Social Economic and Political Impact of Naira Redesign on Nigerians
Chapter One
Research objectives
- To investigate the reasons for the Naira redesign in Nigeria in 2023
- To determine the impact of naira redesign in 2023 on businesses in the informal sector in rural areas
- To determine the best businesses in the informal sector in rural areas can prepare for such change
CHAPTER TWO
LITERATURE REVIEW
An overview of naira redesign in Nigeria in 2023
The Central Bank of Nigeria (CBN) announced on October 26, 2022 that it intended to redesign the three highest denominations of the Nigerian currency: the 200, 500, and 1000 (CBN, 2022 a). Nigerians responded in a variety of ways to this move since it caused an unprecedented cash constraint. While some residents thought the policy was unneeded, others thought it was just a rehash of the previous one and not a redesign (Nwanma, 2023).
The CBN defended this policy, however, by claiming that it would reduce security threats, such as money laundering, kidnapping, and terrorism in the nation, improve system health, track the flow of funds in the nation, and collect the enormous amount of cash that is currently estimated to be outside of the banking system, which is 2.73 trillion and accounts for about 85% of the total amount of cash in circulation (CBN, 2022). Additionally, this strategy aims to strengthen the banking system’s level of financial inclusion in order to expand credit availability and productive activity, implement a better cashless policy, and constrict the money supply to fight inflation (Vanguard, 2022).
According to Muhammad and Abdulmajeed (2022), the policy will stabilize the economy, lower inflation, stop money corruption, ensure a smooth transition to a cashless society, lessen the abuse of Naira notes, and increase the value of the Naira (Olujobi, 2022). While the apex bank claims that the new naira was explicitly intended to focus on eradicating illicit market monies from the system, however Pedro and Adesina-Uthman (2022) expressed the opposite opinion. They said that by disrupting business transactions, raising the cost of production, and promoting counterfeiting, the redesign of the Naira may have harmed the country’s economy.
They list these negative consequences in the following order:
- Disruption of Business Transactions: The redesign of the naira made it more difficult for retailers to collect payments and generated confusion, particularly among those who were not familiar with the new approach.
- Increase in Counterfeit Activity: Because most people might not be familiar with the new note, the likelihood of counterfeiting increases.
- Rising Production and Printing Costs: This increased the nation’s level of spending, which put the economy at risk and created inflation.
- Discomfort for travelers: Business transactions could be challenging because of potential uncertainty caused by currency exchange.
- Decline in Consumer Confidence: This causes consumers to have less faith in the nation’s economy, which lowers demand for goods and services. It resulted in decreased GDP as well as decreased economic activity.
CHAPTER THREE
RESEARCH METHODOLOGY
The study focused on the impact of Naira redesign on businesses that are unstructured in places that are not urbanized. These places are characterized by their agrarian economy, low population density, small choice of businesses, inadequate infrastructure and lots of natural resources. The study adopted a survey research design because relied on first-hand data that is, the use of questionnaire. The study identified Anam, Anyamelum, Otoocha, Nzam, Ogwuanaocha and Ogwu-ikpele as the rural areas in Anambra state. Thus, these places were written on a sheet of paper, put in a container and shuffled. Anam was selected using this method; a simple random sampling technique. Being a community in Anambra west LGA, Anam is made up of eight villages namely; Umueze, Umuoba, Mmiata, Iyiora, Umuikwu, Umudora, Oroma-Etiti, and Umuewelum.
City population (2023) estimated the population of the LGA as 238, 400 as at 2022. Thus, using a sample calculator of 80% confidence level, margin of error of 5, population proportion of 70 and a population size of 238, 400, a sample population of 138 was derived for this study 46 in each of the selected villages. The researcher adopted a snowballing sampling technique in selecting respondents for this study. This non-probability sampling technique ensured that all the respondents are businessmen/women in the informal sector. Respondents comprised of male and female inhabitants of the village, from various social background, religion and educational characteristic who are literate.
The research data were derived using non-participant observation and questionnaire. The research questionnaire comprised of close ended so as to guide respondents towards the research objective. Data derived from this study were presented in tables and analysed using descriptive statistics.
CHAPTER FOUR
Results
Table I: distribution of questionnaire
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
Conclusion
Naira redesign has been part of Nigeria’s history. But, the 2022/2023 Naira redesign seems to be the most memorable in the history of Nigeria basically because it ushered in an era where Naira was to purchase Naira. This was due to the inability to access physical cash even when there is money in one’s bank account.
