Macro Online Quiz/Discussion (Naira Redesign and Monetary Equilibrium)–27-2-2023

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Benedict Jennifer chinagorom
2019/244229
Department:Economics

The main reason for redesigning the naira notes is limits on large cash withdrawals would help curb money laundering and make digital payments the norm in Africa’s biggest economy.

MERIT:Redesigning currencies improve a currency’s security by enabling countries to keep counterfeiting low and stay ahead of counterfeiting threats.
The CBN expects that this dash to redesign Nigeria’s currency would reduce counterfeiting, encourage a cashless economy, and stave-off cash hoarding.
.The currency redesign would assist in the fight against corruption as the exercise would rein in the higher denomination used for corruption and the movement of such funds from the banking system could be tracked easily.
.Enhanced security, greater durability, attractiveness and promotion of rich cultural.
.Adoption of electronic channels, which is in tandem with global best practices.
.Strengthen the economy, reduce the expenditure on cash management, promote financial inclusion, and enhance the CBN’s visibility of the money supply.

DEMERIT: The downsides of going cashless include:
Greater exposure to hacking:due to the cashless policy Nigerians been depending on E-transfer and Pos as a means of exchange or payment which makes us prone to hacking, given that we put in our bank pin in several Pos which may be manipulated and so expose us to fraud.
.Technological dependency:Nigeria as a country does not have a dependable technological system, we all notice how all bank networks has been down or bad during this period(January 31st,2023 till date)
Therefore making it difficult for Nigerians to purchase goods and services.
.Magnifying economic inequality:As of January the gap between the rich and the poor was quite alarming small businesses shut down due to cash scarcity, those who had no bank accounts had no way to transact, even if you desire to create an account the crowd at every bank was quit a lot that it was difficult to get into the banking hall.Even the World Bank has warned that the newly redesigned naira which went into circulation few weeks ago may have negative effect on economic activity especially poor Nigerians due to its timing and short transition period.
.Reduction of Broad Money Supply: Effectively implemented currency redesign large causes a fall in money supply. This will lead to reduction of value of money in circulation and a deceleration of the velocity of money in the economy leading to less pressures on domestic prices.To be able to access cash this past few weeks has been difficult that if u do get access to it it’s at a high cost rate.Pos has been charging 400 per 1000 naira withdrawals.

Money market equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of money supplied. All other things unchanged, a shift in money demand or supply will lead to a change in the equilibrium interest rate and therefore to changes in the level of real GDP and the price level.This being said the new policy will not promote equilibrium in the money market.

Merits of this policy initiative adopted by the CBN
1. Currency redesign by the CBN helped to reduce inflation. Currency in circulation has more than doubled since 2015 rising from #1.46 trillion in December 2015 to #3.23 trillion in September 2022 and its worrisome and cannot be allowed.
2. It also help to reduce speculations against the naira.
3. It also target criminals whose stock in trade is raw cash by promoting a less cash-heavy economy.
4. It aimed also at reducing counterfeiting in the economy.
5. It promotes a cashless economy by limiting the amount of the new banknotes that can be withdrawn
Demerits of this policy initiative adopted by the CBN.
1. Some Nigerians due to the scarcity of new naira notes started taking advantage by exchanging old notes for new one for huge premium.
2. Bankers began to hoard new notes for their own personal benefit.
3. Due to the riots caused by Nigerians to get hold of the scarce new naira notes, many banks were destroyed.
2. What is the nexus between Naira redesign and money market equilibrium?
The scarcity of new note continues to disrupt business activities in markets, restaurants, banks and major sales outlets across Nigeria.
Findings showed that while the poor circulation of new notes stifle economic activities, pos operators have also had a difficult time getting both the old and new notes from banks in recent weeks. Amid the chaos caused by scarcity of new notes, the CBN extended the deadline for the phasing out of the old notes from 31st January deadline to 10th February.Despite the extension, many Nigerians working in the informal sector of the economy have had to scramble for the new notes while others lamented their inability to withdraw their hard earned money from their bank accounts. The failure by the CBN to foresee this necessary cash demand means that it probably underestimated how much demand there would be for the new currency notes.
This underestimation and other faulty assumptions are design errors, and they fall squarely on the CBN. It would have been better for the CBN to overestimate than underestimate. If anyone that wanted a replacement for their deposit cash could get as much as they need from day 1, the queues, the rush for cash and the sharp practice wouldn’t have started. Naira redesign has reduced the amount of money in the market economy because people now hold less wealth as money.
will this policy promote equilibrium in the market economy?
The demand for money is the relationship between the quantity of money people want to hold and the factors that determine that quantity. The supply of money shows the relationship between the quantity of money supplied and the market interest rate, all other determinants of supply unchanged.
Money market is the interaction among institutions through which money is supplied to individuals, firms and other institutions that demand money. Money market equilibrium occurs at the interest rate at which the quantity of money demanded is equal to the quantity of money supplied. The new policy will promote equilibrium in the money market economy by reducing inflation in the market and also reduce the amount of money in circulation. With the Central Bank of Nigeria policy of giving out #500,000 per individual for a week and #5 000 000 per institutions or firms on a weekly basis, it would reduce hoarding of money by politicians etc

Name: Henry Victor Ifeanyichukwu
Reg no : 2019/250111
Email : victorhenry274@gmail.com
1). CBN (Central Bank of Nigeria) redesign of naira note has different effect to the aggregate economy, both negativity and positively some of the demerits includes ;
a, Disequilibrium in the money market :- the money in circulation has dropped by 54% of it’s currency, Nigeria only has 1.39trillion out of 2.7trillion of it’s currency in circulation before the policy was adopted. One of the disadvantage of CBN currency policy of redesigning of the 200,500 and 1000 naira note is disequilibrium in money market. Because the supply of money has dropped but the demand for money is only increasing due to inflation, this causes a shift in the equilibrium point from the previous point in the short-run of the money market during the previous month before the CBN naira redesign policy.
b, Reduction Aggregate Borrowing and investment:- CBN policy to redesign the naira note has influenced the aggregate levels of borrowing and investment. The main objective of CBN is to reduce the money in circulation circulation ( money at hand ) .This policy has set some restrictive regulations on banks, discouraging them to lend to public or lending money at a very high interest rate. This discourage borrowing and this in return discourage aggregate investment, because borrowers uses the money gotten from banks to invest in private sectors in economy and increase Nigeria aggregate investment.
b, Reduction in aggregate demand for goods and services:- CBN naira redesign policy has discourage the local market in accepting old currency naira note .while the new money in circulation is less than the old money which is already in the economy. This policy has effected the aggregate demand of goods and services because of less money in circulation, due to that people have less money to spend on consumer goods and services. This cause a decline in the aggregate demand for goods and services.
As we have demerits of new CBN naira policy we also have merit which were the drive behind the CBN naira redesign policy which includes;
a, Reduction of Inflation:- inflation is the unexpected rising of prices of goods and services. One of major of inflation is when large sum of money chasing fewer goods, Nigeria highly depends on import and hardly produce. Presently Nigeria inflation level is 21.82% . One of the objectives and merits of CBN policy is to attack the inflation level by reducing the circulation of money in the economy to reduce the amount of amount chasing goods and services.
b, Reduction of Counterfeit and Laundry:- the political and economic agenda of CBN of redesigning the naira note, is to curb the amount of Counterfeit in economy and also to discourage illegal laundering of naira note. Since 200,500 and 1000 has a new appearance as designed by CBN officials, this limit the ability of people to laundry the naira note and it also makes all the counterfeit of the old naira note to be invalid because of present of the new naira note by CBN currency redesign policy .
c, Encouragement of technology innovation in use of money transaction:- because of effort of CBN to make it difficult to acquire the new currency note in the hands of citizens. This encourage other means of payment and transaction method, one of the objectives of CBN is to encourage digital payments the norm in Africa biggest economy.
These are just few demerits and merits of new CBN redesign currency policy. the money market is highly effect by action of CBN . The relationship/link between the money market equilibrium and the redesign of naira note is the central bank of Nigeria ( CBN ) , Because CBN control the aggregate supply of money in Nigeria economy, and the money market equilibrium is an interaction between Aggregate supply of money and aggregate demand money. The aggregate supply is controlled by CBN while aggregate demand is controlled by the total population of citizens of Nigeria, and equilibrium point in money market is where everyone is satisfied where the Aggregate supply of money = aggregate demand of money.
CBN currency redesign policy won’t maintain the equilibrium in the money market in the Nigeria economy. Because CBN policy main objective is to reduce the circulation of money in Nigeria. The money aggregate supply would drop causing disequilibrium in the money market ,because the supply of money would be less than the aggregate demand for money . Even if CBN reduce supply it won’t really effect the level of demand of money because of present of other variables effecting demand of money , the demand of money might even increase due to inflation causing disequilibrium in the money market in the long-run period .

Name: Chibueze Manna Chioma
Reg No: 2019/244094
Department: Eco major
Course: Intermediate to Macro I; Eco 303
Date: March, 2023.

CBN Naira notes redesign policy
On the 26th of October, 2022, the Central Bank of Nigeria received the approval of President Muhammadu Buhari to redesign the N200, N500, and N1000 Nigerian banknotes. The general practice across the globe is that a central bank should normally redesign its currency within 5-8 years as a currency and liquidity management function that has important ramification for the effectiveness of monetary policy. It is clear that for over 19 years, the CBN has not been able to undertake this important The implementation of this policy has caused a lot of controversies in the country; it both has seeet and bitter sides to it and will be seen below as the listed merits and demerits of this initiative.

1.Merits and Demerits of this policy initiative by the CBN
MERITS
• Preventing and combating counterfeiting: To prevent Naira notes counterfeiting, this policy will help to remove about 80% of Naira currency outside of commercial banks, and also to mitigate the inflation rate at has essentially driven Nigeria into recession.
• Managing and reducing the amount of money in circulation: This policy has helped to reduce excess of money supply in circulation, reduction of value of money in circulation and a deceleration of the velocity of money in the economy leading to less pressures on domestic prices. It will go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in, by increasing the deposits in the commercial banks, it means the banks will have more money to lend which may reduce interest rates, capital flight and crowd in more investments prospects.
• Reducing inflation: The policy in itself is typically expected to cause deflation in the market as less cash holding reduces currency outside banks and retards money circulation. The accompanying decline in money supply will thus slow pace of inflation
• Minimize the influence of money on the country’s electoral process: This works by discouraging vote-buying and inducing of electoral officers. The new policy may make vote-buying for the 2023 elections more difficult due to the reduced availability of cash.
• Availability of Loans: Loans will become easier and interest rates may come down. As banks will have more money so more loans will be given out which will increase the money supply in the market and it will create inflation.

DEMERITS
• The huge cost of redesigning: The redesigning of naira will impose huge cost on the economy with the Federal Government already struggling with a huge debt deficit and may likely have to borrow more money from external sources to completely fund the redesigning of the naira currency. This would increase the pressure on the economy. There is a high cost of redesigning the naira, the logistics and printing. This would increase budget deficit, and lead to a high debt rate.
• Illegal activities: The implementation of the policy might exacerbate money laundering and corruption, increase in general public apathy for coin utilization, and inflationary pressures due to ill-informed expectations and cost-push factors, making locally produced tradable goods less competitive, enhanced smuggling, and increased unemployment and crime rates. 
• Effect on rural community: This policy has a great toll on rural communities, small-scaled businesses especially those who day-to-day cash transactions, poor Nigerians due to its timing and short transition period.with small-scale businesses heavily reliant on day-to-day cash transactions due to unavailability of banks situated around their areas finding hard to deposit the old Naira notes.
• Fall in level of consumption: The fall in the amount of money in circulation as a result of redesigning the currency following the current economic condition in Nigeria would have a negative impact on the economy as the level of consumption would fall leading to a production decline and eventually, unemployment would rise since a larger percent of the Nigerian population are self- employed and require money (cash-based economy) to run their day-to-day busines
• Rise in price level: As a result of hoarding of money by politicians, they might try converting the naira notes to property since they cannot risk getting caught by the authorities depositing the notes at the bank. They would rather purchase luxury goods like cars, gold, make FOREX transactions that could inflate the economy.

2. Naira redesign policy to equilibrium in the money market?
• My view is that the redesign policy does not cause equilibrium in the money market or rather has a negative impact in the money market.
Currency redesigning by the CBN is a means to reduce excess of money supply in circulation and reinforced more monetary policy effectiveness in curbing inflationary pressure and enhanced the exchange rate policy of the CBN. But there’s a limitation to the policy.
The economic implication of this policies despite the assurance of the CBN governor that the policies will not cause inflation and that excess of money supply in circulation will be reduced. As more currency notes are being introduced in the economy, Currency in Circulation also rises, thereby causing the Narrow Money Supply to escalate. This will promote expected inflation within the economy on one hand and positioning the Nigeria currency as worthless and without real economic value thus promoting movement in the supply and demand for dollars by making people now believes that the dollar is stronger. Also due to possible reluctance to hold coins, most traders are likely to charge higher prices and consequently cause inflation.

Nwabuebo Success Ekene
2019/248711
300 level
Macro economics

The merits and demerits of the CBN redesign initiative policy in the nation.
The following merits is noted below;
1. Reducing and regulating the excess supply of money in circulation.
2. Reducing inflation in the country
3. Reducing illegal activities sponsored by money liquidity eg productivity of counterfeit money, kidnapping, etc
4. Helps to digitally synthesize people to the importance and use of online banking
5. Helps in increase in interest rates as liquidity reduces

The following are the demerits of this policy;
1. This policy is less favorable to the poor due to the fact that they cannot afford the rates to acquiring money
2. Crowding of banks, disruption and uproar in the country in trying to deposit or withdraw money
3. Corruption and Hoarding of money by banks to favour themselves
4. Discontinuation of small businesses involved in supplying of cash eg POS business, retail stores, etc

2. Will this new policy promote equilibrium in the money market?
I will say yes for the reason below;
Currency redesigning by the CBN is a means to reduce excess of money supply in circulation and reinforced more monetary policy effectiveness in curbing inflationary pressure and enhanced the exchange rate policy of the CBN.

Okechi Chinweoke Maria
2019/250252
Economics Major

MERITS
If anything, there have been early successes of the CBN intervention – the monetary policy committee (MPC) of the central bank recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.
Also, the cashless policy has led to a reduction in banditry and kidnappings, which were rampant in the recent past. Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN. It should also be noted that the notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth.”
In essence, the currency redesign policy has helped to mop up monies outside the banking system that had often contributed to rising inflation and currency speculation, which had resulted in foreign exchange challenges in recent times.
Another important merit of the new redesigned currency is to strengthen the performance of key macroeconomic parameters and equally combat social improprieties.
Also, it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth.
DEMERITS
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.
Some other demerits are:
1. Shortage of funds.
2. Economic instability.
3. Poor standard of living.
4. Unemployment.
5 Reduction in the rate of productivity

2. Firstly, I will like to state what we mean by money market equilibrium; it’s a situation where the money supplied equals the money demanded.
At the moment, this new policy hasn’t promoted the money market equilibrium because the monetary institutions haven’t been able to equally supply enough money to the public, thereby causing a shortage of money in the economy.
Most times, effectively implemented currency redesign causes a fall in money supply and this usually lead to reduction of value of money in circulation and a deceleration of the velocity of money in the economy.

The introduction of the new naira note has done more harm than good on evolving real monetary policies of the economy. Although it has demerits but its initiative is front for monetary development of the country
Merits:
1. Reduces the amount of hoarded money: money that was supposed to be in circulation amounting to # 3.23 trillion of which #500 billion was within the banking system and #2.73 trillion in people’s home.
Redesign of the new naira note has drastically reduced hoarding of money, hence enhancing free flow of m2-money for transaction and bank deposits
2. Reduces bribery and theft: due to the redesign policy, bribery involving money(cash)has drastically reduced and citizens tend to see the worth of working hard to get cash for transaction, also cases of theft and other social vices has been limited.
3. Reducing inflation: one merit of the new naira policy is the reduction in the prices of goods and services in real market; hence regulating of prices of goods and services through contractionary monetary policy.
Demerits:
1. SME’s negative effect: many small and micro enterprises that deals with cash at hand transaction lost their stance in the trade circle due to shortage of cash for their patronage. Hence, most businesses were forced to shutdown or look for alternate source of cash transaction to stay up in business.
2. Negative impact on economic activities: particularly, those has affected the rural dwellers, most of whom work for daily wages and directly from their earned wage. Due to the redesign policy, rural dwellers find it hard to meet up with economic activities of purchasing essential commodity for consumption, hence causing hardship since they can only afford to purchase in small quantity using cash-at-hand

The nexus between money market equilibrium and naira policy is achieved when the level of money in circulation in the economy dropped to equate the level of bank reserves. Hence, cash at hand (money in circulation) tends to equate cash in bank for equilibrium to occur in the money market. Due to that effect, valuation of money in the financial market tends to increase at geometric order due to an increase in the demand for money leading to a decrease in inflation and higher interest rate

NAME: MOETEKE EBELE LOUISA
REG NO: 2019/244608
COURSE: ECO 303
EMAIL: moetekeebele@gmail.com
1. On 26 October, 2022, Nigeria’s CBN announced the introduction of redesigned 200, 500 and 1,000 naira notes into the country’s financial system. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this, you are required to discuss and analyse the merits and demerits of this policy initiative adopted by the CBN. Secondly, what is the nexus between Naira redesign money market equilibrium? Will this new policy promote equilibrium in the money market? Discuss this comprehensively.
MERITS OF THIS POLICY INITIATIVE
 It is explained that the new notes will bring “hoarded currency” into the banking system, thereby making monetary policy more effective. Also further explained that there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks. As of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable as this has the potential to harm monetary policy actions, further leading to higher inflation and currency speculation, thereby exposing vulnerable Nigerians to further economic hardship.
 If anything, there have been early successes of the CBN intervention as the monetary policy committee (MPC) of the central bank recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.
 Also, the cashless policy has led to a reduction in banditry and kidnappings which were rampant in the recent past.
 Specifically, it is noted that the move to redesign the currency was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports, and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.
DEMERITS OF THIS POLICY INITIATIVE
While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have 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.
 There is hardly any week without complaints in the banking hall. You will see people shouting with regard to transfer failures. Have we put enough structure to take care of some of these things? The answer is, we are yet to, we are making progress, yes, but we should give enough room and time for some of these things to play out rather than short-circuit the system.
 Worsening shortage of clean and fit banknotes, with attendant negative perception of the CBN and increased risk to financial stability; Increasing ease and risk of counterfeiting, evidenced by several security reports.

THE NEXUS BETWEEN NAIRA REDESIGN MONEY MARKET EQUILIBRUM
The nexus between Naira redesign money market equilibrium is that the redesign aims to address the macroeconomic imbalances that Nigeria has experienced due to the instability of the currency. By redesigning the money market equilibrium, the Central Bank of Nigeria (CBN) seeks to increase liquidity, reduce volatility, and create a more stable currency environment. The new money market equilibrium should also provide a more reliable source of funding for businesses and other institutions, helping to stimulate economic growth. It is the reality that Ghana’s economic policies, regulations and interventions have a direct impact on the Nigerian economy due to their interconnected financial markets. As both countries strive to maintain a stable exchange rate between the Naira and the Cedi, the markets in both countries will be impacted by the actions of the other. As such, the redesign of the Naira can have a direct impact on the money market equilibrium in both countries.

WILL THIS NEW POLICY PROMOTE EQUILIBRUM IN THE MONEY MARKET?
It is not clear how this new policy would promote equilibrium in the money market. It is possible that the new policy would lead to a higher demand for cash, potentially leading to higher interest rates and increased borrowing costs. Alternatively, it is possible that the new policy would lead to a higher supply of cash, potentially leading to lower interest rates and decreased borrowing costs. It is also possible that the new policy would have no measurable impact on the supply or demand for cash, which would lead to no change in the interest rates or borrowing costs. However, cashless policies can help to promote economic equilibrium by reducing transaction costs and increasing access to financial services. Additionally, these policies can help to reduce the costs of money laundering, tax evasion, and other illegal activities by making the financial system more transparent.

