostering economic efficiency.
Lastly, the study’s findings indicate that cashless policies have positively impacted the security of financial transactions for households, with a substantial majority of respondents perceiving improved security. This result underscores the importance of digital financial services in enhancing the safety and integrity of financial transactions, thereby building trust in the financial system.
In summary, the empirical evidence from this study supports the notion that currency redesign and cashless policies in Nigeria have brought about positive changes in financial behaviour, transaction costs, and the security of financial transactions among households. These outcomes underscore the importance of continued efforts to promote and refine such policies to further advance financial inclusion, transparency, and economic efficiency in Nigeria. Policymakers should take heed of these findings to ensure that policies align with the evolving financial landscape and the needs of the Nigerian population.
Recommendations
The following recommendations were made in this study:
- To further encourage the shift towards electronic transactions and promote the redesigned Naira currency, policymakers should prioritize public awareness and education campaigns. These campaigns should focus on educating citizens about the benefits, security features, and proper use of digital financial services and the new currency. Collaborating with financial institutions and educational institutions can facilitate the dissemination of information and ensure that citizens are well-informed.
- In line to reduce transaction costs and increase financial inclusion, policymakers should work to improve the accessibility of digital financial services, particularly in rural and underserved areas. Initiatives such as expanding the network of digital payment infrastructure and promoting affordable mobile banking solutions can help bridge the urban-rural divide. Additionally, special attention should be given to marginalized groups, such as women and those in the informal economy, by tailoring financial products and services to their specific needs.
- Given the increased reliance on digital financial services, it is imperative to bolster cybersecurity measures to protect both individuals and the financial system from potential threats. Policymakers should collaborate with relevant institutions to enact and enforce stringent cybersecurity regulations. Additionally, continuous investment in cybersecurity infrastructure, regular audits, and public-private partnerships can help safeguard digital financial transactions.
- To ensure the continued effectiveness of cashless policies and currency redesign, policymakers should establish a robust monitoring and evaluation framework. This framework should include key performance indicators (KPIs) that allow policymakers to track the impact of these policies over time. Regular assessments and adjustments based on empirical data will enable policymakers to refine and adapt these policies to evolving economic conditions and technological advancements.
Contribution to Knowledge
Firstly, the study sheds light on the nuanced impact of the redesign of the Naira currency on household financial behaviour. While previous research often focused on the physical aspects of currency redesign, this study delves into its behavioural implications. The findings reveal that a significant portion of respondents agreed with the idea that the redesigned Naira currency influenced their financial behaviour, favouring electronic transactions over cash. This nuanced understanding contributes to the broader literature on currency redesign by highlighting its potential role in shaping consumer financial preferences.
Secondly, the research expands our understanding of the effects of cashless policies on transaction costs for households, particularly within different income groups. By employing a one-sample t-test, the study assesses whether cashless policies have led to a significant change in transaction costs. The findings indicate that respondents generally agree that cashless policies have impacted transaction costs. This insight contributes to the literature by offering empirical evidence of the policy’s effectiveness in reducing transaction costs, a critical aspect of financial inclusion and economic efficiency.
Thirdly, the study investigates the relationship between cashless policies, financial inclusion, and the informal economy, providing valuable insights into this complex interplay. The findings suggest that cashless policies may have contributed positively to financial inclusion among marginalized groups within the informal economy. This nuanced understanding underscores the potential of cashless policies to promote financial inclusion among underserved populations and offers a valuable contribution to the literature on financial inclusion and policy implications.
Additionally, the study advances methodological knowledge by employing a rigorous research design, including a large sample size of 1,200 respondents and the use of Cronbach’s alpha to assess questionnaire reliability. This methodological rigour enhances the credibility of the study’s findings and sets a precedent for future research in the field.
References
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