Though, the Naira redesign came with a lot of prospects which was declared by the CBN, it failed to achieve any of these prospects. Rather, it disrupted the social and economic activities in the country. Obviously, the CBN as well as the federal government failed to envisage the challenges that will face the transition into a cashless economy and thus, did not put in place any measure to mitigate these challenges.
The basic challenge which has to do with the printing of sufficient new notes to serve the entire population and the availability of bank network to enable cash transfer was not given the much needed attention. This made it almost impossible to effectively carryout social and economic activities.
Despite the CBN’s 2022 Naira redesign program’s alleged advantages, it has had disastrous impacts on Nigerians, especially small and medium-sized company owners and rural residents who found it extremely difficult to conduct transactions due to the cash crunch. Hierarchies of unscrupulous behavior that became fatally intertwined with the operation of the scheme exacerbated the cash shortage by packing and giving the majority of the new notes to a select group of privileged Nigerians at the expense of others. The lack of adequate currency circulation also highlighted the country’s e-banking infrastructure’s flaws. All of these indicate not only the shortcomings of the Naira redesign program’s hazy implementation, but also the necessity of redoubling efforts to combat corruption in Nigeria’s banking sector, as well as the need to improve the nation’s e-banking channels and other infrastructures required for the successful operation of a cashless economy. Finally, the program and its accompanying push for a cashless society should be seen for what they are: measures taken by the world’s largest economies to further integrate Nigeria’s economy into the global economy in order to facilitate the exploitation of that nation’s economy by international imperial financial organizations like the International Monetary Fund (IMF) and the World Bank.
Therefore, while the redesign of Naira may have been a step in the right direction, the numerous challenges that followed it altered the value of this change. Thus, before the enforcement of the ban on old Naira note in subsequent time, there is need to provide all the logistics needed for the printing and circulation of the new currency and also, aiding transfers.
Recommendation
The government should strictly implement the Naira redesign decision through the Nigerian central bank on a regular basis in order to have a healthier economy and better monetary policy. This will prevent the counterfeiting of Naira notes, withdraw about 80% of Naira currency held outside of commercial banks, and lower the inflation rate that has contributed to Nigeria’s recession.
Based on the finding of this study, the following recommendations were made. They are;
Traders in the informal sector should open a functional bank account and acquire knowledge about transfers and internet banking.
The ban on old currency should not be enforced within a short period of time.
The federal government should put in place, all logistics needed for the printing and circulation of the new currency before enforcing the deadline on old Naira notes.
Old and new Naira notes should be allowed to coexist until old naira notes completely fissile out through bank deposit to the CBN.
References
- Banwo & Ighodalo (2023). Naira Redesign and Cashless Policy: Wither the Role of Bank Neutral Cash Hubs? Retrieved from https://banwo-ighodalo.com/ assets/grey-matter/5d23b3e97 236ff7a280a51ff6077a 95e. pdf on 12th July, 2023.
- Becker, K. F. (2004). The Informal Economy: A Fact Finding Study. Sweden: Swedish International Development Cooperation Agency (Sida), Stockholm.
- Central bank of Nigeria (2022). Redesigning of the currency.Retrieved from www.cbn.gov.ng on 12th July, 2023.
- City population (2023). Anambra State in Nigeria. Retrieved from https://www.citypopulation.de/en/nigeria/admin/nga004 anambra/ on 12th July, 2023.
- Muhammed, A. B. & Abdulmajeed, A. T. (2022). Impact of Naira Redesign and Monetary Policy on Nigeria Economy. International Journal of Research in Finance and Management, 5(2): 226- 232.
- Nwanma, S. M. (2023). “Currency Redesign: Lessons for Nigeria from Global Best Practices”, Daily Trust, February, 5.
- Olujobi, O. (2022).Macroeconomic Implications of the New Currency Refurbishment and Capital Formation in Nigeria. MPRA paper no. 115634, posted 13 Dec 2022 08:10 Utc. Retrieved from https://mpra.ub.uni-muenchen. de/115634/ on 12th July, 2023.
- Pedro, I. & Adesina-Uthman, G. A. (2022). Impact of Monetary Policy Shocks on the Output Gap in Nigeria. International Journal of Economics and Finance, 14 (9): 38-50.