Nwankwo Faith Obiageli
Economic…..2019/244721
ANSWERS
:The merits: central bank recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.
– it led to a reduction in banditry and kidnapping which were rampant in recent past
– It aimed to checking the increasing ease and risk of current counterfeit evidenced by several security report, and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.
-CBN policy will aid in accelerating the monetary policy objectives and will positively enhance the monetary and fiscal space as well as improve the profitability of the banking sector.
-The new CBN policy will certainly aid in accelerating the monetary policy objectives, whilst also tackling the insecurity challenges and encouraging financial inclusion.
-The policy could address the current exchange rate gaps. “The policy will also be a good step in strengthening the value of the naira. At this rate, if this is played right and it is sustained, we may see a scenario where the naira/dollar rate comes down and the naira can strengthen a little bit against the dollar when there is not much money flowing after the dollar.”
– The naira redesign and implementation of the cashless policy would plug fiscal leakages, boost government revenues, and aid the economic empowerment of vulnerable Nigerians as well as benefit the country as a whole.
:Demerits: As of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable as this has the potential to harm monetary policy actions, further leading to higher inflation and currency speculation, thereby exposing vulnerable Nigerians to further economic hardship.
-Reduction of Broad Money Supply: Effectively implemented currency redesign large causes a fall in money supply. This will lead to reduction of value of money in circulation and a deceleration of the velocity of money in the economy leading to less pressures on domestic prices.
-The new policy would negatively affect small businesses especially those who day-to-day cash transactions. “While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have 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.
:According to the central bank governor, the main objectives of the cashless policy and currency redesign were to make monetary policy decisions more effective, deepen financial inclusion in the country, curb terror financing and banditry, and discourage vote-buying by politicians and money laundering, among others. Politicians were stocking money for election activities, according to the CBN governor. the naira redesign policy is expected to curb the inflation in the market as less cash holding reduces currency outside banks and retard money circulation, stressing that the accompanying decline in the money supply would slow the pace of inflation.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. policy are basically to control inflation, maintain a healthy balance of payment position in order to safeguard the external value of national currency and promote adequate and sustainable level of economic growth and development. These goals are achieved by controlling money supply in order to enhance price stability (low and stable inflation) and economic growth.
: The CBN monitors the use of scarce foreign exchange resources to ensure that foreign exchange disbursements and utilization are in line with economic priorities and within the annual foreign exchange budget in order to ensure available balance of payments position as well as the stability of the Naira.The effectiveness of any central bank in executing its functions hinges crucially on its ability to promote monetary stability. Price stability is indispensable for money to perform its role of medium exchange, store of value, standard of deferred payments and unit of account. Attainment of monetary stability rests on a central bank’s ability to evolve effective monetary policy and to implement it effectively. Since June 30, 1993 when the CBN adopted the market-based mechanism for the conduct of monetary policy, Open Market Operations (OMO) has constituted the primary tool of monetary management supported by reserve requirements and discount window operations for enhanced effectiveness in liquidity management. Specifically, liquidity management by the Central Bank of Nigeria involves the routine control of the level of liquidity in the system in order to maintain monetary stability. Periodically, the CBN determines target growth rates of money supply, which are compatible with overall policy goals. It also seeks to align commercial and merchant banking activities with the overall target. The CBN through its surveillance activities over banks and non-bank financial institutions seeks to promote a sound and efficient financial system in Nigeria

1,merits
A, some politicians who usually loot away cash will find it difficult to do so this time around because the new notes are not out to everyone’s reach
B, introducing a new change of currency will help the country’s currency not to depreciate as fast as possible in the foreign market
C,it also helps to boost exports, shrink trade deficits and reduce the cost of interest payments on its outstanding government debts
D,the policy will positively enhance the monetary and fiscal space as well as improve the profitability of the banking sector.

1B, DEMERITS
A,citizens all over the country are in hardship as the new redesigned cash is scarce and nowhere to be seen even in banks
B, protests, destruction
In the midst of the uncertainties, many Nigerians have taken to the streets on major cities to protest the hardship caused by the policy.

In parts of southern Nigeria, many protesters were said to have sustained injuries and some were arrested for vandalising bank properties.
C, it has also slowed transactions in the international and domestic markets all over the country as people can’t pay for goods and services already rendered to them

2, what is the nexus between naira redesign Money market equilibrium?
During the recent global financial crisis and the recession, unorthodox monetary policy interventions helped salvage the economy where conventional practices have failed.
Recently, the central bank’s efforts at curtailing rising inflation had proved nearly fruitless amidst growing food and commodity prices.

In the same vein, attempts to stabilise the naira against the US dollar had been difficult partly due to speculative activities and other challenges.
However, the recent engagement between the CBN governor and the diplomatic community exposes the primary intent of the bank’s cashless and naira redesign programmes
If anything, it showed the benefits of the cashless policy, whose implementation began in 2012; and that the currency redesign programme was initially underestimated.

Emefiele’s interaction with the diplomatic community was particularly critical to shed more light on the policies and disabuse their minds of wrong perceptions following some antagonism by some political class members.

According to the central bank governor, the main objectives of the cashless policy and currency redesign were to make monetary policy decisions more effective, deepen financial inclusion in the country, curb terror financing and banditry, and discourage vote-buying by politicians and money laundering, among others. Politicians were stocking money for election activities, according to the CBN governor.
According to Emefiele, the naira redesign policy is expected to curb the inflation in the market as less cash holding reduces currency outside banks and retard money circulation, stressing that the accompanying decline in the money supply would slow the pace of inflation.

3,will this new policy promote equilibrium in the money market, discuss this comprehensively?
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. The CBN claims that about N2.73 trillion of the N3.23 trillion currency in circulation in Nigeria, is outside the bank vaults. This is about 85% of the total money in circulation. Also, the Naira is not as secured as it ought to be, as it is easier to counterfeit theN500 and N1000 denominations.
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. 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.
CBN believes that the redesign of the currency will help deepen our drive to entrench a cashless economy, as it will be complemented by increased minting of our eNaira. This will further rein in the currency outside the banking system into the banking system, thereby making monetary policy more efficacious. Also, in view of the prevailing level of security situation in the country, the CBN is convinced that the incidents of terrorism and kidnapping would be minimised, as access to the large volume of money outside the banking system used as source of funds for ransom payments will begin to dry up.
James Emejo writes that the naira redesign and implementation of the cashless policy would plug fiscal leakages, boost government revenues, and aid the economic empowerment of vulnerable Nigerians as well as benefit the country as a whole.

Name;Chidiebere James. C
Reg no:2019/249120
Dep; COMBINED SOCIAL SCIENCES (Economics/Sociology)

Introduction of redesigned currency notes is a policy initiative that can have both merits and demerits. In the case of Nigeria’s CBN introducing redesigned 200, 500, and 1,000 naira notes, the following are the possible merits and demerits of this policy initiative.

Merits:

1). Improved Security Features: The introduction of redesigned currency notes often comes with improved security features, making it difficult for counterfeiters to replicate. In the case of Nigeria, the new notes come with enhanced security features such as machine-readable security threads, raised print, and other features that make it difficult to counterfeit.

2). Improved Aesthetics: The new notes are designed to be visually appealing and attractive, making them easier to identify and distinguish from other notes. This will make it easier for people, especially those who are visually impaired, to identify and use them.

3). Reduction in Money Laundering: The introduction of new currency notes can also help to reduce money laundering and other criminal activities, as it becomes more challenging to launder large sums of money using new notes that are more easily traceable.

Demerits:

1). Shortage and Accessibility: The introduction of new currency notes can lead to a temporary shortage of cash in the economy, especially if there is not enough supply of the new notes to meet demand. This can lead to long queues at banks and ATMs, making it difficult for people to access their money.

2). Cost Implications: The introduction of new currency notes often comes with a high cost implication, including the cost of printing, distributing, and exchanging the old notes for the new ones. This cost can be significant, and it may take some time before the benefits of the new notes are felt.

3). Disruption to Business: The introduction of new currency notes can disrupt business activities, especially for those who rely heavily on cash transactions. The time taken to exchange old notes for new ones can result in significant disruptions to business activities, leading to lost revenue.

Conclusion:

In conclusion, the introduction of redesigned currency notes is a policy initiative that can have both positive and negative impacts. While the new notes come with improved security features and aesthetics, it can also lead to temporary shortages of cash, high cost implications, and disruptions to business activities. Therefore, the CBN needs to take proactive measures to ensure that the new notes are made readily available to the public and that there is a smooth transition from the old notes to the new
ones.

Redesigned Naira Notes Impact

The introduction of redesigned 200, 500, and 1,000 naira notes by Nigeria’s Central Bank could potentially affect the market equilibrium in the country’s financial system.

Market equilibrium is the point where the demand for a product or service is equal to the supply of that product or service, resulting in a stable price. In the case of currency, the market equilibrium is the point where the demand for money is equal to the supply of money, resulting in a stable exchange rate.

The introduction of new banknotes can affect the market equilibrium in several ways. Firstly, if the new notes are perceived as being of higher quality or more secure than the old notes, then demand for the new notes may increase, which could cause the exchange rate of the Naira to appreciate. On the other hand, if the new notes are perceived as less valuable than the old notes, then demand for the new notes may decrease, which could cause the exchange rate of the Naira to depreciate.

Additionally, the introduction of new notes can also affect the supply of money in the economy. If the Central Bank decides to print more money to replace the old notes with the new notes, then the supply of money in the economy will increase, which could potentially lead to inflation if the increase in the money supply is not matched by an increase in the supply of goods and services.

Overall, the introduction of redesigned Naira notes could potentially have an impact on the market equilibrium in Nigeria’s financial system, depending on how the public perceives the new notes and the actions taken by the Central Bank to manage the money supply.

It is possible that the introduction of redesigned Naira notes could promote equilibrium in the money market in Nigeria.

If the new notes are perceived as being more secure and of higher quality than the old notes, it could increase demand for the new notes, which could increase the value of the Naira and promote stability in the exchange rate. Additionally, if the Central Bank manages the money supply carefully and ensures that the increase in the money supply due to the introduction of the new notes is matched by an increase in the supply of goods and services in the economy, it could help prevent inflation and promote stability in the economy.

However, it is important to note that the introduction of new notes alone may not be sufficient to promote equilibrium in the money market. Other factors such as government policies, international trade, and economic growth will also have an impact on the stability of the economy and the exchange rate of the Naira.

In summary, the introduction of redesigned Naira notes could potentially promote equilibrium in the money market in Nigeria, but it is not a guaranteed outcome and will depend on several factors beyond just the introduction of new notes.

Name: Eligwedire Victor Ozioma
Reg No.: 2019/249216

Introduction:
On October 26, 2022, the Central Bank of Nigeria (CBN) announced the introduction of redesigned 200, 500, and 1,000 naira notes into the country’s financial system. This policy initiative was aimed at improving the security features of the banknotes and making it more difficult for counterfeiters to produce fake notes. However, since the notes were unveiled, Nigerians across different parts of the country have been struggling to access them from banks and ATM cash points. In this response, we will discuss and analyze the merits and demerits of this policy initiative adopted by the CBN. We will also examine the nexus between Naira redesign and money market equilibrium, and whether this new policy will promote equilibrium in the money market.

Merits of Redesigned Naira Notes:
The introduction of redesigned Naira notes has several potential benefits for the Nigerian economy. Firstly, the enhanced security features of the new banknotes will help to reduce counterfeiting and protect the value of the currency. This will instill confidence in the financial system and encourage more investment in the country. Secondly, the new notes have improved durability, which will reduce the need for frequent replacement and lower the cost of printing and circulating currency. Finally, the new notes will help to modernize the currency system and bring it in line with global standards.

Demerits of Redesigned Naira Notes:
Despite the potential benefits of the redesigned Naira notes, there are also some drawbacks to this policy initiative. Firstly, the implementation of the new notes has been fraught with difficulties, as Nigerians have struggled to access them from banks and ATM cash points. This has led to frustration and complaints from the public, and may damage public confidence in the financial system. Secondly, the cost of producing and distributing the new notes may be high, which could result in increased costs for the CBN and commercial banks. Finally, the introduction of new notes may lead to confusion and disruption in the financial system, particularly for those who are not familiar with the new designs.

Nexus Between Naira Redesign and Money Market Equilibrium:
The redesign of Naira notes can potentially affect the money market equilibrium in several ways. Firstly, if the new notes are successful in reducing counterfeiting and improving confidence in the currency, this could lead to an increase in demand for Naira, which would lead to an appreciation of the currency. Conversely, if the introduction of new notes leads to confusion and uncertainty in the financial system, this could lead to a decrease in demand for Naira and a depreciation of the currency. Secondly, the cost of producing and distributing the new notes could lead to an increase in the money supply, which could lead to inflation if not managed carefully by the CBN. Finally, the introduction of new notes may lead to changes in the demand for other forms of money, such as digital currencies, which could have knock-on effects on the broader economy.

Will the New Policy Promote Equilibrium in the Money Market?
It is too early to determine whether the introduction of redesigned Naira notes will promote equilibrium in the money market. The success of this policy initiative will depend on several factors, including the public’s acceptance of the new notes, the effectiveness of the enhanced security features, and the CBN’s ability to manage the money supply effectively. If these factors are managed well, the introduction of new notes could help to stabilize the Naira and promote equilibrium in the money market. However, if these factors are not managed well, the new policy could lead to disruptions and instability in the financial system.

In addition to the potential benefits and drawbacks of the redesigned Naira notes and their impact on the money market equilibrium, there are several other factors to consider.

One issue that has arisen since the introduction of the new notes is the challenge of distributing them to all parts of the country. As the notes are not yet widely available, this has created an uneven distribution of money, which could potentially lead to inflation in some areas where the supply of new notes is limited. To address this challenge, the CBN has announced plans to increase the supply of the new notes and ensure that they are distributed more widely.

Another important consideration is the impact of the redesigned Naira notes on the informal economy. Many Nigerians rely on cash transactions, particularly in rural areas, and may not be able to access the new notes if they are not widely available. This could lead to a situation where the informal economy continues to use old banknotes, creating a two-tier currency system that could potentially lead to inflation and currency devaluation.

Furthermore, the introduction of the new notes may also impact the international value of the Naira. If the enhanced security features of the new notes are successful in reducing counterfeiting, this could lead to an increase in demand for Naira from international investors. This could potentially lead to an increase in the value of the currency, which could have a positive impact on the Nigerian economy.

In conclusion, the introduction of redesigned Naira notes has both potential benefits and drawbacks for the Nigerian economy. The success of this policy initiative will depend on a variety of factors, including the public’s acceptance of the new notes, the CBN’s ability to distribute them widely, and their impact on the money market equilibrium. Ultimately, if managed carefully, the introduction of new notes could help to stabilize the Naira and promote equilibrium in the money market, leading to a more stable and prosperous Nigerian economy.

Name: Okeke Michael Obinna
Dept: Combined social science(Eco/pol)
Reg no: 2019/250019
Course: Eco 303

1. The recent naira redesign policy initiative adopted by the CBN has been met with challenges since the introduction of the new notes. Here are the merits and demerits of the policy initiative:
Merits:
1. Improved security features: The new notes have improved security features, such as a window thread with holographic effects, that make it more difficult to counterfeit. This will enhance the security of the currency and prevent fraud.
2. Enhanced durability: The new notes are made of polymer material, which is more durable than paper money. This will increase the lifespan of the currency, reduce the need for frequent replacement, and save the government money on printing costs.
3. Modernized design: The new notes have a modernized design that reflects Nigeria’s culture and heritage. This gives the currency a new identity and a sense of pride to Nigerians.
4. Improved international perception: The new notes can improve the international perception of Nigeria’s currency, projecting the country as a modern and technologically advanced nation that is committed to fighting corruption and economic crimes.
Demerits:
1. Poor distribution: The new notes have not been evenly distributed across the country, leading to a shortage of cash in some areas. This has made it difficult for people to access the new currency from banks and ATM cash points.
2. Inadequate public education: The CBN has not adequately educated the public on the new notes’ features and how to differentiate between the old and new notes. This has resulted in confusion and suspicion among the public, making it difficult for some people to transact business using the new currency.
3. Resistance to change: Some Nigerians may be resistant to the new notes, preferring the old currency, which they are more familiar with. This can make it challenging for the CBN to phase out the old currency and fully implement the new currency.
4. Cost: The cost of redesigning and printing the new notes is high, and the CBN may have to spend a considerable amount of money on the project that could have been used for other developmental projects.
In conclusion, the naira redesign policy initiative adopted by the CBN has both merits and demerits. While the improved security features, enhanced durability, modernized design, and improved international perception are commendable, the challenges of poor distribution, inadequate public education, resistance to change, and cost need to be addressed. The CBN should ensure that the new currency is adequately distributed, and the public is educated on the features of the new notes. This will ensure a smooth transition to the new currency and increase public confidence in the financial system.

2. The nexus between naira redesign money and market equilibrium is primarily through the impact that the introduction of the new currency has on the market forces of demand and supply.
Firstly, the redesign of the naira can affect the demand and supply of money in the economy. When the CBN introduces a new currency, people tend to hold on to their old currency, causing a temporary decrease in the demand for the new currency. This can lead to a reduction in the supply of the new currency, which can cause an increase in its value or exchange rate.
Secondly, the distribution of the new currency can impact the market equilibrium. If the new currency is not evenly distributed across the country, it can lead to a shortage of cash in some areas, leading to a decrease in demand for goods and services in those regions. This can cause a temporary shift in the market equilibrium, with prices and output adjusting to the new market conditions.
Thirdly, the introduction of the new currency can impact inflation and interest rates, which can, in turn, affect the market equilibrium. If the new currency reduces inflation and interest rates, it can lead to an increase in demand for goods and services, leading to an upward shift in the market equilibrium.
Finally, the introduction of the new currency can impact the confidence of investors and consumers in the economy, leading to changes in their behavior that can affect the market equilibrium. If investors and consumers are confident in the new currency, they may invest more in the economy, leading to an increase in output and prices, which can cause an upward shift in the market equilibrium.

3. The new naira redesign policy by the CBN can promote equilibrium in the money market if it is implemented effectively. However, whether or not it will promote equilibrium in the money market depends on various factors, including the distribution of the new currency, its impact on inflation and interest rates, and its effect on investor and consumer confidence.
If the distribution of the new currency is well-planned and executed, it can ensure that there is an adequate supply of cash in the economy, reducing the risk of a shortage of cash in some areas that can lead to market instability. This can help to promote equilibrium in the money market.
The impact of the new currency on inflation and interest rates is also critical. If the new currency reduces inflation and interest rates, it can lead to an increase in demand for goods and services, leading to an upward shift in the market equilibrium. However, if it has the opposite effect, it can lead to market instability and disequilibrium.
Finally, the new currency can impact investor and consumer confidence in the economy. If investors and consumers are confident in the new currency, they may invest more in the economy, leading to an increase in output and prices, which can cause an upward shift in the market equilibrium.
In conclusion, whether or not the new naira redesign policy by the CBN will promote equilibrium in the money market depends on several factors, including the distribution of the new currency, its impact on inflation and interest rates, and its effect on investor and consumer confidence. If the CBN can manage these factors effectively, it can promote equilibrium in the money market and contribute to overall economic stability.

Merits:
1. Reduces the amount of hoarded money: money that was supposed to be in circulation amounting to # 3.23 trillion of which #500 billion was within the banking system and #2.73 trillion in people’s home.
Redesign of the new naira note has drastically reduced hoarding of money, hence enhancing free flow of m2-moneynfor transaction and bank deposits
2. Reduces bribery and theft: due to the redesign policy, bribery involving money(cash)has drastically reduced and citizens tend to see the worth of working hard to get cash for transaction, also cases of theft and other social vices has been limited.
3. Reducing inflation: one merit of the new naira policy is the reduction in the prices of goods and services in real market; hence regulating of prices of goods and services through contractionary monetary policy.
Demerits:
1. SME’s negative effect: many small and micro enterprises that deals with cash at hand transaction lost their stance in the trade circle due to shortage of cash for their patronage. Hence, most businesses were forced to shutdown or look for alternate source of cash transaction to stay up in business.
2. Negative impact on economic activities: particularly, those has affected the rural dwellers, most of whom work for daily wages and directly from their earned wage. Due to the redesign policy, rural dwellers find it hard to met up with economic activities of purchasing essential commodity for consumption, hence causing hardship since they can only afford to purchase in small quantity using cash-at-hand
The redesign policy could potentially impact the money market equilibrium in several ways. For example, if the new Naira design includes enhanced security features that reduce counterfeiting, this could increase confidence in the currency and lead to an increase in demand for Naira. This increase in demand could result in an increase in the value of the Naira relative to other currencies, leading to a decrease in inflation and interest rates.
Conversely, if the redesign policy leads to a significant increase in the supply of Naira, this could lead to an oversupply of money in the economy, potentially leading to inflation and higher interest rates.

