World Bank Cautions CBN on Naira Redesign

The World Bank has cautioned that the newly redesigned naira, which went into circulation last week, may have a negative impact on economic activity due to the timing and short transition period, particularly for poor Nigerians.

This was disclosed by the Washington-based bank in a recent study titled “Nigeria Development Update.”

This occurred in the wake of the conflicting responses to the newly revised notes.

The Central Bank of Nigeria this month released new N1000, N500, and N200 notes in an effort to combat, among other things, counterfeiting, ransom payments for kidnapping, and excess money in circulation.

However, the World Bank cautioned in its analysis that the new development would have a major impact on small businesses, particularly those with regular cash transactions.

The report read in part, “While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have not been redesigned for two decades, the timing of and short transition period for this demonetization may have negative impacts on economic activity, in particular for the poorest households.

“International experience suggests that rapid demonetizations can generate significant short-term costs, with small-scale businesses, and poor and vulnerable households, potentially being particularly affected due to being liquidity-constrained and heavily reliant on day-to-day cash transactions.

“At present, households and firms already face elevated financial pressures from prolonged, high inflation, recently compounded by external food and fuel price shocks, and the severe floods, and phasing out existing naira notes over a short time period may add to their challenges.”

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