NAME: IDAJOR, JOHN AYUOCHIEYI
DEPARTMENT: ECONOMICS (MAJOR)
REG. NUMBER: 2019.248707
EMAIL: idajorjohnmario@gmail.com

The onset of the news about the printing of new naira notes was so desiring by people due to the objectives following it, but on the contrary, things changed drastically from what the main objective was to something unbelievable which up till now Nigeria is still suffering it.
For want of time, I would if permitted say that, this change of naira notes has no advantage or merit anywhere.
(a) Merits of the new naira notes
Reduction of corruption: one of the objectives of redesigning of the Nigerian naira notes was to cube corruption in the financial system. Most Nigerian politicians are fund of embezzling money from the government and this has gotten to the climax, in regards to this, the CBN came up with the new naira notes so that those old notes may cease to be in use and this will cube the huge amount of money in the hands of politicians and others.
Boosting of government revenue: The coming of the new naira notes was aimed at boosting government revenue in all dimensions because with the new naira notes, the government would be able to checkmate and balance the money flow in the economy and to see how it would be well utilized in different sectors of the economy. This is said to be done when the government would with the new naira notes, reallocate them into areas that would fetch enough revenue for the country under the guidance of the federal government with a comprehensive account of how well the money is being utilized.
To serve as empowerment for Nigerians: The advent of the new naira notes was meant to serve as empowerment to all Nigerians since there would be a decease of the old naira notes, this would in a way serve as avenue for every Nigerian to have access to the new naira notes, with this, the would sem to be a redistribution of the currency between the poor and the rich if not equitably, then, closely related, also, this would make people to work more in order to get at high quantity the new naira notes.
NOTE: All the merits mentioned above are abstract, they were just there to fulfil all righteousness. For me, the new naira notes do not have merits.
Demerits of the new naira notes
Scarcity of money: The policy of introducing new naira notes in Nigeria has turned down the purpose for which it was meant to be. The policy became a means of taking money from the poor and leaving them with nothing. The new naira notes instead of being circulated is now being sold out to some set of people who can bribe bsnk managers such as politicians in order to use it for their selfish motives.
It affected the economy of the country: The policy that shows the introduction of new naira notes which turned out to hiding both the new and the old notes has led to decrease in the production and consumption level of the economy. Since there is little supply of money, the need to purchase more goods for consumption is lost likewise the acquisition of raw materials for production. With this going on in the country, the economy of the country is at stake.
Increase in poverty: The advent of the new naira notes left the whole nation with poverty because it has in a way managed to cease the supply of money in the country without the release of the new notes. This has left the people with an increased level of poverty which in contrast makes the poor to become poorer and the rich to get richer. This is shown as politicians get more of the currency from the bank paying a huge amount to bankers while those of the low class are left without money. This shows that the money was meant for a particular set of people in the country.
Increase in corruption: This policy brought about increase in the stealing of Nigerian money by politicians and corrupt leaders which for the moment has led to bad practices such as rigging of election results since the money was used by politicians to bribe INEC officials to gain positions which they are not qualify to occupy.
Extreme stress on the masses: The policy brought about stress on the masses whereby you see people piling up at the ATM machine to withdraw the new naira notes and most at times the ATM is empty and if in a given opportunity there seemed to be money, hence, the withdrawal at a very little and unsustainable amount. This has affect a whole lot of people in the nation that the cries of both the young and the old about the current situation in the country is now heard upon the housetops of foreign nations.
It is a form of stealing money from people: The outcry of Nigerians for help on the issue of money is high, this policy brought about stealing not from the rich but from the poor ones, this is why the cry of the people is becoming alarming. Since there is no supply of the new naira notes, it seems the country is operating a cashless system, hence, when and individual carryout a transaction on his or her account, the charges levied on the individual is almost close to or more than the transactioade. For instance, if I make a transfer for the purchase of two hundred naira bread, the charges from the bank cannbe one hundred and fifty naira. Even those at the Point Of Sale (POS) cannot save the masses when they are being consulted. Withdrawal of ten thousand naira takes the charge of five thousand naira, dividing the money equally, this has brought an embezzling spirit not only on our leaders but also on the poor masses learning to steal from the fellow poor ones.
(b). The nexus between the naira redesigned notes and the money market equilibrium
From the onset, the view of money market equilibrium is seen to occur at the interest rate level whereby the quantity of money demanded is equal to the quantity of money supplied or that is in circulation in the economy. This in an attempt tries to show people’s motives for holding money as a financial asset either in cash with them or as a demand deposit in the bank or as a bond which would yield interest to the people.
For an economy to grow and for people to get interest to the asset they hold, they have to be rational in thought, this can be in a way for the people, when there is high interest rate in keeping money as an asset in bond, people tend to withdraw their money from the bank and keep it as bond in order to get an interest from it, this means that the demand for holding of money in the country is low compared to interest rate, also, in a situation where the is high need of money in the country due to interest rate from it maybe for purchase of raw materials and for production and consumption in the country, then, demand for holding of money at hand is high in the economy due to interest rate gotten from it. Now the function of the government and the Central Bank is to checkmate and balance the supply and demand of money in the economy in order for the economy to move smoothly. When there is equal supply and equal demand of money in the economy, then, the economy is said to be in equilibrium with the money market. Thus, when there is equilibrium supply and demand for money, there is a well utilization of the supply of money. I’m a situation whereby there is need for money to be held as bond whereas the is surplus supply of money, then, there is disequilibrium, also, in a situation whereby there is need for money to be held by the people and also by the bank in order to carryout production and consumption in the economy, and whereas thre is little supply of money, this is also said to be a disequilibrium money market.
Haven looked at what money market equilibrium is all about, now comparing it with the situation on ground vis-a-vis the redesigned naira notes and the aftermath of what it has left behind we go this way.
Looking at the condition of the country now, we can deduce that people especially the poor and the work force of the country are highly in need or demand for the supply of money in the country because the money at hand with the people before the introduction of the new naira notes have all been ceased by the government and the Central Bank, leaving the people with nothing to hold unto, but on the contrary, we see the the demand deposit in the bank has been withheld from the people not even minding the high and clarion need for the money. Thus, instead of the economy growing in a speedy rate, it is decreasing because the urgent need for the supply of money has been withheld. Unlike holding the money as bond which should have generated interest for the people, all the money in at demand deposit which at the money is said to be in a fixed state or in a fixed account which has an infinity term of release. Looking at this critically, we can say that the economy is drastically suffering from a highly and negatively disequilibrium state of money supply in the economy, and at this level, there is no other option to be made since holding the money in bond is not there and the demand deposit has been withheld.
I’m summary, we can boldly say that, the nexus or the link between the redesigned naira notes and the money market equilibrium is negative which is adversely affecting the economy of Nigerian.
(c) Will this new policy promote equilibrium in the money market?
It is well to say that haven seen the effect of the policy and the outcome of it in the nation within a short period of its manifestion, it will not in anyway make way for an equilibrium money market. A point of reference to back up my statement can be traced to my local market here in cross river state, where an astonishing shock overwhelmed me to see that on the market day that formerly used to be filled with many buyers and sellers, behold, I was able to count the number of people who were able to come to the market for purchase of goods that day. The.market was scanty as never before, while there were few buyers and sellers due to lack of money.
This shows how drastic the economy is falling away because, people are willing to produce and sell goods but the purchasing power and capital has being withheld by the government, also people are willing to buy goods and consume from producers but their assets have being withheld by the government making it difficult to access.
In summary, this policy cannot bring about equilibrium in the money market unless the government of this country can look into it, making readjustment and following suite the adjustment made.

NAME: UDEZE KELECHI BLESSING
REG NO:2019/241719
DEPT: ECONOMICS EDUCATION
EMAIL: blessingkelechi74@yahoo.com
ASSIGNMENT ON MACRO ECONOMICS (ECO 301)
QUESTION: On 26 October, 2022, Nigeria’s CBN announced the introduction of redesigned 200, 500, and 1,000 maria notes into the country’s financial system. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this, you are required to discuss and analyse the merits and demerits of this policy initiative adopted by the CBN. Secondly, what is the nexus between Naira redesign money market equilibrium? Will this new policy promote equilibrium in the money market? Discuss this comprehensively.

1) Introduction:
The Central Bank of Nigeria (CBN) announced that the bank would release re-designed naira notes by December 15, 2022, while existing notes would seize to be regarded as legal tender by January 31, 2023. Through this policy,CBN hopes to control the money supply, and inflation as well as curb counterfeit currency and ransom payment to kidnappers and terrorists.
Also, the apex bank noted that available data indicated that N2.73 trillion out of the N3.23 trillion currency in circulation was outside the vaults of commercial banks across the country, and supposedly held by members of the public. It also noted that the Nigeria currency in circulation has more than doubled since 2015, rising from N1.46 trillion in December 2015 to N3.23 trillion as at September, 2022. Despite the various monetary policies measures and reasons for the re-design of the naira by the CBN, there are positive and negative effect of the redesign. Though, the introduction of these notes was also aimed at enhancing the efficiency of the payment system and to ease the difficulties associated with high-volume cash transactions. However, since the notes were unveiled, Nigerians have been struggling to access them from banks and ATMs. This essay will discuss and analyze the merits and demerits of this policy initiative adopted by the CBN. Secondly, we will examine the nexus between Naira redesign, money market equilibrium, and whether this new policy will promote equilibrium in the money market.

2a) Merits of the policy initiative:
The introduction of the redesigned notes can bring about the following benefits:
Improved efficiency: The redesigned notes are expected to enhance the efficiency of the payment system by easing the difficulties associated with high-volume cash transactions.
Curbing Counterfeiting: The new notes come with enhanced security features that make it more difficult to counterfeit.
Reduced transaction cost: The introduction of the new notes will help reduce the transaction cost associated with cash transactions, especially for individuals and small businesses.
Promoting cashless policy: The new notes are expected to promote the cashless policy of the CBN by reducing the volume of cash in circulation.

2b) Demerits of the policy initiative:
Cost of printing: The cost of printing the new notes can be high, which could result in an increase in the budget deficit.
Limited availability: Since the introduction of the new notes, Nigerians have been struggling to access them from banks and ATMs. This has led to frustration and delays in completing transactions.
Inflation: The introduction of the new notes could lead to an increase in inflation, especially if there is an excessive supply of cash in circulation.
With the new policy, financial dollarization is imminent. Most hoarded local currency will be converted to dollar as a saving asset or store of value, thus, intensifying dollarization trend in Nigeria.
Also, from the monetary economics literature, a decrease in liquidity is likely to result in reduced economic activity, which translates to lowered GDP, and increased unemployment Thus, the apex bank must apply caution in implementing the policy as well as learn from the experiences of other developing economies such as India, venezuela, and Zimbabwe.

3) Nexus between Naira redesign, money market equilibrium, and promotion of equilibrium in the money market:
The redesign of the Naira can have a significant impact on the money market equilibrium. Money market equilibrium refers to the point where the demand for money equals the supply of money in the economy. The introduction of the new notes can affect the money market equilibrium in the following ways:

Increase in money supply: The introduction of the new notes can increase the money supply in the economy, which can lead to an increase in demand for goods and services, resulting in an increase in prices.
Interest rates: The redesign of the Naira can affect interest rates in the economy. If the CBN increases the money supply by printing more currency, interest rates are likely to decline. This can lead to increased borrowing and investment, which can boost economic growth.

4) Will the New Policy Promote Equilibrium in the Money Market?
Yes, the new policy initiative to reduce the cost of cash transactions and promote cashless transactions can help promote equilibrium in the money market. Equilibrium in the money market refers to the situation where the demand for money equals the supply of money. When there is an excess demand for money, interest rates tend to rise, and when there is an excess supply of money, interest rates tend to fall. By reducing the cost of cash transactions and promoting cashless transactions, the new policy initiative can help increase the supply of money in the economy. This is because cashless transactions are more efficient and cost-effective than cash transactions, which can encourage more people to adopt cashless payment systems. As more people adopt cashless payment systems, the demand for money may also increase as economic activity increases. This can help promote equilibrium in the money market and help stabilize interest rates. Overall, the new policy initiative to promote cashless transactions can help promote equilibrium in the money market, which can have positive effects on economic activity and growth.

5) Conclusion:
In conclusion, the introduction of the redesigned Naira notes by the CBN has its merits and demerits. While it can enhance the efficiency of the payment system, reduce transaction costs, and curb counterfeiting, it can also lead to an increase in the money supply, inflation, and limited availability of the new notes. However, the new policy can promote equilibrium in the money market by reducing the cost of cash transactions and promoting the cashless policy of the CBN. Overall, the CBN needs to address the challenges associated with the introduction of the new notes to ensure that it achieves its intended objectives.

NAME:SIMON PATIENCE PRECIOUS
REG NO:2019/244760
DEPARTMENT:ECONOMICS
The introduction of the redesigned 200,500 and 1000 naira notes into the country’s financial system featured several changes.Some of the merits of the redesign include:
1. Improved Security: The new Naira notes have enhanced security features, such as optically variable ink, window threads, raised print, and gold patches, making it more difficult for counterfeiters to duplicate. The improved security features are expected to reduce the incidence of fake currency in circulation, thereby maintaining the integrity of the currency.
2. Modern Designs: The new Naira notes feature modern designs that reflect the country’s culture, heritage, and aspirations. The notes feature portraits of important national figures, such as Alvan Ikoku, Nnamdi Azikiwe, and Obafemi Awolowo, as well as iconic landmarks like the Central Bank of Nigeria’s headquarters and the National Assembly Complex. The new designs help to promote national pride.
3. It paved a way for the next generation of the financial system which is cashless economy.
4. It helped to reduce impulse buying since the cash is not easily accessible.
5. It helped in reducing the rate of embezzlement by the government officials.
Just like it has advantages, it also has numerous disadvantages and some of the Demerits are:
1. High Cost of Production: One of the potential demerits of the redesign of the new Naira notes is the high cost of production. The Central Bank of Nigeria invested a considerable amount of resources in designing and printing the new notes, which may have resulted in increased production costs. This could potentially result in a higher cost of currency production, which may impact the economy negatively in the long run.
2. Inconvenience to Some People: Some people may find it inconvenient to adapt to the new currency designs, particularly those who have grown accustomed to the old designs. Some may also have difficulties recognizing the new features of the notes, particularly the visually impaired who may need to learn new tactile features and also the old women in the market
3. Counterfeiters may still try to make fake notes: Despite the improved security features of the new Naira notes, some counterfeiters may still try to duplicate them. Criminals who specialize in making counterfeit notes may work to discover and exploit any weaknesses in the new notes, putting the integrity of the currency at risk.
4. Scarcity:It brought about scarcity of cash which really restricted the common man,people queuing to get cash from the ATM for a long period of time just because POS people started selling cash at high rate
5. Inaccessible: the new naira notes became inaccessible because few was in circulation and not everyone was able to get it
6. It also brings about failure in the network system of banks because many adopted online banking which caused a lot of traffic,making some transactions hang and USSD codes not working.
7. The most painful disadvantage was that market women and a lot of sellers refuse to be paid with bank transfer because a lot of people started defrauding sellers all in the name of cashless policy,so it promoted illegal activities.

The nexus between Naira redesign and money market equilibrium is quite complex. theoretically, the redesign of the naira notes should not have a direct impact on the money market equilibrium, as the redesign does not affect the supply or demand of money. However, in practice, the availability and accessibility of the new notes can affect the money market equilibrium.In the case of Nigeria, the struggle to access the new notes from banks and ATMs has created a shortage of cash in circulation. this shortage of cash has lead to an increase in interest rates, as people are willing to pay more to access the limited cash available. this increase in interest rates can have an impact on the overall money market equilibrium. If the interest rates are too high, it can lead to a decrease in investment and spending, which can ultimately lead to a decrease in economic growth.The success of this new policy initiative will depend on the ability of the CBN to manage the availability and accessibility of the new notes in the

Will this new policy promote equilibrium in the money market?
Money market equilibrium refers to the state where the demand for money equals the supply of money in the market. In other words, it is the point at which the quantity of money demanded by individuals and institutions is equal to the quantity of money supplied by the central bank or other financial institutions,at this point, the interest rate in the money market is at equilibrium, and there is no excess demand or supply of money. A currency redesign can lead to changes in the supply and demand of the currency, which can affect the exchange rate and the purchasing power of individuals and businesses.
In the case of Nigeria, the demand for money right now has basically exceed the supply of money and this will cause the interest rate to increase and this also will lead to disequilibrium in the money market because the demand and supply of money are not equal.

Discuss and analyse the merits and demerits of the redesign 200, 500, 1000 in Nigeria Financial system.
The introduction of the redesigned 200, 500 and 1000 in Nigeria Financial system with a lot of merits and demerits to both the economy and the citizens.
MERITS
1.CBN believs that the redesigned of the currency will help deepen our to entrench cashless economy.
2.CBN also believes that the introduction of the Naira notes 200, 500, 1000 will be a complement by increasing the minting of our e-naira.
3. It will further rein in the currency outside the banking system, thereby making monetary policy more efficacious.
4. Also in view of the prevalent level of insecurity situation in the country, the CBN is convinced that the incidents of terrorism and kidnapping would be minimized as access to the large volume of money outside the banking system used as source of hands for Ransome payments will begin to dry up.
DEMERITS
1. Nigeria has in the past, had reasons to change, redesign and redominate it’s currency, but never in the annals of the nations political history has such an exercise brought so much hardship, confusion, apprehension, rancour and despondency like is currently being witnessed and experienced
2. Perceptible disobedience to the order of the supreme court, pitching states against the federal government and gradually descending to the masses against the federal government, resulting in unimaginable angst, expressed in wantom destruction of properties of Financial institutions and even loss of lives .
3. Many Nigerians who do not have bank account have been left stranded, as they are unable to exchange their old notes for new ones
Nexus between Naira redesign money market equilibrium
Money market is an economic model for describing a countrys money supply and demand
The money market is an economic model describing the supply and demand for money in a nation.
Consumers and businesses have a demand for money including cash and checking and savings accounts and they use Financial institutions for this purpose
Equilibrium of the policy in the money market
The Central Bank of Nigeria (CBN) has said the cash policy will enhance the efficacy of monetary policy as more economic agents will resort to more use of cheques and e-payments while more currency in circulation will be captured within the banking system.
Speaking on ‘Cashless Economy: The Role Of Microfinance Banks’ at a capacity building programme organized by the Lagos State Chapter of the National Association Of Microfinance Banks (NAMB), Mr. David Adelana, Senior Bank Examiner, OFISD, CBN, said CBN’s stabilization measures will become more effective as higher proportions of transactions will be done through cheques and electronic payments (e-payments).
“The policy would enhance the efficacy of monetary policy operations and economic stabilization measures and balance genuine currency transaction demands and speculative market behaviours.“As at March 2011, currency in circulation stood at N1.42 trillion while that outside banks’ vaults stood at N1.025 trillion as at February, 2011. Cashless banking is the route to financial inclusiveness and inclusive development.”
Speaking on the role of MfBs in the cashless economy, Adelana said MfBs who become agents to mobile payment service providers can offer mobile deposit and withdrawal of money, anytime, anywhere nationwide.
“Mobile payment revolu-tion is currently sweeping across the African continent and Nigeria shouldn’t be out of the modern and global trend in enjoying such initiatives by adopting technological practices that make lives easier.
“The mobile payment industry will play a huge role in the development of the Nigerian economy.
“Already, 11 Mobile Payment Service Providers (MPSP) – Pagatech, Fortis Mobile, UBA/Afripay, GTBank, eTranzact, Monetise, Eartholeum, Paycom, FET, Ecobank, and Kudi – have been licensed.
Eartholeum, Paycom, FET, Ecobank, and Kudi – have been licensed.
“16 MfB operators applied for MPSP licenses and ran pilot tests for about 6 months. Agents can provide payment services like social pay-outs (airtime top-up, loan repayment, local money transfer, bill payment government collections, etc), funds transfer.”

NAME: UGWU SARAH CHINECHEREM
DEPARTMENT: ECONOMICS EDUCATION
REG NUMBER : 2019/241843

Macro Online Quiz/Discussion (Naira Redesign and Monetary Equilibrium)–27-2-2023
On 26 October, 2022, Nigeria’s CBN announced the introduction of redesigned 200, 500 and 1,000 naira notes into the country’s financial system. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this, you are required to discuss and analyse the merits and demerits of this policy initiative adopted by the CBN. Secondly, what is the nexus between Naira redesign money market equilibrium? Will this new policy promote equilibrium in the money market? Discuss this comprehensively,

MERITS
1. The Naira redesign helped a lot of citizens to save money due to the cashless situation
2. The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on October 26, 2022, announced policy initiatives to redesign the N200, N500, and N1, 000 denominations, and subsequently introduced the cash withdrawal limits to regulate the movement of cash in the system as well as solve other challenges including currency counterfeiting among others.
3. It is expected that the ransom money that is yet to find its way into the banking system would be brought out to be exchanged for the newly redesigned notes. This could also lead to crime detection and probable prosecution as many who could not explain the sources of their wealth may find themselves in trouble with law enforcement agencies.

4. Also, politicians who have stacked away money for the purpose of vote buying during the election may have a difficult time changing their notes into the new naira while bringing such money back to the system could upset some of their plans.
5. Also, the cashless policy has led to a reduction in banditry and kidnappings, which were rampant in the recent past.
6. The redesign is also expected to strengthen the economy, reduce the expenditure on cash management, promote financial inclusion, and enhance the CBN’s visibility of the money supply.

DEMERIT
1. Nigeria economy have been falling down due to redesign of Nigeria naira note, bcs there is not availability new naira note in commercial bank.
2. the current naira redesign would further take the Central Bank of Nigeria cashless policy initiative a nudge higher by raising the bar for more stakeholders’ onboarding of the Central Bank Digital Currency CBDC.
3. The huge cost of printing the new note could run to trillions of naira, which the economy may be least prepared for with the current state of the economy, the state of the nation’s foreign reserves since the currency is expected to be printed abroad and the implications for the balance sheet of the central bank.
4. The banking hall was jam-packed with people scrambling to exchange their old currency for new notes, putting pressure on the lean capacity of the banks to process currency.
5. Armed robbery could escalate with criminals targeting bullion vans to be used in the distributions of the new notes in some rural areas in a bid to minimize their losses on the old naira notes stacked away previously in order to evade the law.
6. Both the CBN and the banks will face logistic challenges in the distribution of the new notes across the country with the rate of crime in form of banditry and terrorism across the country escalating. Also, security around the banks would be threatened because of the huge demand for the new notes as criminals could also take advantage of the change-over to commit their illicit trade.

7. There is the possibility that counterfeiters may take advantage of the lag in distribution to circulate their own notes in some parts of the country, which may not be effectively covered by the publicity around the new notes.

*what is the nexus between Naira redesign money market equilibrium? ANS:
The connection between the Naira redesign and money market equilibrium is the theory of liquidity preference which state that the interest rate adjusts to balance the supply and demand for the economy’s mostly liquid asset (money). And the federal government through the CBN decreases the money (new Naira note) supply balances, and the cashless situation we are expressing is being caused by the decreases in supply of Naira redesign by the Central Bank of Nigeria, and it lead to a raise in interest rate.

*Will this new policy promote equilibrium in the money market? ANS:
Yes it will, the equilibrium interest rate rise’s and the higher the interest rate, people satisfied to hold the smaller quantity of real money balances. As a reduction in the money supply occurs, it causes the money supply curve to shift to the left and raising the equilibrium interest rate. Higher interest rates lead to a shift in the aggregate demand (lr function)curve to the left.

(1i) MERIT OF NAIRA REDESIGN
(I) Reduction of inflation
(ii) Reduction of corruption
(iii) Increase in gross domestic product
(iv) Stablizing the economy
(v) Increase in standard of living
(I) Reduction of inflation: The introduction of new naira redesign helps to reduce the rate of inflation in an economy because there won’t be enough money in circulation for people to have access to that they will be spending recklessly and also spend it on things that are unnecessary but this policy will help to curb inflation in an economy.
(ii) Reduction of corruption: This policy helps in reduction of corruption in a country because there won’t be enough money for people to have access to that they can use to plan what is not good for the country and also reduces kidnapping in a country because those people that are involved in the act already knows that there is no money to pay them if they kidnap somebody and request for a huge amount of money so it reduces kidnapping and the rest in an economy.
(iii) increase in gross domestic product: The introduction of the new currency helps to increase the GDP of a country because people will like to work more since they know the money is scarce and by doing so they are indirectly contributing to the growth of the GDP of the country.
(iv) Stablizing the economy: it helps in Stablizing the economy since there won’t be enough money in circulation so demand will equal supply and by doing that it will Stablize the economy.
(V) Increase in standard of living: it helps to raise standard of living of individuals in an economy since money is not enough for individuals to go about their daily activities, they will definitely reduce their spending and with that producers can decide to lower the prices of goods so that individuals will be able to afford what they desire and with that their standard of living in increasing.
(ii) DEMERIT OF NAIRA REDESIGN
(I) Inability to access money
(ii) Scarcity of the money
(iii) Insufficient funds in circulation

(i) Inability to access money: The policy of naria redesign has made it very difficult for people to access their money in banks because the money they normally deposit in banks for customers to withdraw are not always enough to meet their daily transactions and it has affected some business to extent of folding up because no more to continue their businesses.
(ii) Scarcity of money: The policy has greatly influenced the scarcity of money in a country because people will asked to deposit all their old currency in bank and their are left with nothing to go on with their business and the new currency is nowhere to be found either so it is greatly affecting the the country and economy as a whole.
(iii) Insufficient funds: It has also made the amount of money in circulation to be too small compare to the demand of people, which will eventually leads to disequilibrium of an economy because demand is greater than supply, which is not good for the growth of an economy or our country that is still underdeveloped.
(2) The nexus between naria redesign and money market are positive because this policy tends to last for a short period of time and it will really increase interest rate because if there is decrease in quantities of money supplied the interest rate will increase because people will like to hold more money than to invest and they will be willing to pay any amount of interest attached to the money they want to borrow from money market because they don’t have choice due to lack of funds in circulation and they will be willing to pay the interest rate just to see what they will be using to run their daily activities and by doing that interest rate will be high because they notice that the demand for money has exceed the quantity of money supplied in the economy and that will lead to disequilibrium of the economy and the only way to solve the problem of disequilibrium is for CBN to push more in circulation so that demand can be equal to the quantity of money supplied which will lead to the equilibrium of an economy because all things being equal that quantity demanded of money is equal to the quantity of money supplied.

ONUGWU UZONNA MICHAEL 2019 /245479
ECONOMICS MAJOR.

MONETARY POLICY (NAIRA REDESIGN)
On the 26th of October 2022 The Central Bank of Nigeria (CBN) announced the introduction of redesigned Naira notes of 200, 500, and 1,000 and new deposit and withdrawal policy into the economic system, to take effect on the 15th of December 2022 where the old and new notes will co-exist as legal tenders until the 31st of January 2023 when the old notes will cease to be legal tender. In effect to this every old note in personal possession or business possession is expected to be returned to commercial banks for deposit or cash swap for the new notes. According to the CBN under the leadership of Prof. Godwin Emefiele, claims that the Naira redesign and cash deposit and withdrawal policy is necessary to address the issue of those people involved in currency fraud as their major source of income so that the CBN will be in control of the amount of cash flow and circulation in the economy, to encourage a more cashless economy and to strengthen the economy. There have been some down turns following the effectiveness of the new CBN policy ranging from scarcity of the new notes, inadequate withdrawal of cash, poor network for online transactions amidst other set backs.
MERITS OF THE NAIRA REDESIGN, CASH WITHDRAWAL AND DEPOSIT POLICY
(1). Currency in Circulation Control ;
According to the CBN’s Governor, Pof. Godwin Emefiele, through a report from Vanguard newspaper on the 3rd of February 2023, “the Naira note in circulation in 2015 was N1.4trillion and in 2023 N3.23trillion, but out of these money only N500billion was within the banking system and N2.7trillion have permanently been in individuals hand kept dormant at homes”. These money generally is supposed to be collected, invested and later returned into the banking system to booster the economy, which have not been the case.
According to the Governor, Prof. Godwin Emefiele, since the insertion of this exercise the CBN have succeeded in bringing back N2.1trillion into the banking system, remaining N900billion in individuals hand.
(2). Formalisation of Business Activities ;
The short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government.
In the long-term, the policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance. As experiences from other jurisdictions have shown, effective currency redesign can support regulatory reform, increased legislative reach and coordinated fiscal and structural policies.
(3). EASY LOAN ACCESS ; Loans will become easier and interest rates may come down. As banks will have more money so more loans will be given out which will increase the money supply in the market.
DEMERITS OF THE NAIRA REDESIGN CASH DEPOSIT AND WITHDRAWAL POLICY
(1). Slowing down of domestic businesses ; due to the scarcity of the new notes on the short- run, the turnover rate of Small Medium Businesses (SMB’s) have been reduced and business activities slowed.
(2). National Unrest; due to the scarcity of the new naira notes Nigerians find it hard to run their day to day activities leaving many people stranded and frustrated leading to violence.

THE RELATIONSHIP BETWEEN THE MONEY MARKET AND NIGERIA MONETARY POLICY (NAIRA REDESIGN)
With the increase in the CBN’s requirements of 27.5% to 32.5% of the reserve ratio, it leaves commercial banks with less money to give as loan. It will increase the aggregate demand for money and the interest rate will also increase on the short – medium term. This will shift the demand curve to the right and the supply curve to the left, and the nominal interest rate will rise simultaneously, shifting the money market away from equilibrium.

OKECHUKWU TIMOTHY CHUKWUEZUGOLUM
2019/244962
ECO/SOC
The idea behind pulling currencies and redesigning them from time to time, is an operational one, and it is all about risk management. Nigeria has a big challenge with currency counterfeiting, with many such operations all over the country. Nigerians have even been caught in the past counterfeiting several currencies in other countries – Uganda and Kenya as cases in point. Within Nigeria, there have been major busts of currency counterfeiting operations in every state. One chap was caught while attempting to print N20 billion in Banana Island and Parkview Estate in 2019. Another pastor in Ikorodu was caught in 2013 and should still be in prison. A mere Google search reveals many such busts all over the country. perhaps a fair proportion of the N500 and N1,000 in circulation is forged. A central bank or currency management regulator in a country should not sit back and watch. 17 years is a very long time to rein such people in. Add to that the fact that Nigeria thrives on corruption and many corrupt people hold cash in bulk in their soak-aways or overhead tanks. What about the fact that Nigeria has waited for this long to deploy the instrument of finance against kidnappers, bandits, terrorists and all these other guys who have destroyed our society? We have been pumping money into buying guns and helicopters instead of following the money and squeezing these criminals out of their comfort zone. This terrible situation could only have lasted this long because we have now made disunity into a badge in Nigeria. It looks like very little brainstorming goes on around our major problems. Perhaps those who lead us at every level preferred the money slushing around for so long. But everything must come to an end at some point.

In the time since the announcement was made, some Nigerians have been throwing tantrums of all sorts, some alleging that the timing was not right or that this was not the priority for now. Most surprising are very respected people including intellectuals in the president’s economic team. Also, the naira had initially lost value against the dollar, depressing to as low as N900 as some people ‘fled’ to the US dollar and away from the Naira. The rationale for a normal person to start changing their naira to dollar is convoluted but those who have no hope in Nigeria – because they are not making any efforts to help but to game the system – say it is normal. This option is for Nigerians with slush funds though. A salary earner will not do that because dollars are not accepted – or understood – in the local markets. As that went on, these ‘highly sophisticated’ economic thinkers pushed for the CBN to abandon the ‘official’ rate and take on the value of what we know as the ‘black market’ for the Naira. From a former Governor of the central bank to economic advisers and every one in between, they almost pushed Nigeria into the abyss. No thoughts were given to the consequences of such a flippant decision. Even an illiterate of economics knows that if the Naira was valued overnight by the CBN at N900, the black market will move to N1800 or N2000. For our own good, these guys have to be shut up. They have enough dollars stashed away and want to keep dictating the pace. We also have to be thankful that the CBN is not easily manipulable to them. Unfortunately, the Vice President is in this camp, and keeps making pronouncements that are directed at devaluing the Naira. He was again at the NESG opening event saying something about how the Naira is not properly valued. I think I will hold him responsible for most of the naira’s woes since 2015 when they came into office. He it was who signed off that the N198 official rate be equated with the ‘black market’ in 2016. Official rate became N360. Buhari was abroad sick. Black market moved to N500 and has since been unreachable.
How can a country plan on black market rates? How can black market rates be quoted openly in newspapers and even network news? Except of course because our hearts are black and evil. Black market is an illegal market even though that illegal market is traded openly in Nigeria and everyone has access to it. Bureaux de Change should not trade standing on the street or under trees. They should be in their offices and all transactions (even $100 changed to Naira) must be receipted and documented. Let anyone who needs to buy or sell dollars take their identification along and BDCs must be punished by CBN if they are found to ignore or forge documentation (because they do that a lot). Buhari has a big role to play here to at least retrieve some of his lost image. Note that his Vice is working at cross purposes when it comes to the value of the naira. He belongs to the ultra-right wing on matters of the economy and with those guys, there is no hope for the common man.

The Naira rate then recovered in the ‘black market’ from N900 to almost N650. Recall that we could have been pushed to adopt N900. We should probably take a lesson from the disaster going on in Ghana. When that country redenominated its currency from 9,200 Cedis to $1 in 2007, Nigeria almost copied that idea. I was one of those who pushed then through my writings that we were not ripe for that. Thankfully, President Yar’Adua did not agree. Ghana ‘floated’ its currency, following the advice of foreign bodies that she always listens to. They enjoyed the euphoria of a faux ‘strong’ currency for a while when the new Ghana Cedi was 0.92 to $1. Then they were lulled to sleep. Today, 0.92 has become GhCedi 15 = $1. In other words, what was 9,200 has become 150,000. Nigeria has been lucky to date, in spite of our many excesses.

So, somehow the Naira redesign move now has multiple implications and is not only about operational counterfeiting issues but also a window to establish a better trajectory for the naira in terms of its value. The Central Bank must seize this opportunity and I also advise President Buhari to do the same. In Economics we always talk about unintended consequences. The first phase was the slump in the value of the naira as people moved money from their soak-aways to buy foreign currency, especially those who are too criminal to put same in a bank. A second phase could be marked by the strengthening of the Naira in that same black market. A third face may be precipitated by the CBN if it acts quickly and decisively to take the narrative away from speculators and currency saboteurs. Already, those who never wish well for Nigeria are gloating that the currency will fall to N1,000 now that the N650=$1 cannot be held firm.

GUTON DAMILOLA MAUTON
2019/245651
ECO/SOC
Experts say that there is no doubt the advantages of the currency redesign exercise will enormously benefit the economy in the long run, as emphasised by the CBN Governor.
If anything, the number of employment opportunities already created by the policies further demonstrates that rather than impoverishing Nigerians, the cashless policy has the potential to boost wealth creation across the country.
Experts say that there is no doubt the advantages of the currency redesign exercise will enormously benefit the economy in the long run, as emphasised by the CBN Governor.
If anything, the number of employment opportunities already created by the policies further demonstrates that rather than impoverishing Nigerians, the cashless policy has the potential to boost wealth creation across the country.
Already over 30,000 super agents had been engaged to carry out mobile services across the country.
Further highlighting the benefits of the cashless policy, Emefiele pointed out that generally, currency redesign policies (sometimes called demonetization policies) are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties.
“Chiefly, it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth,” Emefiele said.
According to him, the macroeconomic impacts of currency redesign are multidimensional and could seem uncertain especially at this early stage when its inconvenience is widespread.
Emefiele said, “By spurring more people to use bank accounts, this policy will further increase bank account ownership and increase the use of accounts by enhancing people’s saving behaviour, and further encourage some hitherto informal business operators to formalize the pattern of transactions and adopt more formal settlement channels.
“In addition, the short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government.”

Since the CBN embarked on the redesign of the Naira as well as expanded the implementation of the cashless policy programme, which began in 2012, a section of Nigerians, apparently with vested interests have not considered the benefits of the policies but have rather criticised them and tried to stir public objection.
Critics of the cashless policy have argued that it would further impoverish Nigerians and create unemployment in the financial value chain. But they lacked evidence to buttress their rejection.
It is not surprising that most of the objections to the central bank policies are by those who currently benefit from the rot in the system – politicians, and other corrupt public officials who take undue advantage of the opaque system of administration that does not allow for transparency in government business.
Corruption remains the biggest challenge facing the country and has continued to retard its growth trajectory.
At 62, Nigeria is still groping in the dark in search of its pathway to socio-economic prosperity – bad leadership, weak institutions, and abuse of due process are among a litany of moral and ethical deficits that have held it bound over the years.
Corruption, including vote-buying among others, has also influenced the selection of those in the seat of power: often times those who are not qualified have succeeded, and their performance had been abysmal.

Although it is one of the government’s most important economic tools, most economists think monetary policy is best conducted by a central bank (or some similar agency) that is independent of the elected government. This belief stems from academic research, some 30 years ago, that emphasized the problem of time inconsistency. Monetary policymakers who were less independent of the government would find it in their interest to promise low inflation to keep down inflation expectations among consumers and businesses. But later, in response to subsequent developments, they might find it hard to resist expanding the money supply, delivering an “inflation surprise.” That surprise would at first boost output, by making labor relatively cheap (wages change slowly), and would also reduce the real, or inflation-adjusted, value of government debt. But people would soon recognize this “inflation bias” and ratchet up their expectations of price increases, making it difficult for policymakers ever to achieve low inflation.
To overcome the problem of time inconsistency, some economists suggested that policymakers should commit to a rule that removes full discretion in adjusting monetary policy. In practice, though, committing credibly to a (possibly complicated) rule proved difficult. An alternative solution, which would still shield the process from politics and strengthen the public’s confidence in the authorities’ commitment to low inflation, was to delegate monetary policy to an independent central bank that was insulated from much of the political process—as was the case already in a number of economies. The evidence suggests that central bank independence is indeed associated with lower and more stable inflation.

OKECHUKWU CHISOM PETER
2019/244670
ECO/SOC

As you all know, currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2(b) of the CBN Act 2007. Indeed, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank.
Besides, the general practice across the globe is that a central bank should normally redesign its currency within 5-8 years. From the on-set of this currency redesign program, we made it clear that for over 19 years, the CBN has not been able to undertake this important currency and liquidity management function that has important ramification for the effectiveness of monetary policy.
and exchange rates relatively stable. Secondly, we aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the Military are making good progress in this important.
Available data at the Central Bank of Nigeria showed that in 2015, Currency-in-Circulation was only N1.4trillion. As of October 2022, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the Banking System and N2.7 trillion held permanently in people’s homes. Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN. It should also be noted that the Notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth.
So far and since the commencement of this program, we have collected about N2.1 trillion; leaving us with about N900 billion . To achieve effective distribution, of the new currency the CBN has taken the following steps:
We held several meetings with Deposit Money Banks (DMBs) and provided them with Guidance Notes on processes they must adopt in the collection of old notes and distribution of the New Notes to all Nigerians. These includes specific directives to DMBs to load new notes into their ATMs nationwide to ensure an equitable/transparent mechanism for the distribution of the new notes to all Nigerians. This approach was initially adopted following reports that some DMBs were favoring their Prime customers at the expense of their small account holders at bank branches. After sometime, and in a meeting with the DMBs, we decided to allow withdrawals over the Counter but subject to no more than N20,000. We also gave instructions that bank branches be kept open on Saturdays and Sundays. At our last meeting held this morning, the CEO of the banks reported that although calm was beginning to return to their banking halls , their were still some areas of pressure and everything is being done to divert more resources to such pressure points in order to ease the tension. The Meeting further resolved to extend the Cash swap initiative nationwide and expand the number of participating agents as well as formally include some Micro Finance Banks in the cash swap initiative.
We commenced a nationwide sensitization through the Print and Electronic Media to create an awareness on the redesigned Notes to Nigerians including collaboration with the National Orientation Agency to reach all Nigerians across multiple channels.
We deployed 30,000 Super Agents nationwide to assist in our Cash Swap initiative in the hinterlands, rural areas, and regions underserved by banks in the Country to ensure that the weak and vulnerable ones amongst us can swap/exchange their old notes.
We deployed all our staff, particularly the Assistant Directors, Deputy Directors, and Directors in Abuja to proceed to all CBN branches Nationwide to join the mass mobilization campaign and monitoring programs, working with the Deposit Money Banks, Agents, and our Branch Controllers across the 36 states of the Federation. This is meant to ensure compliance with all our guidelines already issued for smooth implementation of the program. The CBN welcomed the participation of the EFCC, and ICPC who joined our monitoring teams nationwide and this has further enhanced compliance at bank branches and agent locations
We are happy that so far, the exercise has achieved a success rate of over 80 percent as about N2.7 trillion held outside the banking system has been returned. Nigerians in the rural areas, villages, the aged and vulnerable have had the opportunity to swap their old notes, leveraging the Agent Naira Swap initiative as well as the CBN Senior Staff nationwide sensitization team exercise.

Generally, currency redesign policies (sometimes called demonetization policies) are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties. Chiefly, it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth.
The macroeconomic impacts of currency redesign are multidimensional and could seem uncertain especially at this early stage when its inconvenience is widespread.
By spurring more people to use bank accounts, this policy will further increase bank account ownership and increase the use of accounts by enhancing people’s saving behavior. It could encourage some hitherto informal business operators to formalize the pattern of transactions and adopt more formal settlement channels.
In addition, the short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government.
In the long-term, the policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance. As experiences from other jurisdictions have shown, effective currency redesign can support regulatory reform, increased legislative reach and coordinated fiscal and structural policies.
In summary, the general benefits of a currency redesign include:
Reduction of Broad Money Supply: Effectively implemented currency redesign large causes a fall in money supply. This will lead to reduction of value of money in circulation and a deceleration of the velocity of money in the economy leading to less pressures on domestic prices.
Lowering Inflation: the policy is typically expected to cause deflation in the market as less cash holding reduces currency outside banks and retards money circulation. The accompanying decline in money supply will thus slow pace of inflation.
Collapse of Illegal Economy Activities: People who have earned money through illegal ways would be afraid to declare the money as they may be prosecuted by the Income tax department on the legitimacy of their income.
Easy Loans: Loans will become easier and interest rates may come down. As banks will have more money so more loans will be given out which will increase the money supply in the market and it will create inflation.
Before concluding this remark, let me state and sadly too, that we have observed some incidences of widespread hoarding and predatory activities of some vendors. We appeal to those involved in these nefarious activities to please desist from such practices. This is because , these actions if left unchecked could derail the achievement the objectives of the naira redesign policy.
a.Hoarding – We have noticed that some members of the public are hoarding the new notes thereby restricting their flow through the economy. Cash kept at home will not circulate but may fuel a perception of scarcity which leads to higher demand for the currency, signalling to those who don’t have an urgent or immediate cash need to store cash. The CBN would like to encourage the public to use alternative channels as much as possible for their transactions and hold minimal cash in line with the cashless policy.

Panic Queues – The CBN has also noticed long queues at some bank ATMs and banking halls. Whilst some of these withdrawal requests are genuine and DMBs continue to load the ATMs only with new notes, monitoring suggests that there appears to be some opportunistic and panic queuing. The Bank wishes to reassure the public that the new notes are available for all who need it at the appointed time. There is no need to queue for new notes if you have alternative channels of payment and don’t have an emergency cash need. We reiterate that the new redesigned notes are more than enough to go round for legitimate needs.
Damage of Bank Branches & Assault of Bank Personnel – It has also come to our notice that at some branches, customers have become aggressive, verbally and/or physically abusing bank staff. They have also damaged or destroyed bank property, premises, and assets. We enjoin Nigerians to be peaceful and law abiding when they visit bank branches as this wanton destruction will be counterproductive, reducing the number of financial access points in these communities.
Incidences of Economic Opportunism – We have also noticed that some Nigerians are capitalising on the transition to charge exorbitant fees or demand cash payment on the false pretext that POSs don’t work, especially at petrol stations. These selfish actions for personal monetary gain is creating hardship for Nigerians and may come at the expense of fellow citizens lives and livelihood.

OKORO OLUCHI RUTH (2019/241597)

On 26th October 2022, the Central Bank of Nigeria (CBN) introduced redesigned 200, 500, and 1,000 Naira notes into the country’s financial system. This policy initiative was aimed at promoting cashless transactions, improving the security features of the currency, and reducing the cost of printing currency. However, since the notes were unveiled, Nigerians have been struggling to access them from banks and ATM cash points. In this essay, we will discuss and analyze the merits and demerits of this policy initiative adopted by the CBN, and examine the nexus between Naira redesign and money market equilibrium.

Merits and Demerits of the Policy Initiative:
The introduction of the redesigned Naira notes by the CBN has both merits and demerits. Some of the merits include:

Improved Security Features: The new currency notes have enhanced security features that make them difficult to counterfeit. This will help to reduce the circulation of fake currency notes in the country, which will ultimately boost the confidence of Nigerians in the currency.

Reduced Cost of Printing Currency: The CBN has claimed that the introduction of the new notes will save the country a significant amount of money in the long run. This is because the new notes are more durable than the old ones and have a longer lifespan. This will reduce the need to print new currency notes frequently.

Promotion of Cashless Transactions: The introduction of the new notes is expected to promote cashless transactions in Nigeria. This is because the CBN has also introduced a new set of guidelines that will make it easier for Nigerians to use electronic payment channels instead of cash.

However, the policy initiative also has some demerits, which include:

Difficulty in Accessing the New Notes: Since the notes were unveiled, Nigerians have been struggling to access them from banks and ATM cash points. This is due to the slow pace at which the CBN is releasing the new notes into circulation.

Possibility of Inflation: The introduction of new currency notes into circulation can lead to inflation. This is because an increase in the money supply without a corresponding increase in production can lead to a rise in prices.

Nexus between Naira Redesign and Money Market Equilibrium:
The money market is the market where financial instruments with short-term maturities are traded. The introduction of the new Naira notes by the CBN is expected to have an impact on the money market equilibrium in Nigeria.

Firstly, the introduction of the new notes is expected to increase the money supply in Nigeria. This is because the CBN will be releasing more currency notes into circulation. This increase in the money supply can lead to a decrease in the interest rate, as there will be more money available for lending. This can lead to an increase in investment, which can ultimately lead to economic growth.

Secondly, the introduction of the new notes can also lead to an increase in demand for financial instruments such as Treasury bills and bonds. This is because investors may be more willing to invest in these instruments if they perceive them to be more secure. This can lead to a decrease in the interest rate on these instruments, which can further stimulate investment and economic growth.

However, the introduction of the new notes can also lead to inflation, as stated earlier. This can negatively impact the money market equilibrium, as it can lead to an increase in the interest rate, which can discourage investment and lead to a slowdown in economic growth.

Conclusion:
In conclusion, the introduction of the new Naira notes by the CBN has both merits and demerits. While the new notes have enhanced security features and can reduce the cost of printing currency, they have also been difficult to access, and their introduction can lead to inflation. The introduction of the new notes is expected to impact the money market equilibrium in Nigeria. While it can lead to an increase in investment and economic growth, it can also lead to inflation, which can negatively impact the interest rate and discourage investment.

To promote equilibrium in the money market, the CBN must carefully manage the introduction of the new notes into circulation. This can be achieved by controlling the pace at which the new notes are released, ensuring that the money supply is not increased too rapidly, and implementing measures to manage inflation.

Furthermore, the CBN can also promote cashless transactions by encouraging the use of electronic payment channels, which can help to reduce the demand for physical currency and promote economic growth. The CBN can also explore ways to increase the production capacity of the economy to ensure that an increase in the money supply does not lead to inflation.

Overall, the introduction of the new Naira notes by the CBN has the potential to promote economic growth in Nigeria. However, to achieve this, the CBN must carefully manage the policy initiative to avoid negative impacts on the money market equilibrium and the economy as a whole

Aniemeka Chijindu Dennis 2019/250915
Economics department
On October 26, 2022 the CBN received the approval of President Muhammadu Buhari to redesign the N200, N500, and N1000 Nigerian banknotes, and this was rolled out on December 15, 2015.
Available data from the CBN showed that in 2015, Currency-in-Circulation was only N1.4 trillion. As of October 2022, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the banking system and N2.7 trillion held permanently in people’s homes.
MERITS OF NAIRA REDESIGN
*. The principal aim with the currency redesign initiative is to make our Monetary Policy decisions more efficacious and as you can see; we have started to see inflation trending downwards and exchange rates relatively stable.: Nigeria’s headline inflation rate decelerated by 12bps to 21.34 percent, year-on-year in December, down slightly from a 17-year peak of 21.47 percent y/y in November, according to the National Bureau of Statistics (NBS) (although these statistics are yet to reflect on the prices of some essential goods and services).
*. Secondly, the aim to increase financial inclusion in the country by reducing the number of the unbanked population : as stated earlier the amount of money in circulation in the economy is about N3.23 trillion of which N500 billion is in the banking system while N2.7 trillion held permanently in people’s home. With the policy of Naira redesign it will help to lure out the N2.7 billion back into the banking system and be accounted for.
*. Thirdly, the aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the Military are making good progress in this important area.
Chiefly the Naira redesign policyis expected to reduce the amount of cash in the underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation.
The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth.
DEMERIT OF NAIRA REDESIGN
*. Poor timing of transition: The World Bank has warned the newly redesigned naira which went into circulation may have negative effect on economic activity especially poor Nigerians due to its timing and short transition period.
The Washington-based bank revealed this in a new report titled, “Nigeria Development Update.
The World Bank has warned the newly redesigned naira which went into circulation may have negative effect on economic activity especially poor Nigerians due to its timing and short transition period.
The Washington-based bank revealed this in a new report titled, “Nigeria Development Update.”
This came amid the mixed reactions that have been trailing the newly redesigned notes.
The Central Bank of Nigeria had last month unveiled new N,1000, N500 and N200 notes as part of measures to mop up excess cash in circulation, ransom payment for kidnapping, terrorism financing, counterfeiting, among others.
The World Bank, in its report, however, said the new policy would negatively affect small businesses especially those who day-to-day 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 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
*. Execution flaws: The cash crunch and the attendant economic and social dislocations created by the currency redesign policy of the Central Bank of Nigeria (CBN) have surfaced many design and implementation flaws that typically undermine the effectiveness of public policies. There are many lessons screaming to be learnt in the unfolding odyssey of this CBN policy. But the policy designers/implementers and the policy authorisers must demonstrate the capacity to learn, the humility to admit their errors, and, most importantly, the ability to undertake necessary course correction to avoid creating a greater crisis. Nigeria and Nigerians are going through it at the moment. With generalised insecurity, rising food prices, election-related anxieties, and petrol queues, there is enough tension in the land. The implementation of the Naira redesign policy has already created a spark. This should be avoided. At all cost. By all means.
The CBN has been busy pointing accusing fingers at those frustrating the implementation of the policy. Mr. Godwin Emefiele, the CBN governor, toed this path on Friday in his presentation to the Council of State. He reportedly laid the blames at the doors of hoarders, politicians, panicking public and economic opportunists. During his appearance before a committee of the House of Representatives on 31st January, Emefiele also said that some bankers were undermining the policy and that the apex bank was working with NFIU, ICPC and EFCC to bring the errant bankers to heel. And indeed, the anticorruption agencies have hauled in some bankers. Angry members of the public have also attacked a few banks and destroyed some money-dispensing machines. In some places, banks have closed down, further compounding the crunch.
*. The policy caused socioeconomic mayhem: This policy undoubtedly with it’s good intentions has thrown the socioeconomic structure of the economy into a serious dilemma. People struggling to get hold of the new currency, banks and other financial institutions not being able to dispense the currency, small businesses who make earnings through day to day cash transactions, POS agents charging exhorbitant amount of money just to get hold of the new currency and generally throwing the circulation of cash in the economy into disequilibrium.
THE NEXUS BETWEEN NAIRA REDESIGN AND THE MONEY MARKET
Statistically speaking the amount of money in circulation in the economy has dropped from N3.23 trillion to around N1.4 to 2.5 trillion which is obviously a decline in the amount of money in circulation and the supply of money is an exogenous variable controlled by the Apex bank CBN. Having stated the fact that CBN controls the amount of money in circulation then we move over to the demand for real money; going with the recent happenings in the country wereby citizens can’t access there hard earned money, exhorbitant POS charges and a whole lot of other variables obviously points out the fact that there is currently a total disequilibrium in the money market.
This is because there’s a shortage in the supply or circulation of money in the economy relative to it’s demand. This in turn influences the interest rate (the opportunity cost of holding money).
According to the liquidity preference theory the supply and demand for real money balances determines what interest rate prevails in the economy.
So whenever the money market is not in equilibrium (which is currently in disequilibrium in Nigeria) people try to adjust their portfolios of assets and in the process alter the interest rate.
With these being said I would like to state it clearly that the interest rate in Nigeria is below the equilibrium because the quantity of money demanded exceeds the quantity supplied which in turn increases interest rates as merely seen at POS shops and so on.
However in due time with the approval of the old currency to be in circulation till December (yet to be approved by the CBN) the money market will be thrown or restored to balance and the amount of money demanded will equal the amount supplied and bring the interest rate to normalcy.

Name: Nwadike VivianMmesoma
Reg no: 2019/244657

Since the CBN embarked on the redesign of the Naira as well as expanded the implementation of the cashless policy programme, which began in 2012, a section of Nigerians, apparently with vested interests have not considered the benefits of the policies but have rather criticised them and tried to stir public objection.

Critics of the cashless policy have argued that it would further impoverish Nigerians and create unemployment in the financial value chain. But they lacked evidence to buttress their rejection.

It is not surprising that most of the objections to the central bank policies are by those who currently benefit from the rot in the system – politicians, and other corrupt public officials who take undue advantage of the opaque system of administration that does not allow for transparency in government business.

Corruption remains the biggest challenge facing the country and has continued to retard its growth trajectory.

At 62, Nigeria is still groping in the dark in search of its pathway to socio-economic prosperity – bad leadership, weak institutions, and abuse of due process are among a litany of moral and ethical deficits that have held it bound over the years.

Corruption, including vote-buying among others, has also influenced the selection of those in the seat of power: often those who are not qualified have succeeded, and their performance had been abysmal.

As a result of the lack of transparency in financial dealings, social safety interventions for instance have been compromised as monies end up in private pockets while the vulnerable are left in worse conditions.

Because monies cannot be partly accounted for or traced as a result of physical cash handling, a lot of underhand transactions are perpetrated and often go unnoticed by anti-graft and regulatory agencies.

It is partly given the foregoing and the need to address some of the actions that have continued to shortchange the economy and the vulnerable in particular that the central bank, with the permission of President Muhammadu Buhari, decided to redesign the local currency as well as introduce limits on physical cash withdrawals.

Naira redesign and it’s Merits

The Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele on October 26, 2022, announced policy initiatives to redesign the N200, N500, and N1,000 denominations, and subsequently introduced the cash withdrawal limits to regulate the movement of cash in the system as well as solve other challenges including currency counterfeiting among others.

In announcing the Naira redesign programme, the CBN governor said the move was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports, and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.

Emefiele, further explained that there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.

According to him, as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable as this has the potential to harm monetary policy actions, further leading to higher inflation and currency speculation, thereby exposing vulnerable Nigerians to further economic hardship.

However considering the timing of the policies – being an election year – some Nigerians, particularly politicians, believed that the apex bank’s move was targeted against certain individuals and have refused to see beyond their assumptions to know that the actions are in the best interest of Nigerians and the economy if the country must address the current gale of insecurity, corruption and economic sabotage among other actions of some privileged elites who continued to take advantage of a dysfunctional system to short-changed the country.

If anything, there have been early successes of the CBN intervention – the monetary policy committee (MPC) of the central bank recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.

Also, the cashless policy has led to a reduction in banditry and kidnappings, which were rampant in the recent past.

Demerits

The naira redesign affected so many businesses mostly the growing local business in Nigeria.

So many petty traders were forced to open an account with the bank for their business to survive amidst in cashless policy.

Pos merchants used the means to extort money from the masses as they were looked upon as their only messiah.

Banks got congested with people who stood in a long queue to get the new naira note.

The amount of new notes created were low considering the large population of Nigeria, so they couldn’t circulate, as only a small part of the country had access to the new notes.

Bank managers sold huge amounts of the new naira notes to politicians leaving a small ratio for the masses which wasn’t enough.

It increased hunger as Nigerians wallow in depression and frustration.

The new naira note redesign affected the money market equilibrium, in the sense that, people could not buy goods as they could not get access to their money, and demand for goods reduces, causing a shift from the equilibrium to move inward, same as the supply, in a bid to sell goods especially perishable goods in order not to perish, prices were reduced.

NAME: OMEBE SAMUEL OFORBUIKE
REG NO: 2019/246454
COURSE: ECO 341

(1) Following the Naira Redesign Policy by the Central Bank of Nigeria in October,2022,, we will be critically discussing the benefits and short comings of such initiative by the central Bank of Nigeria (CBN). Some of the benefits of the policy includes:
(i) lowering the total money supply: A reduction in the money supply results from successfully implemented currency redesigns. This will lessen pressure on domestic prices by lowering the value of money in circulation and slowing the velocity of money in the economy.
(iI) Reduce Inflation: As less cash is held outside of banks and less money is circulated, the strategy is often anticipated to result in market deflation. The speed of inflation will therefore be slowed by the concurrent decrease in the money supply.
(iii) Collapse of the illicit economy: Individuals who have made money illegally would be hesitant to declare it because they could face legal action from the Income Tax Department if their income was found to be illegitimate.
(iv) Easy Loans: Loans will be simpler to obtain, and interest rates could drop. More loans will be made as a result of banks having more funds, which will lead to a rise in the amount of money in circulation.
Having discussed on the benefits or merits of the Naira Redesign Policy,it is also pertinent to discuss the demerit of the policy as well. Below are some of the demerits of the adoption of the policy:
(i) logistical difficulty: Given that Nigeria borrows to cover its budget shortfalls, the practicalities of such printing provide a hurdle. Also, to traverse the 774 local governments, some of which do not have any banking facilities.
(ii) Monitoring electioneering expenditures: The believe that the CBN’s goal of limiting electioneering spending by redesigning the naira notes could only be accomplished if the new notes were produced in a finite quantity.
(iii) Insufficient space in the banking halls: The banking hall will be filled with numerous, lengthy lines. It will cause a great deal of inconvenience for the populace. We don’t have banks in most local government areas, therefore the elderly and unbanked may not be able to cope.
(iv) Rural residents factor: Rural residents who live distant from banking facilities are worried that doing away with their old notes and initially getting their hands on the new ones will be difficult.
(v( The concern of ongoing inflation: The action would end inflation “since there are other key drivers for inflation, such as the FX crisis, which this new measure can aggravate, as well as the impact of the security issue on food price inflation.

(2) The money Market equillibrium consist of supply of money and the demand for money. The supply of money is an exogenous (fixed) policy Variables choosen by the central bank such as the Naira Redesign policy in this case. The money demand is endogenous ( it is not fixed), rather, it is affected by interest rate; interest rate determines the demand for money. The Nexus between the Naira redesign policy and the money market equillibrium is that the naira Redesign policy is the exogenous policy variable which is choosen by the CBN to control money supply. This implies that the Naira Redesign policy is set to bring back the money that are out of circulation, into the financial system of the Nation through the CBN. This will reduce the amount of money people are holding,thereby increasing the demand for money which in turn increase interest rate and subsequently the money market will attain equillibrium; the demand for money and the supply of money will equilibrate each other.
Another question to ask is, will the Naira Redesign Policy cause an equillibrium in the money Market? Of course yes,and my reasons are as follows:
As I have earlier discussed,the Naira Redesign Policy is acting as the exogenous (fixed) policy variable set by the CBN to control the money supply. The Naira Redesign policy,prior to its commencement, there was a total of 3.23 trillion in circulation, in which out of this amount only 500 billion was in circulation and about 2.7 trillion was out of circulation. So far, as a result of the commencement of the Policy, about 2.1 trillion has been collected back and it is remaining about 900 billion to balance the 3.23 trillion in circulation. We could see from this statiscal evidence of the money in circulation prior to the adoption of the policy that,the money within the banking system was far below what should be,and obviously this is as a result of hoarding of this currency by some obnoxious and dubious individuals. The commencement of the policy in the nation has attained a remarkable and effective result in bringing back about 2.1 of the money out of circulation. With time,the remaining amount of money in circulation will be retrieved as well. This shows us that the policy is driving back the money market that is at disequilibrium presently to equillibrium.
Another reason is that,this policy will reduce money supply because the policy is majorly formulated to retrieve most of the money in circulation and the ones out of circulation, by so doing there will be shortage of cash circulating in the economy. This in turn will increase the demand for money,and interest rate charged to give out money will increase due to this. The theory of liquidity preference which is used to explain equillibrium in the money market states that “a reduction in the supply of money will cause an increase in the interest rate”. This is quite obvious currently,as people pay huge amount of interest rate to POS agents in order to acquire little amount of cash. When this occurs continuously the money market will be driven back to equillibrium. When there is an alteration maybe later in the future an alternative CBN policy variable will be employed in order to increase the money in circulation in order to set the money market at equillibrium again.

OMEYE ADANNA NGOZIKA
2019/242941
ECONOMICS MAJOR

MERITS OF CURRENCY REDESIGN
The redesign of Naira may have not be easy on Nigerians but truth be told, it will have a good effect in the long run. Such macroeconomic decisions aren’t seen as good decision and that is why we need to look on the merits this redesign of currency will bring in future. These merits are:
1. Reduction in money supply: This will go a long way in reducing the velocity and volume of money outside the bank vault. One of the reasons why there is pressure on domestic prices of goods and services is because of excessive flow of money in the economy. According to Businessday NG, As of October 2022, currency in circulation had risen to N3. 23 trillion; out of which only N500 billion was within the banking system and N2. 7 trillion held permanently in people’s homes. From the above statistics, it is obvious that there have been excess flow of cash outside the banking sector and money has been changing from hand to hand at an accelerating rate. This doesn’t correspond with the production of goods and services. The amount of money people spend high compared with the goods available. Nigeria is so dependent on oil which is bad for a nation with a population of over 200 million and yet, the rate of production is not even encouraging. Data from the upstream regulatory body shows that the country’s oil production averaged 1.49 million barrels per day (bpd) in 2020, 1.31 million bpd in 2021 and 1.14 million barrels per day in 2022(Business day NG). Using the case of oil, there is reduction in production and when large number of Nigerians with the currency is in desperate need of fuel, with the scarcity of it, there will be a hike in its price. As a result of such scenario, there is every tendency for a fluctuation in the domestic price of goods. With the help of redesigning naira, this will be reduce as a result of reduction of currency and introduction of cashless policy.
2. Lowering Inflation: Inflation is general rise in the average level of prices of goods and services. One of the causes of inflation is excess money supply. Just as explained above, excess money outside the bank brings about rise in the price of goods and services, thus, inflation. To reduce inflation, deflation if introduced. This policy of naira redesign is typically expected to cause deflation in the market as less cash holding reduces currency and retards money circulation. The accompanying decline in money supply will thus slow pace of inflation.
3. Truncating the activities of criminals and reducing the amount of cash inn underground or illicit economy: It’s not new news that most of our politicians are corrupt and engage in embezzlement of money. This money is most likely stored in their warehouse or probably in their main houses. With the change of money, they are forced to bring out the money they’ve stored for years. These will implicate them(bringing such amount of money to the bank will bring about questions that may even involve the EFCC) and at the same time make sure money a waste for them (because they if they can’t take the money to the bank due to its quantity, it will only make it a waste). This also will be a great disadvantage for criminals. With the redesign of money and introduction of cashless policy, it will be (near to) impossible for them to demand a huge ransom. Trying to use transfer will highly implicate them because they will be easily traced since this involves a digital screen that can be worked on by experts.
4. Increase in loan: According to CEIC Data, Nigeria Bank Lending Rate was reported at 13.850 % pa in Dec 2022. This records an increase from the previous number of 13.170 % pa for Nov 2022. This shows it have been on the increase. With this new policy, inflation will reduce and more money will be in the bank vault. Banks give loans at high interest rate because of the desire to reduce inflation and also to get more money to give out as loans since there is less of it in the vault. It is expected that with this new policy, interest rate will be low and thus, encourage more people to borrow.
5. Increased production: Having stated that there will be less interest rate paid, borrowing will increase and this will encourage investment. With an increase in investment, there is increase in production, increase in consumption. Giving the amount of production, there will be need for more labour force thus, increase employment in the country.
The above named merits and more can be witnessed in Nigeria if this policy stands the wave of difficulties that come with it.

DEMERITS OF NAIRA REDESIGN
As we know, everything on earth has merits and demerits. This policy is not a bad one but due to some cases (like over population), it has proven to be ineffective in the economy at this time. The demerits of redesigning naira are explained below:
1. Negative effects on SMEs: According to World Bank, Naira redesign will affect the poor, SMEs. It is so obvious that the large number of Nigerians storm the money in search of cash. Unlike the old currency that can be easily access, it is very difficult to access the new currency (owing to the fact that the amount printed has even reduced). This falls greatly on the informal sector involved in small and medium scale enterprise. According to The Sun Nigeria, The lingering scarcity of Naira appears to be biting hard on micro, small and medium enterprises (MAMEs), as their inability to access cash needed to do business is threatening their existence. More so Nigerians are yet to feel any respite as the scarcity continues to unleash untold hardship on consumers and suppliers. Many businesses aren’t functioning well again because of the scarcity of cash. This is bad for them especially for those that don’t have an account, talk more of carrying out online transactions.
2. The challenge of the unbanked rural dwellers: Most of the population of the rural dwellers is unbanked and thus excluded from banking activities. The olds notes according to CBN must be paid into an account to be able to access the new notes. This would disrupt their business activities which is cash driven. According to National Bureau of Statistics, 63% of persons living within Nigeria (133 million people) are multidimensionally poor. This means half of Nigerians don’t have enough to eat and to an extent, doesn’t have an account. This clearly shows that these people are going to starve to death. If they can’t gain access to money, what are they going to resort to? Even if they have an account, do they have enough money to pay for each #1000 note they get from POS? This is one thing that CBN failed to consider that is really hurting citizens.
3. Hoarding: According to Vanguard, On January 31st 2023, CBN has also found out that the banks may actually be hoarding the new notes for either completion advantage or for vested interests of privileged customers. On the other hand, the commercial banks are claiming not to be hoarding the money and that they don’t have the money. The question is, who is now with the money? What is exactly the problem with the circulation of the money? It’s been 3 months since the circulation of the new money and Nigerians are still suffering from its scarcity. No one knows who is holding the money and who is telling the truth between the two parties. CBN? Or Commercial Banks? Cash hoarded will not circulate but may fuel a perception of scarcity which leads to higher demand for the currency, signaling to those who don’t have an urgent or immediate cash need to store cash.
4. Greater deficit: Nigeria is in a pool of debts before the redesign of naira. According to , CBN spent 218 billion on this redesign. Don’t you think this will incur more cost on the debt owed? This policy is a good one but there are more pressing needs that we ought to focus on such as channeling it to education. Omoyele Sowore, Presidential candidate of the African Action Congress (AAC) stated, “These are issues you get from leaders who are concerned about the welfare of the people of the country, not the redesign of the naira which cost us N218 billion. We should have given that money to ASUU,” This has only increased the debt rate and its servicing in Nigeria and if care is not taken, it will be out of control.

NEXUS OF NAIRA REDESIGN AND MONEY MARKET EQUILIBRIUM
The money market is the interaction among institutions through which money is supplied to individuals, firms, and other institutions that demand money. Money market equilibrium occurs at the interest rate at which the quantity of money demanded is equal to the quantity of money supplied. For money market equilibrium to be attained, the achievement of equilibrium in the money market must work to attain the achievement of equilibrium in the bond market. Money demand and supply affects the money market.
Nigeria’s scenario is a case where there is less money (decrease in total money supply after money redesign) in the economy. In the midst of this situation, Nigerians have less desire to hold bonds. With the little supply of money, they rather hold money (mostly like because of future expectations that money will be scarce in future). This will result to an interest rate increase because less money will be in the bank vault and thus, a fall in the aggregate demand curve and investment. This also will lead to a fall in the GDP of the country. Having stated this, it is obvious that less supply of naira in the economy has brought about a hike in the demand of money.
On the other side, Nigeria is highly indebted to internal and external organization and is also facing inflation and for this reason, will sell bonds as a contractionary measure to curb inflation. When this happens, there is greater reduction in money supply, causing the money supply curve to shift to the left and raise the equilibrium interest rate. Higher interest rate discourages investment which will aggregate demand and shift it to the left.
Studying the money and bond market, it is clear that this will bring about negative outcomes because both will reduce money supply and discourage investment. Thus, it can be said that, there is a negative relationship between the naira resign and money market equilibrium.

WILL THIS NEW POLICY PROMOTE EQUILIBRIUM IN THE MONEY MARKET?
This will not bring about equilibrium in the money market. This is because the money supply in the economy isn’t enough given the amount of people that seek for it. Unlike the old currency that was over 3.29trillion in circulation, the new currency was only 500 million. This makes it impossible for the demand to equal to the supply owing to the fact that more people want to hold money. Also, the interest rate isn’t promising at all. Since less money is in the bank vault, there will be increase in interest rate which will further reduce money supply and decrease aggregate demand.

Part 1.
On the 26th of October 2022, the Central Bank of Nigeria announced the redesign of the N200, N500, and N1,000 denominations of the Nigerian currency. On the 15th of December 2022, the new naira notes were released into circulation and the apex bank announced that by the 31st of January, the old denominations of the N200, N500, and N1000 notes will cease to be legal tenders.
The announcement brought about panic among the entire populace of Nigeria. Even though the move by the apex bank has its merits and successes, its demerits and weakness has rather proved to outweigh the intended merits of the policy.
According to the CBN governor, Mr. Godwin Emefiele, the policy was aimed at checkmating the increasing risk of currency counterfeiting, and the increased risk of financial instability, as well as checkmating the worsening shortage of clean and fit currency. Also, to curb insecurity, corruption, and other economic sabotage, and to reduce inflation.
According to him, as of September 2022, N3.2tn was in circulation, of which almost 80% was estimated to be outside the banking system. This, therefore, implies that about 80% of the money in circulation was in the hands of kidnappers, armed robbers, and drug dealers. Others were in the hands of corrupt government officials who might be looking to influence the election negatively through vote-buying, and the rest were under the mattresses or saving boxes of the unbanked, such as the grandmas and grandpas as we have them. As a result, the redesigning of the naira became paramount.

THE MERITS OF THE NAIRA RE-DESIGN
• To ease vote buying by politicians against the general and gubernatorial elections
According to the CBN boss, vote buying during the general elections was one major problem the policy was set to disrupt. Right from the pronouncement of this policy back in October 2022, there was an uproar by the political class.
The ideal expectation of the policy was that politicians who had been hoarding money given the general election would find it rather difficult to buy votes, as they would release back those cash into the system and have to approach the banks for exchange, which would attract the Economic and Financial Crime Commission to question their source of such huge amount of cash and be jailed if there is no clear proof. However, there is not enough information to confirm whether this was the case.

When the new N200, N500, and N1,000 notes were released into the system by the apex bank, aside from normal Nigerians running on the banks to collect the new cash, there were reported cases of some group of politicians running on the commercial banks with loads of old naira note for a swap with the new naira notes at a huge amount of cost. It surprisingly became a business for bankers and bank managers to sell the new naira notes to politicians that command the highest demand.

So, already the politicians knew what the lack of the new legal tender was going to do to their bid to hold a political office and then resulted to buy the new notes. Those of them who were able to buy the new notes could have however been able to succeed in the vote-buying that the CBN governor was aiming to stop.

Although, since not all the politicians would be willing to pay the bankers say, 1 million nairas for 5 million, one can say that the number of votes buying across the country was reduced since we don’t have empirical data to show this.

• Decrease in Inflation
One thing that was expected of the policy upon implementation is that it would decrease the ever-rising inflation rate in the country. If due to the rise in the demand for real money balances the CBN now decides to increase the interest rate and the money market settles at equilibrium, the cost of living crises will reduce to an appreciable or significant minimum, and with that Nigerians would not find it too difficult to purchase goods and services and live in their country.

Although, it will have no immediate effect on the inflation rate due to its high level, in the middle to the long term, the naira redesign is expected to help the economy recover from inflation to an extent. However, it is expected that from mid-2023, the mop-up of the currency will ensure that the money has been effectively regulated and circulation of the new naira notes is not in excess.

• Effect on Crime
One mistake that criminals, kidnappers, armed robbers, and drug dealers cannot make is to open a bank account or have any sort of transaction that can be traced electronically. With the old naira notes becoming obsolete on the 31st of January, it meant that they had a very short time to launder all the cash in their possession because they rely solely on cash. And some might, out of depression decide to walk into a legitimate financial institution to exchange their cash, of which the Economic and Financial Crimes Commission are supposed to act upon their illegal means. This is how it is been done in advanced democracies. However, here in Nigeria where the pronounced winner of the general election was alleged to have been a drug dealer, we found out before the last election that the banking sector itself is corrupt. Otherwise, there could have been reports from every part of the country of unidentified sources of cash from politicians, kidnappers, and the like, which would now guarantee that the policy is having its positive effects.

Since the banking system is corrupt, how sure would the CBN be to say that its policy succeeded as projected? If the kidnappers and the like, succeed in exchanging their cash in the banks, it would be a repetition of the cycle of money hoarding.
However, in the long run, the crime rate would reduce because of the further strengthening of the cashless policy, and ransom takers will soon seize to exist.
• Better Adoption of Digital Payment
As the old naira became scarce, and the new notes were in short supply, many businesses now began to accept electronic transfers and transactions like never before. They now accept payment for commodities of N100They accept payment for commodities of N100 and even below, which wasn’t the case before as the business owners would put a transfer restriction of N1,000 and above.

This would be good for the economy as the unbanked would now open bank accounts, and with a high amount of the population making use of the banking system, it would lead to more efficient bookkeeping and better tax collection by the government and further boost social welfare. But this would rather be unfair to the petty traders who have no knowledge of online transactions and thus require cash to run their day-to-day transactions.

THE DEMERITS OF THE NAIRA REDESIGN POLICY
• It might lead to a crash of the naira against the dollar
Over the years there has been a continued increase of the dollar against the naira. From an average of about N565/$1 as of 31st December 2021, to as high as about N760/$1 current market price, and still rising. The crash might soon happen in a couple of weeks if the people who hoarded cash decided to buy dollars with their money. In other words, too much naira chasing the few dollars available will crash the exchange rate at the black market.

• Overcrowding at the banks
As soon as the deadline for the depositing of the old naira notes was approaching a lot of people began to run to the bank to exchange the old naira notes for new ones or deposited them into their bank accounts. Meanwhile, there wasn’t yet enough of the new currency available to give. This then also led to the doubling of the crowd at the bank because it seemed as if the deposit insurance that people trusted had failed. However, as soon as people began to adopt electronic transactions and realized that their money was still safe in the bank, the crowd now began to decrease. Although, in some rural areas where a lot of people have not still adopted electronic means of transaction, still run on the banks to get cash for transactional and precautionary purposes.

• High deficit cost of printing the new naira
Printing the new naira notes is capital-intensive. With a population of over 200 million people, a sufficient quantity of the new currency will need to get into the hands of many Nigerians to facilitate economic transactions.

However, redesigning and printing new currencies will certainly come at a huge deficit cost to the economy. The problem is that Nigeria is struggling with a huge debt deficit already. For example, the country’s proposed budget of N20.5 trillion has a debt servicing payment of N6.31 trillion. So, one must wonder where the money to print the new currency notes come from, considering the debt payment that the country has to pay. If the CBN, however now considers borrowing to fund the redesign, it only further complicates the country’s debt portfolio.

• Increase inflation rate
Although, in the Merits section of this paper I had already highlighted that the Naira redesign will tackle inflation in the long run. In the same vein, the policy is, however, likely to trigger inflation in the short run.

Due to the clearing off of the old currencies and the limited supply of the new ones, there is already an increase in the inflation rate to 21.82% as of January 2023, which experts say it’s the highest since September 2005, from 21.34%. High demand for the new currencies is what is happening now, and the limited supply of the new currencies means that a deficit is created and an urgent need to address it.

The pressure manifests in the economy as there is a drop in the supply of goods or services as a result of currency shortage, but moderate to high demand remains the same. This leads to a rise in prices. Also, the high rate of black market non-economic activities using the naira has inflationary tendencies for the economy.

Part 2:
As the CBN redesign policy has been implemented and the new notes are already in circulation, there is now a high demand for the new notes. However, the CBN didn’t print as much money to meet the aggressive demand by people. According to Punch news, “of the about N2.1tn that the CBN retrieved from circulation, it only printed 500bn of the N200, N500 and, N1,000naira new notes to replace it”.
Now, this is a major problem that the CBN would strictly find a necessary measure to meet the situation. Otherwise, this would lead to (as seen in Nigeria) a massive run on the banks.
Since the currency is in short supply the CBN would now have to ensure that people are guaranteed that their money is safe and can yield great returns and come up with a policy that reduces the bank run.
To balance the short supply of the cash that is fixed and the excess demand, John Meynard Keynes proposed that interest rate should be used as a tool to bring demand for real money balances towards equilibrium with the fixed money supply in the short run because in the short run, the supply for real money balance is fixed. This he postulated in his work titled “The General Theory”. However, the interpretation of his opinion is known as ‘the theory of liquidity preference’, which states that the interest rate adjusts to balance the supply and demand of money.
According to the theory, the supply for real money balance is fixed and demand for real money balances varies along the interest rate to equate the fixed money supply. In other words, the interest rate adjusts to equate the demand for real money balances with the fixed supply. When the demand for real money balances is high so that individuals run on the bank to withdraw cash or liquidate their bonds, the CBN responds by increasing interest rate so that the bank run would decrease, and then individuals would now tend to save more and buy more bonds due to high-interest rate. Again, when the supply of cash now exceeds the demand for real money balances due to high-interest rates, the CBN would now decrease the interest rate so that people would sell off their bonds and withdraw their cash. The CBN would continue to increase or decrease the interest rate until the money market is at equilibrium.
Also, to respond to changes in the long-run money supply induced by a central banker like the CBN, the CBN would have to push up the equilibrium interest rate to meet the new equilibrium point as a result of a change in the money supply.
For example, a fall in money supply (M) reduces the supply for real money balances (M/P) because the price (p) is fixed. In other words, the higher interest rate makes people well off to hold the smaller quantity of real money balances that they have. Thus, according to the theory of liquidity preference, a decrease in the money supply raises the interest rate and an increase in the money supply lowers the interest rate.

To conclude, in Nigeria’s situation, as its central banker withdrew the old naira notes worth about N2.1tn and circulated only N500bn worth of the new notes with prices being fixed, the supply of real money balances would reduce. People would withdraw their cash deposits and liquidate their bonds, as is the current case in the country. However, to respond to this bank run, the CBN has to increase the interest rate to promote equilibrium in the money market. If that is effectively done individuals would be content with the amount of cash that they already have and demand less of the new notes that are in short supply.

NAME: DIKE JOHN CHUKWUDOZIE
REG NO: 2018/241837
COURSE: ECO 303

1. After the Central Bank of Nigeria’s Naira Redesign Policy was implemented in October 2022, we will critically discuss the merits and demerits of this initiative by the CBN. The following are a few of the policy’s advantages:
(i) Cutting back on overall money supply: Currency redesigns that are successfully implemented lead to a decrease in the money supply. By reducing the value of money in circulation and slowing the velocity of money in the economy, this will relieve pressure on domestic prices.
(ii) Decrease Inflation: It is frequently expected that the policy will lead to market deflation as less money is circulated and stored outside of banks. So, the parallel decline in the money supply will slow the rate of inflation.
(iii) Reduction in illegal economic activity: Those who have made money illegally could be reluctant to declare it because they risk facing legal action from the Income Tax Department if their income is determined to be legal.
(iv) Straightforward Loans: Borrowing will be less complicated, and interest rates may decrease. Banks will provide more loans as a result of having more money, increasing the amount of money in circulation.
Having spoken about the advantages of the Naira Redesign Policy, it is important to also talk about its disadvantages. Some disadvantages of the policy’s adoption are listed below:
(I)logistical challenge: Since Nigeria borrows to make up for budgetary shortfalls, the logistics of such printing provide a challenge. Also, to navigate the 774 municipal administrations, some of which lack any financial services.
(ii) Keeping an eye on election spending: Some people think that the CBN’s plan to reduce election spending by redesigning the naira notes can only be successful if the new notes are created in a limited number.
(iii) Banking halls will be crowded: There will be a lot of people waiting in long lines. It will generate a tremendous inconveniences for the public. Since most local government regions lack banks, the elderly and unbanked might not be able to manage.
(iv) Factor involving rural residents: Rural residents who live far from banking facilities worry that replacing their old notes and initially obtaining the new ones will be challenging.
(v) The persistent inflation concern: As there are other major factors that contribute to inflation, such as the Currency crisis, which the new measure may exacerbate, and the effects of the security situation on food price inflation.
2. The supply of money and the demand for money make up the money market equilibrium. Money supply is an exogenous (fixed) policy variable, in this case the Naira Redesign policy, which is determined by the central bank. The desire for money is endogenous (it is not fixed), and the demand for money is determined by the interest rate. The Naira Redesign Policy is the exogenous policy variable that the CBN selects to govern money supply, which is the nexus between the policy and the money market equilibrium. This suggests that the Naira Redesign programme is intended to reintroduce out-of-circulation currency into the country’s financial system via the CBN. People will hold less money as a result, which will boost the demand for money and raise interest rates. As a result, the money market will reach equilibrium as the demand for and supply of money balance each other out.
Will the Naira Redesign Policy lead to a state of equilibrium in the money market? is a related query. Of course, and here are my justifications:
Because the naira redesign policy is primarily designed to recover the majority of the money in circulation and the out-of-circulation amounts, there would be less currency flowing in the economy. The demand for money will rise as a result, which will raise the interest rates paid to lend money. According to the liquidity preference theory, an increase in the supply of money will result in an increase in interest rates. This theory is used to explain why there is equilibrium in the money market. This is fairly visible at the moment, as consumers pay POS agents astronomical interest rates in order to obtain small amounts of cash. If this keeps happening, the money market will eventually return to equilibrium. If there is a change, the CBN may use a different policy variable in the future to raise the amount of money in circulation and restore equilibrium to the money market.

Name: Ubazoro Chukwuemeka George
Department: Economics
Reg No: 2019/251195
The Merits of the Naira redesign policy initiative by the CBN
1. Lowering Inflation: The policy lowers inflation as there will be a reduction in the amount of currency outside banks as more money will be deposited in banks in a bid to meet up with the deadline stipulated by the Apex bank. This will create a shrink in the money supply and accordingly lower the long-run path of inflation.
2. Financial Inclusion: For one to deposit money in a bank, the person is required to have a bank account. The policy paved way for the financial inclusion of a large number of unbanked population in the country.
3. Increase in Naira’s value in the foreign exchange market: With the reduction in the velocity of money supply in the economy. The naira will become relatively scarce. This has had a positive impact in the value of the naira and has made the value increase, though at a very slow rate.
4. Smooth Transition into a Cashless Economy: With less cash in the hands of individual, the CBN is ensuring a smooth transition into a cashless economy like the rest of the world.
5. Collapse in Illegal Economic Activities: The policy also aims to lead to a collapse in the illegal economic activities in the country as most individuals who earned their money through illicit methods would be afraid to declare the money in fear of being prosecuted by the Income tax department on the legitimacy of their income.
6. Giving the Apex Bank more control over the money in circulation thereby allowing for effective implementation of monetary and fiscal policies as it controls the bulk of the money stock.
Demerits
The only demerit I can point out in the CBN redesign policy is the time allocated for the cash swap. The time was too short for the whole money in circulation to be brought to the banks , coupled with the fact that the CBN wasn’t printing enough money and stories of bank managers making the availability of the new naira only to the highest bidder. People started hoarding the money leading to a scarcity.
2.The policy won’t promote equilibrium in the money market. Reason being that, the CBN intends to reduce the money in circulation, thereby making it scarce. The demand for the naira has already shot up and the supply has dwindled thereby leading to a disequilibrium in the money market.

NAIRA REDESIGN
The redesign of the notes is aimed at making them more secure to enhance their durability to last longer in circulation and streamline their asethetic and security features.
On 26 October 2022, the CBN Governor Mr Emefiele Godwin announced that the highest denominations of the Naira would be redesigned giving a deadline of 31 January 2023 for all old notes to be deposited in banks in exchange for the new notes.
The CBN Governor gave reasons for the redesign policy. According to him, the policy would enable the CBN to control the Naira in circulation, manage inflation, combat counterfeiting and ransom payments.
This Naira redesign has merits and demerits
Some of the merits or advantages includes
James Emejo writes that the naira redesign and implementation of the cashless policy would plug fiscal leakages, boost government revenues, and aid the economic empowerment of vulnerable Nigerians as well as benefit the country as a whole.
(1). Reports of armed and highway robberies have reduced drastically in different parts of Nigeria in the past one month. Which cash they wan collect?
(2). There appears to be a zero report of Bank robbery in all parts of Nigeria in the last 3 weeks or thereabouts
(3). Many online and mobile banking apps and platforms hitherto left grossly unutilized or underutilized are now being put to maximum use.
(4). Reports of kidnap-for-ransom by terrorists and other criminals, have gone down drastically in parts of Nigeria.
(5). Generally, people now spend wisely, as a result of the introduction of cashlessness in much of our affairs.
(6). Many businesses that hitherto depended on cash, appear to have now learnt to practice the cashless style which is safer, reduces corruption and leaves permanent records, which could be recalled in the future.
(7). Fewer people now carry huge cash around, unlike was usually the case. Carrying cash around comes with huge risks, which appear to get reduced when you carry little cash and do more cashless transactions
Some of the Demerits or disadvantages includes:
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.
The amount of queueing Nigerians have been subjected to in the last couple of weeks is unprecedented. It is equally unbecoming. It’s almost like the country had gone back four decades.Fights have broken out in queues at bank facilities, filling stations and INEC and LGAs offices across the country. There are trending videos of people stripping naked in protest inside banking halls, others hitting each other with queue dividers and one person has been confirmed dead inside a banking hall, somewhere in Asaba. Nigerians born in the 2000s, GenZs, should be forgiven for thinking the end of the world is here.
The reality is that the suffering is real, the pain is widespread and anger is rising to a boiling point. The CBN must act to ease the pain. It is a case of demand and supply – make more new naira notes available across the banks, monitor the deployment and see the relief across the land.
MARKET EQUILIBRIUM
A market is in equilibrium if at the market price the quantity demanded is equal to the quantity supplied. The price at which the quantity demanded is equal to the quantity supplied is called the equilibrium price or market clearing price, and the corresponding quantity is the equilibrium quantity.
Equilibrium is the state in which market supply and demand balance each other, and as a result prices become stable. Generally, an over-supply of goods or services causes prices to go down, which results in higher demand—while an under-supply or shortage causes prices to go up resulting in less demand.
The nexus between both is that their are talking about a particular word ‘money’ and how it’s in circulation.
Although there are good advantages of the Naira redesign but I don’t think it promote market equilibrium since the supply of money is not equal to the demand of money in circulation. People pay higher amount of money to purchase goods and as well buy the new currency.
Redesigning currencies improve a currency’s security by enabling countries to keep counterfeiting low and stay ahead of counterfeiting threats. The CBN expects that this dash to redesign Nigeria’s currency would reduce counterfeiting, encourage a cashless economy, and stave-off cash hoarding.

In October 26, 2022, the CBN governor Godwin Emefiele announced a policy initiative to redesign N200, N500 and N1000 notes and subsequently introduced the cash withdrawal limits.
Here are the merits set to obtain from this policy:
The policy initiative is aimed at checking the increasing risk of currency counterfeit which has become very prominent in the past few years.
Secondly, the policy was initiated to help curb inflation. Emefiele explained that there was significant hoarding of naira notesby the public as 84.71 percent of currency in circulation was outside the bank vaults. He further explained that as at October 2022, a total of N3.2 trillion was in circulation, out of which only N500 billion was within the banking system and 2.7 trillion was held by the public. This hoarding leads an increasing rate of inflation thereby exposing vulnerable Nigerians to further economic hardship. So far, since the commencement of this program, the CBN has been able to collect about N2.1trillion leaving the public with about N900 billion.
Thirdly, the CBN aims to increase financial inclusion in the country by reducing the number of the unbanked population and moving towards a more cashless economy, ensuring greater formalization of the Nigerian economy.
Finally, as the exercise would bring the hoarded currency into the banking system, it would have way for a more effective monetary policy as the CBN now has total control of the amount of money that leaves the bank. Also, it would help the bank access more accurate data of money supplied as well as monetary aggregates.
Although the policy comes with all these merits, it also has several drawbacks and demerits. First, with the new policy, dollarization is imminent. The CBN gave a very short notice and a very short time for the implementation of this policy, hoarders of local currency are thereby likely to exchange their Naira for dollars as a store of value, thus, intensifying the dollarization trend in Nigeria.
Secondly, from the monetary economics literature, a decrease in liquidity is likely to result in reduced economic activity, which translates to lowered GDP, and increased unemployment.
Presently, Nigeria is experiencing high fiscal deficit, high inflation, high unemployment, underemployment, high youth unemployment, and a slowing GDP. Redesigning the naira would come with increased logistics costs, and what I would consider avoidable dislocations to small business operators in Nigeria. Indeed, there is never an appropriate time to redesign any currency, however, given the vast number of unbanked citizens in the country especially in the rural areas, where some states do not have banks in their local governments, it would be somewhat difficult to achieve those goals CBN aims to achieve from the policy.
What is the Nexus between naira redesign and money market equilibrium?
One of the goals the CBN aims to achieve in redesigning the naira is to bring all the money outside the bank vaults back into the banking system. By so doing, they have total control of the amount of money supplied to the public. From the money market equilibrium, we can see that of supposedly, the CBN suddenly decreases the amount of money supplied, a fall in M reduces the supply of real money balances M/P as P is fixed. This decrease in money supply causes equilibrium interest rate to increase and as a result, people tend to demand lesser quantity of real money balances, that is, people tend to hold lesser quantity of their money.
Will this new policy promote equilibrium in the money market?
Yes it is most likely going to promote equilibrium in the money market if this policy is carried efficiently and effectively.

Name: Eze Daniel Uchenna.
Dept.: Economics.
Reg. No.: 2018/244280.
Course: Macro Economics (Eco.303).

NAIRA REDESIGN AND MONETARY EQUILIBRIUM
NAIRA REDESIGN:
On the 26th of October, the Supreme Court announced the introduction of the redesign of N200, N500, and N1000 banknotes in Nigeria. The CBN governor, Godwin Emefiele, had said the banknotes were redesigned due to a request from the federal government. This act by the Nigerian government and the CBN governor was said to be an attempt to reduce the amount of money in circulation outside the banking system. Many other objectives of the naira redesign were given but the reduction of money in circulation was said to be the foremost.
Most of these objectives are desirable while one or two stands on thin ice. There is also a lack of clarity about whether the policy was about cash swaps or demonetization and whether the two objectives can be pursued simultaneously. This is also a flaw. All these notwithstanding, a concession can be made that CBN has the right to set its goals whether those objectives are realizable or not. However, CBN has not provided a compelling argument why these objectives can only be achieved within six or eight weeks of making the new Naira notes available. Some effects on the population in Nigeria regarding the Naira redesign policy involve; rising prices of goods and services as a result of the unavailability of cash, lack of cash in our local bank ATMs, unending queues at the bank, not being able to purchase goods from your local stores, increasing tension in the ongoing election, etc. The Central Bank of Nigeria said that both old and new notes are now legal tender. The Acting Director of Corporate Communications CBN, Dr. Isa Abdulmumin disclosed this on Tuesday. He affirmed that commercial banks have started issuing both old and new notes to their customers. But insisted that the apex bank is yet to issue an official statement. He said Banks are paying old notes as well as new notes. They are all legal tender. “Yes, the CBN has not issued an official statement on the issue. Anyone banks give to you, you can collect. We just want to make life easy for Nigerians. Last week, the Supreme Court gave its verdict on the Naira redesign, directing the federal government to allow the validity of N200, N500, and N1000 notes till 31 December. In response to the ruling, DAILY POST gathered on Monday that some banks in Abuja and Lagos have started issuing the old notes to customers. But, traders, business owners, and motorists are not accepting the old notes.
The National Council of State (NCS) has tasked the Central Bank of Nigeria (CBN) to make the new Naira notes available or recirculate the old Naira notes to ease the current suffering of Nigerians.
The CBN had in October 2022 announced the redesign of N200, N500, and N1000 notes, and asked Nigerians to deposit their old notes before January 31, 2023, when they would cease to be legal tender.
The deadline was shifted to February 10 following difficulties obtaining the new notes.
Thereafter, governors of Kaduna, Zamfara, and Kogi states dragged the federal government and the CBN to the Supreme Court over the time limit, and the court gave an interim order suspending the February 10 deadline.
It also emerged yesterday that the governors of Kano and Ondo state, Abdullahi Ganduje, and Rotimi Akeredolu, respectively, have approached the Supreme Court over the swap deadline, and withdrawal limits.
Rising from its maiden hybrid meeting in 2023, presided over by President Muhammadu Buhari, the Council, however, expressed its support for the government’s new monetary policy, but tasked the apex bank to take urgent steps to arrest the scarcity of cash plaguing the country.
These resolutions, at the end of the meeting held at the Council Chambers of the State House, Abuja, were made known to newsmen by the Attorney-General of the Federation and Minister of Justice, Abubakar Malami, alongside the governors of Lagos and Taraba states, Babajide Sanwo-Olu and Darius Ishaku, respectively, and Media Adviser to the President, Femi Adesina.
MONETARY EQUILIBRIUM
Monetary equilibrium in my opinion is when the money supply is equal to the money demand. It occurs when the quantity of money demanded is equal to the quantity of money supplied or in circulation.
THE THEORY OF LIQUIDITY PREFERENCE
This theory was propounded by Keynes, and he simply offered his view on how the interest rate is determined in the short run. The explanation of this theory is called liquidity preference because it states that the interest rate adjusts to balance the supply and demand for the economy’s most valued asset (money). If M stands for money supply and p stands for price level then M/P is the supply of real money balances. The liquidity preference theory assumes that there is a fixed supply of real money balance that is (M/P)’s = M/P. The money supply variable M is an exogenous policy variable chosen by a central bank, such as the Federal Reserve. The price level P is also an exogenous model. These assumptions imply that the supply of real money balance is fixed and, in particular, does not depend on the interest rate. However, when we plot the supply of real money balance against the interest rate, we obtain a vertical supply curve as shown in the diagram below.

According to the theory of liquidity preference, the supply and demand for real money balances determine what interest rate prevails in the economy. That is the interest rate adjust to equilibrate the money market. As the figure shows, at the equilibrium interest rate; the quantity of real money balance demanded is equal to the quantity supplied.
How does the market rate get to this equilibrium of money supply and money demand?
The adjustment occurs because whenever the money market is not in equilibrium, people try to adjust their portfolios of assets and in the process alter the interest rate. For example, if the interest rate is above the equilibrium level, the quantity of the real money balance supplied exceeds the quantity demanded. Individuals holding an excess supply of money try to convert some of their non-interest-bearing money into interest-bearing bank deposits or bonds. Bank and bond issuers who prefer to pay a lower interest rate, respond to this supply of money by lowering the interest rate they offer. Conversely, if the interest rate is below the equilibrium level so that the quantity of money demanded exceeds the quantity of money supplied, individuals, try to obtain money by selling bonds or making bank withdrawals. To now attract scarce funds, banks and bond issuers respond by increasing the interest rate they offer. Eventually, the interest rate reaches an equilibrium level, at which people are now content with their portfolios of monetary and non-monetary assets.

REFERENCE
• All content is Copyrighted © 2023 The Premium Times, Nigeria
• Principles of Economics at the y University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
• © 2023 Springer Nature Switzerland AG. Part of Springer Nature.
• MR. CHIOBI C. J

Name udeogwu precious kosarachi
Ref.no.2019/244167
Depth.Economics/philosophy

On 26 October, 2022, Nigeria’s CBN announced the introduction of redesigned 200, 500 and 1,000 naira notes into the country’s financial system. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this, you are required to discuss and analyse the merits and demerits of this policy initiative adopted by the CBN. Secondly, what is the nexus between Naira redesign money market equilibrium? Will this new policy promote equilibrium in the money market? Discuss this comprehensively,

Answers

The Central Bank of Nigeria (CBN) announced last year the redesign of 200, 500 and 1,000 naira notes, and plans to end the use of the old notes by 31 January 2023.But acute scarcity of the new notes made the 31 January deadline unfeasible, and prompted the bank, with the approval of President Muhammadu Buhari, to extend the legal tender status of the old notes till 10 February.
From 3 February to 3rd of March, they was meetings and deliberations and disagreement between some state governors, the president ,supreme Court and CBN concerning this monetary redesign and the common people had the consequences to bear because at the end,we are the one who is hungry not them because everyday,it is the common people who queue for hours in bank to get the new note that is insufficient not even for personal consumption and hence gave birth to selling of money by POS ventures who uses this opportunity to also exploit their fellow commoner.

MERITS of The Money redesign policy
From my own personal perspective, the money redesign policy didn’t merit we the common man in anyway but put us into unnecessary stress,opening our eyes further to see that Nigeria truly is a saddening country, but then as required, I will outline few of the expected or assumed merits of the redesign policy;
(1) According to Emifiele Godwin,the cbn governor,the redesign policy will help the cbn take control of the money in circulation.
(2) It is going to help curb inflation in the economy
(3) Combat counterfeiting and ransom payments of any kind.
(4) meticulous use of money
(5) civilised the primitive citizens of the need to open bank accounts as majority then do not make use of bank.

Demerits of the redesign policy.
(1) shortage/scarcity of money in circulation .
(2) unavailability of cash even in the POS machine
(3) hording of money by those who are privileged to see it.
(4) increase in service charge for withdrawal from pos ventures.it became a system of use money to buy money.
(5) counterfeit in circulation
(6) Hunger for we students especially who before can use #100 to withdraw #1000 as it became# 300 as service charge. Not to talk of the market women who do not have bank, they was practically no means to buy from them as they will not collect transfer.

Connection between money redesign and the market equilibrium.

The market equilibrium is meant to balance the relationship between the demand for goods and its supply.when the demand for a good is higher than the supply,the price will rise and the demand will fall.
The monetary policy hence,was a tool to curb inflation. As their was a shortage in money supply and availability inflation is reduced and the money at hand and in bank can have value for when their is excess money in circulation, the naira it value and become just high notes.
The money design hence was meant to reduce the supply of money so that it can be in balance with the demand.

Will this new policy promote Equilibrium in the money market?
-YES.This new policy is going to promote equilibrium in the market in the sense that the with the current scarcity of cash flow,demand for money is going to go down as people will.lewrn to spend less of their cash due to unavailability of it and hence the minimal supply of the money in the economic system will balance with the demand in the longrun theirby bringing about equilibrium in the money market amongst the consumers and financial institutions that distribute the money.

Ugwu Silas Chinazaekpere
2019/244182
Economics

The CBN regulates monetary policy. It is a quintessential regulatory agency. A good cost-benefit analysis will include social and political costs and benefits, not just financial and commercial costs and benefits of the Naira redesign.

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 question is whether this policy is the right policy at this time, considering its 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.

It is agreed that redesigning currencies could curb counterfeiting, especially where the existing design is very worn and its security can be easily bypassed .

While we will be looking at both the merits and demerits of this Naira redesign. Let’s first consider the merits;

According to Emefiele, the central bank’s principal objective for the currency redesign initiative was to make our monetary policy decisions more efficacious, saying: “We have started to see inflation trending downwards and exchange rates relatively stable. We aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the military is making good progress in this important.

Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN. It should also be noted that the notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth.”

Another merit is that, this measure would help to limit the use of cash for illicit activities such as banditry and terrorism financing and help to track the movement of money through electronic channels. If anything, limiting cash handling with reduce the rate of armed robbery and other associated risks.
it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth

In addition, the short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government.”

Coming to the demerits;

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. 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.

The President of the Bank Customers Association of Nigeria, Dr Uju Ogunbunka, had also said the objectives of the cashless policy was understandable but noted that the execution and timing were not right.

Also, the Lagos State Chairman of the Nigerian Association of Small and Medium Enterprise, Dr Adebayo Adams, had said the policy would hit businesses and the MSMEs.

James Emejo writes that the cashless policy and naira redesign have become yet another unorthodox intervention by the Central Bank of Nigeria, which has emerged as practical tools for resolving some of the country’s macroeconomic challenges and fighting endemic corruption.

During the recent global financial crisis and the recession, unorthodox monetary policy interventions helped salvage the economy where conventional practices have failed.

Recently, the central bank’s efforts at curtailing rising inflation had proved nearly fruitless amidst growing food and commodity prices. In the same vein, attempts to stabilise the naira against the US dollar had been difficult partly due to speculative activities and other challenges.

This new naira redesign may or may not promote equilibrium in the money market but what we can deduce is we have seen the naira gain explicitly to Dollar in the black market.

Discussion on Naira Redesign
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on October 26, 2022, announced policy initiatives to redesign the N200, N500, and N1, 000 denominations, and subsequently introduced the cash withdrawal limits to regulate the movement of cash in the system as well as solve other challenges including currency counterfeiting among others. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this,I will like to discuss and analyze the merits and demerits of this policy initiative adopted by the CBN.
Merits of the Naira Redesign.
James Emejo writes that the Naira redesign and implementation of the cashless policy would
.Plug fiscal leakages
.Boost government revenues
. Aid the economic empowerment of vulnerable Nigerians as well as benefit the country as a whole.
Demerit of the Naira Redesign.
.Hoarding of money by high rank citizens
.High charges rate by POS merchants
.Slow down on economic growth
.Slow down of most small scale business
Monetary Equilibrium
The goal of monetary policy is monetary equilibrium. This is true for any monetary arrangement that claims to serve a general interest among the population rather than to simply divert wealth to the ruler and his cronies.
Monetary equilibrium is a situation where the supply of money equals the demand, given a particular constellation of prices. The supply of money includes both the monetary base and various forms of credit. In monetary equilibrium, the monetary system is doing the most it can to facilitate beneficial trades. An excess supply of money induces people to make some trades that market participants will later judge not to have been beneficial. A deficient supply of money hinders people from making some beneficial trades.

God’spower Ekene
2016/239090
Eco major
Eco 303

The merits and demerits of the CBN redesign initiative policy in the nation.
The following merits is noted below;
1. Reducing and regulating the excess supply of money in circulation.
2. Reducing inflation in the country
3. Reducing illegal activities sponsored by money liquidity eg productivity of counterfeit money, kidnapping, etc
4. Helps to digitally synthesize people to the importance and use of online banking
5. Helps in increase in interest rates as liquidity reduces

The following are the demerits of this policy;
1. This policy is less favorable to the poor due to the fact that they cannot afford the rates to acquiring money
2. Crowding of banks, disruption and uproar in the country in trying to deposit or withdraw money
3. Corruption and Hoarding of money by banks to favour themselves
4. Discontinuation of small businesses involved in supplying of cash eg POS business, retail stores, etc

2. Will this new policy promote equilibrium in the money market?
I will say yes for the reason below;
Currency redesigning by the CBN is a means to reduce excess of money supply in circulation and reinforced more monetary policy effectiveness in curbing inflationary pressure and enhanced the exchange rate policy of the CBN.

1. MERITS

November 23, (THEWILL) – President Muhammadu Buhari has unveiled the redesigned Naira notes by the Central Bank of Nigeria (CBN).

The notes which include N200, N500 and N1000, were formally unveiled on Wednesday, at the state House, Abuja, before a meeting of the Federal Executive Council (FEC).

Presenting the new notes to the President, CBN Governor, Godwin Emefiele, said the redesigned currency will help control inflation.

He explained that the new notes will bring “hoarded currency” into the banking system, thereby making monetary policy more effective.”

The redesigned notes, Emefiele said, would also increase financial inclusion as the country moves towards a more cashless economy.

In addition, the new notes would assist in the fight against corruption and better design and implementation of Monetary Policy for accurate data on money supply and monetary aggregates, he said.

DEMERITS

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.

The Washington-based bank revealed this in a new report titled, “Nigeria Development Update.”

This came amid the mixed reactions that have been trailing the newly redesigned notes.

The Central Bank of Nigeria had last month unveiled new N,1000, N500 and N200 notes as part of measures to mop up excess cash in circulation, ransom payment for kidnapping, terrorism financing, counterfeiting, among others.

The World Bank, in its report, however, said the new policy would negatively affect small businesses especially those who day-to-day 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 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.

2. The Central Bank of Nigeria (CBN) announced that the bank would release re-designed naira notes by December 15, 2022, while existing notes would cease to be regarded as legal tender by January 31, 2023. Through this policy, the apex bank aims to control the money supply, inflation, as well as, curb counterfeit currency and ransom payment to kidnappers and terrorists.

Also, the apex bank noted that available data indicated that N2.73 trillion out of the N3.23 trillion currency in circulation was outside the banking system and supposedly, held by members of the public.

Furthermore, the Nigerian currency in circulation has more than doubled since 2015, rising from N1.46 trillion in December 2015 to N3.23 trillion as at September, 2022.
Historically, the re-design of the Naira started in the last 30 years. In 1973, the naira was changed from metric to decimal which precipitated the change from pounds to naira and kobo. In 1977, the highest denomination at the time, the 20 naira note was introduced. In 1979, the government minted the N1, N5, and N10 notes respectively.

In 1984, similar reason in line with the recently announced CBN policy to issue new banknotes as regards to ameliorate the rate of trafficking and counterfeit precipitated the change of all banknote colours. During President Olusegun Obasanjo’s regime, the N100 was introduced to the economy for circulation in 1999, the N200 in the year 2000, the N500 in the year 2001, and N1000 in the year 2005. On 30th September, 2009 following the successful money supply and performance of the N20 (polymer) banknote, the CBN redesigned and converted the N50, N10 and N5 banknotes into polymer substrate.

Despite the various monetary policy measures and reasons for the re-design of the naira by the CBN, there were both positive and negative effects of the re-design. From the positive-view, the re-design would enable the apex bank effectively control the liquidity in circulation, thus reducing inflationary pressure in the economy. Also, the policy may likely improve the security situation in the country as ransom payment may be aborted.

The re-design would force people to put money into the banks which helps the cashless agenda and would be complemented by the increased minting of the e-naira. Also, this will help the Federal government reduce counterfeit notes and reduce the speculative attacks on the naira in the FX parallel market.

Although the policy comes with some positive implications to the real economy, it has several drawbacks as the economy is yet to recover from the market disruption caused by the Russia-Ukraine war.

First, with the new policy, dollarization is imminent. In situations where policies are implemented with a limited window for adoption, hoarders of local currency are likely to exchange their Naira for dollars as a store of value, thus, intensifying the dollarization trend in Nigeria.

Secondly, from the monetary economics literature, a decrease in liquidity is likely to result in reduced economic activity, which translates to lowered GDP, and increased unemployment. Thus, the apex bank must apply caution in implementing the policy as well as learn from the experiences of other developing economies such as India, Venezuela, and Zimbabwe.
Implication of re-designing the naira: A case study of some selected developing economies.

Name: Amushi Arinze Emmanuel
Reg No: 2019/245697
Department: Combined social sciences (economics/psychology)

Question
On 26 October, 2022, Nigeria’s CBN announced the introduction of redesigned 200, 500 and 1,000 naira notes into the country’s financial system. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this, you are required to discuss and analyse the merits and demerits of this policy initiative adopted by the CBN. Secondly, what is the nexus between Naira redesign money market equilibrium? Will this new policy promote equilibrium in the money market? Discuss this comprehensively,

Answer
Since the CBN embarked on the redesign of the Naira as well as expanded the implementation of the cashless policy programme, which began in 2012, a section of Nigerians, apparently with vested interests have not considered the benefits of the policies but have rather criticised them and tried to stir public objection.

Critics of the cashless policy have argued that it would further impoverish Nigerians and create unemployment in the financial value chain. But they lacked evidence to buttress their rejection.It is not surprising that most of the objections to the central bank policies are by those who currently benefit from the rot in the system – politicians, and other corrupt public officials who take undue advantage of the opaque system of administration that does not allow for transparency in government business.

Corruption remains the biggest challenge facing the country and has continued to retard its growth trajectory.

At 62, Nigeria is still groping in the dark in search of its pathway to socio-economic prosperity – bad leadership, weak institutions, and abuse of due process are among a litany of moral and ethical deficits that have held it bound over the years.Corruption, including vote-buying among others, has also influenced the selection of those in the seat of power: often times those who are not qualified have succeeded, and their performance had been abysmal.

As a result of the lack of transparency in financial dealings, social safety interventions for instance have been compromised as monies end up in private pockets while the vulnerable are left in worse conditions.

Because monies cannot be partly accounted for or traced as a result of physical cash handling, a lot of underhand transactions are perpetrated and often go unnoticed by anti-graft and regulatory agencies.It is partly in view of the foregoing and the need to address some of the actions that have continued to shortchange the economy and the vulnerable in particular that the central bank, with the permission of President Muhammadu Buhari, decided to redesign the local currency as well as introduce limits on physical cash withdrawals.Naira redesign

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on October 26, 2022, announced policy initiatives to redesign the N200, N500, and N1, 000 denominations, and subsequently introduced the cash withdrawal limits to regulate the movement of cash in the system as well as solve other challenges including currency counterfeiting among others.In announcing the Naira redesign programme, the CBN governor said the move was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports, and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank.Emefiele, further explained that there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.

According to him, as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable as this has the potential to harm monetary policy actions, further leading to higher inflation and currency speculation, thereby exposing vulnerable Nigerians to further economic hardship.However considering the timing of the policies – being an election year – some Nigerians, particularly politicians, believed that the apex bank’s move was targeted against certain individuals and have refused to see beyond their assumptions to know that the actions are in the best interest of Nigerians and the economy if the country must address the current gale of insecurity, corruption and economic sabotage among other actions of some privileged elites who continued to take advantage of a dysfunctional system to short-changed the country.If anything, there have been early successes of the CBN intervention – the monetary policy committee (MPC) of the central bank recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.

Also, the cashless policy has led to a reduction in banditry and kidnappings, which were rampant in the recent past

Gains

According to Emefiele, the central bank’s principal objective for the currency redesign initiative was to make our monetary policy decisions more efficacious, saying: “We have started to see inflation trending downwards and exchange rates relatively stable.“We aim to increase financial inclusion in the country by reducing the number of the unbanked population. Thirdly, our aim is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria through this program and we can see that the military is making good progress in this important.

According to him, “Available data at the Central Bank of Nigeria showed that in 2015, Currency-in-Circulation was only N1.4trillion. As of October 2022, currency in circulation had risen to N3.23 trillion out of which only N500 billion was within the banking system and N2.7 trillion was held permanently in people’s homes.Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN. It should also be noted that the notes in private homes and outside the banking system are not available for economic activities and thus may affect the economy attaining its potential growth.”

Emefiele said since the commencement of the programme, the apex bank had collected about N2.1 trillion, “leaving us with about N900 billion”. In essence, the currency redesign policy has helped to mop up monies outside the banking system that had often contributed to rising inflation and currency speculation, which had resulted in foreign exchange challenges in recent times.Experts say that there is no doubt the advantages of the currency redesign exercise will enormously benefit the economy in the long run, as emphasised by the CBN Governor.

If anything, the number of employment opportunities already created by the policies further demonstrates that rather than impoverishing Nigerians, the cashless policy has the potential to boost wealth creation across the country.Further highlighting the benefits of the cashless policy, Emefiele pointed out that generally, currency redesign policies (sometimes called demonetization policies) are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties.
Chiefly, it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market. By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth
the macroeconomic impacts of currency redesign are multidimensional and could seem uncertain especially at this early stage when its inconvenience is widespread.By spurring more people to use bank accounts, this policy will further increase bank account ownership and increase the use of accounts by enhancing people’s saving behaviour, and further encourage some hitherto informal business operators to formalize the pattern of transactions and adopt more formal settlement channels.

“In addition, the short-term decline in cash holding and the increased formalization of business activities as the cashless policy forces more economic agents to open bank accounts, will also boost fiscal policy. With more transactions going through e-channels and bank accounts, more agents come within view of the government’s tax net. This enlarges the base of taxable activities and increases the possibility of more tax receipts by various tiers of government.”

Disadvantages
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.

The Washington-based bank revealed this in a new report titled, “Nigeria Development Update.”

This came amid the mixed reactions that have been trailing the newly redesigned notes.

The Central Bank of Nigeria had last month unveiled new N,1000, N500 and N200 notes as part of measures to mop up excess cash in circulation, ransom payment for kidnapping, terrorism financing, counterfeiting, among others.

The World Bank, in its report, however, said the new policy would negatively affect small businesses especially those who day-to-day 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 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

Ngene Francisca onyeka
2019/249518
Economics
Merits
Many people have suggested that the new measure could restore confidence in the local currency as the bulk of the naira note stacked away by politicians, criminals and other illegal operators would be returned to the banking system, helping the CBN to monitor the currency in the economy.
It is also expected that with the new notes, most tattered naira notes currency pushed into the system would be eliminated while counterfeiters would be refrained for a couple of years in carrying out their illicit business.
Another angle to look at the measure is the positive effect it will have on crime in the country. Currently, Nigeria is having challenges with terrorists and banditry across the country with money being paid to kidnappers as ransom running to billions of naira.
It is expected that the ransom money that is yet to find its way into the banking system would be brought out to be exchanged for the newly redesigned notes. This could also lead to crime detection and probable prosecution as many who could not explain the sources of their wealth may find themselves in trouble with law enforcement agencies.
Also, politicians who have stacked away money for the purpose of vote buying during the forthcoming election may have a difficult time changing their notes into the new naira while bringing such money back to the system could upset some of their plans.

Other merits include:
Statistics had shown that over 80 per cent of the currency in circulation were outside commercial banks’ vaults, which was fuelling illicit financial flow within the economy:
A significant hoarding of banknotes by members of the public, worsening shortage of clean and fit banknotes and increasing cases and risk of counterfeiting informed the decision.
 “The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender them to get new ones or else it becomes illegal tender after Jan. 31 2023.
“This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation.
“The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go to the parallel forex market to buy hard currency, putting further downward pressure on the value of the Naira as too much Naira will be chasing too few dollars.”
Checkmating electioneering spending: A 90-day window will have been better, but one can understand the need to avoid interfering with the elections.

Demerits
The huge cost of printing the new note could run to trillions of naira, which the economy may be least prepared for with the current state of the economy, the state of the nation’s foreign reserves since the currency is expected to be printed abroad and the implications for the balance sheet of the central bank.
Learning from the previous similar occurrence 38 years ago, the economy will surely be upset by the change in the currency as many merchants and petty traders would start rejecting the old notes ahead of the implementation of the policy on December 15.
The cost of food and other items will shoot up as the naira notes for transactions will become scarce while many people may go hungry because they could not get new naira to make necessary purchases.
The banking hall will be jam-packed with people scrambling to exchange their old currency for new notes, putting pressure on the lean capacity of the banks to process currency.
Armed robbery could escalate with criminals targeting bullion vans to be used in the distributions of the new notes in some rural areas in a bid to minimize their losses on the old naira notes stacked away previously in order to evade the law.
Both the CBN and the banks will face logistic challenges in the distribution of the new notes across the country with the rate of crime in form of banditry and terrorism across the country escalating. Also, security around the banks would be threatened because of the huge demand for the new notes as criminals could also take advantage of the change-over to commit their illicit trade.
There is the possibility that counterfeiters may take advantage of the lag in distribution to circulate their own notes in some parts of the country, which may not be effectively covered by the publicity around the new notes.

Other demerits include:
Logistics challenge: The challenge of logistics of such printing due to the fact that Nigeria is borrowing to fund the budget deficits. In addition, to navigate the 774 local governments when some of them don’t have banking halls present in the local governments.
Checkmating electioneering spending: CBN dream of checkmating electioneering spending by redesigning the naira notes could only be achieved if the new notes were limited in supply, a task he considered would be quite tall for the apex bank.
Overcrowding in the banking halls: There will be lots of long queues in the banking hall. It’s going to create lots of inconveniences for the people. The unbanked and the elderly may not be able to cope since we don’t have banks in most local government areas
Rural dwellers factor: It is feared that rural dwellers who live far from where banking services are available would experience hardship dumping the old notes, as well as, initially, obtaining the new ones.
Fear of persistent inflation: the step would solve inflation, “because there also are other major reasons for inflation such as the forex crisis, which this new move can exacerbate, as well as the impact of the security crisis on food price inflation.”

For an economy to grow and for people to get interest to the asset they hold, they have to be rational in thought, this can be in a way for the people, when there is high interest rate in keeping money as an asset in bond, people tend to withdraw their money from the bank and keep it as bond in order to get an interest from it, this means that the demand for holding of money in the country is low compared to interest rate, also, in a situation where the is high need of money in the country due to interest rate from it maybe for purchase of raw materials and for production and consumption in the country, then, demand for holding of money at hand is high in the economy due to interest rate gotten from it. Now the function of the government and the Central Bank is to checkmate and balance the supply and demand of money in the economy in order for the economy to move smoothly. When there is equal supply and equal demand of money in the economy, then, the economy is said to be in equilibrium with the money market. Thus, when there is equilibrium supply and demand for money, there is a well utilization of the supply of money. I’m a situation whereby there is need for money to be held as bond whereas the is surplus supply of money, then, there is disequilibrium, also, in a situation whereby there is need for money to be held by the people and also by the bank in order to carryout production and consumption in the economy, and whereas thre is little supply of money, this is also said to be a disequilibrium money market.
Haven looked at what money market equilibrium is all about, now comparing it with the situation on ground vis-a-vis the redesigned naira notes and the aftermath of what it has left behind we go this way.
Looking at the condition of the country now, we can deduce that people especially the poor and the work force of the country are highly in need or demand for the supply of money in the country because the money at hand with the people before the introduction of the new naira notes have all been ceased by the government and the Central Bank, leaving the people with nothing to hold unto, but on the contrary, we see the the demand deposit in the bank has been withheld from the people not even minding the high and clarion need for the money. Thus, instead of the economy growing in a speedy rate, it is decreasing because the urgent need for the supply of money has been withheld. Unlike holding the money as bond which should have generated interest for the people, all the money in at demand deposit which at the money is said to be in a fixed state or in a fixed account which has an infinity term of release. Looking at this critically, we can say that the economy is drastically suffering from a highly and negatively disequilibrium state of money supply in the economy, and at this level, there is no other option to be made since holding the money in bond is not there and the demand deposit has been withheld.
I’m summary, we can boldly say that, the nexus or the link between the redesigned naira notes and the money market equilibrium is negative which is adversely affecting the economy of Nigerian.
(c) Will this new policy promote equilibrium in the money market?
It is well to say that haven seen the effect of the policy and the outcome of it in the nation within a short period of its manifestion, it will not in anyway make way for an equilibrium money market. A point of reference to back up my statement can be traced to my local market here in cross river state, where an astonishing shock overwhelmed me to see that on the market day that formerly used to be filled with many buyers and sellers, behold, I was able to count the number of people who were able to come to the market for purchase of goods that day. The.market was scanty as never before, while there were few buyers and sellers due to lack of money.
This shows how drastic the economy is falling away because, people are willing to produce and sell goods but the purchasing power and capital has being withheld by the government, also people are willing to buy goods and consume from producers but their assets have being withheld by the government making it difficult to access.
In summary, this policy cannot bring about equilibrium in the money market unless the government of this country can look into it, making readjustment and following suite the adjustment made.

1. MERITS

Notwithstanding the antagonism against the CBN’s cashless policy direction, analysts have thrown their weight behind the move, noting that the decision to limit cash withdrawal limits to individuals and corporate organisations following the currency redesign programme was the right way to go if the country must move forward.

The central bank had placed a limit on cash withdrawals under the new dispensation, restricting the maximum cash withdrawal over the counter by individuals and corporate organisations per week to N500,000 and N5 million respectively.

The move by the apex bank was generally believed was aimed at discouraging vote-buying as the 2023 general election approaches as well as addressing hoarding of the local currency in a bid to check inflationary pressures as well as address critical security issues.

However, speaking in separate interviews with THISDAY, analysts said the new CBN policy will aid in accelerating the monetary policy objectives.

They said the policy will positively enhance the monetary and fiscal space as well as improve the profitability of the banking sector.

The analysts, however, cautioned that the slow adoption of e-banking, the rise in cybercrime coupled with an election year, and other macroeconomic factors could slow the benefits of the policy. They also believed that the policy could strengthen the Naira against the US Dollar.

Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, said the effectiveness of monetary policy hinged on being able to mop up excess liquidity and having the majority of the population included in the financial system.

He said, “Several initiatives by the CBN have tried to encourage both financial inclusion and a cashless society, however, these have been largely ineffective. The new CBN policy will certainly aid in accelerating the monetary policy objectives, whilst also tackling the insecurity challenges and encouraging financial inclusion.

“Though there will undoubtedly be implementation challenges, it is a step in the right direction for sanitising the economy. The excess liquidity floating around in the economy needs to be mopped as this will also help inflation.”

DEMERITS
To start with, is there anything that has happened that the CBN couldn’t have anticipated and shouldn’t have planned for or against? Hardly. Policy makers are usually advised to take Murphy’s Law as an iron law and to always factor it into policy design and implementation. Murphy’s Law roughly translates to assume that: ‘anything that can go wrong will go wrong’. Did CBN anticipate all the things that could go wrong with its Naira redesign policy and did it plan adequately against those things and how have those back-up stacked up against unfolding reality?

In other words, what risks did the CBN identify and what risk-mitigation strategies did it put in place? Or did CBN just assume that with presidential approval secured all would go swimmingly? It is apparent that CBN was surprised by the reaction to the thinness of its groundwork and has had to play catch-up to the few taking advantage of the arbitrage opportunities that it created and to its lack of rigour.

The second and related issue is that there is a serious scarcity of the new Naira notes, and the CBN cannot be absolved of the blame. The CBN governor has been busy talking about how much the apex bank has pulled in from the currency in circulation but has never mentioned how much money CBN has printed or distributed to the banks. The reason is simple: CBN has not printed enough. By its own admission, CBN is printing locally, and not a few people know the full capacity of the Mint. Beyond what people know or sense about this capacity constraints, CBN also actively signalled that it didn’t have enough notes: it didn’t make the new notes available until December 15th, it initially asked banks not to pay new notes over counter, then it imposed a limit on how much they could give out over the counter.

Nigerians easily picked up the signal that CBN was rationing the new notes. Those who have access to the new notes assign a margin. Those who get or buy the new notes are not letting go of them, so the notes are not getting back into the banks or are not going into circulation. The initial scarcity created a second order scarcity: most people are scampering to join the ever-growing queues, increasing the sense of scarcity. The inadequacy of online banking and digital payment platforms compounded the search for cash. A few have taken advantage of the scarcity, and they should be made to face the music. But the real problem is the scarcity that CBN created and signalled. Once there are enough new notes, there won’t be a reason for anyone to hoard them or pay a premium to get them or spend precious hours on queues just to get just a few thousands.

2. The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, is not new to criticisms concerning his choice of unorthodox measures in addressing monetary policy issues – and he stands tall over this approach.

Emefiele had often told his critics not to judge his tactics but evaluate the positive results produced by such unconventional interventions.

During the recent global financial crisis and the recession, unorthodox monetary policy interventions helped salvage the economy where conventional practices have failed.

Recently, the central bank’s efforts at curtailing rising inflation had proved nearly fruitless amidst growing food and commodity prices.

In the same vein, attempts to stabilise the naira against the US dollar had been difficult partly due to speculative activities and other challenges.

NAIRA REDESIGN AND CASHLESS POLICY

However, the recent engagement between the CBN governor and the diplomatic community exposes the primary intent of the bank’s cashless and naira redesign programmes.

If anything, it showed the benefits of the cashless policy, whose implementation began in 2012; and that the currency redesign programme was initially underestimated.
The CBN’s Governor’s interaction with the diplomatic community was particularly critical to shed more light on the policies and disabuse their minds of wrong perceptions following some antagonism by some political class members.

According to the central bank governor, the main objectives of the cashless policy and currency redesign were to make monetary policy decisions more effective, deepen financial inclusion in the country, curb terror financing and banditry, and discourage vote-buying by politicians and money laundering, among others. Politicians were stocking money for election activities, according to the CBN governor.

James Emejo, writes that the naira redesign and implementation of the cashless policy would plug fiscal leakages,boost government revenue, and aid the economic empowerment of vulnerable Nigerians as well as benefit the country as a whole.

* Currency redesign is aimed at reducing the counterfeit in that is in circulation.

* Currency redesign is also aimed at reducing the money in circulation.

*Merits of Naira Redesign*

A.strengthening of our macro economic parameters.

b. Reduction of broad money supply leading to a deceleration of the velocity of money in the economy which should result in less pressures on domestic prices.

c. Lowering of Inflation as a result of the accompanying decline in money supply.

d. Collapse of Illegal Economic Activities which would help to stem corruption and acquisition of money through illegal ways.

e. Exchange Rate stability; the helps stabilize the value of a county’s currency.

f. Availability of Easy Loans and lowering of interest rates; Account to central bank of Nigeria (CBN).

g. Greater visibility and transparency of our financial actions translating to efficient enforcement of our anti-money laundering legislations.

*Demerits of Naira Redesign*

This policy has some short comings which affects the SMEs. This cashless policy has crumbled a lot of businesses recently, because of inadequate planning.
Especially those who engage in daily cash transactions. Many people decluttered the prices of their goods way below the cost price, once you have cash to pay.
losses as many sold below their cost price.

*The cashless policy beyond the cash supply challenge is a digital banking infrastructure issue. Digital banking deals with everyday essentials, including checking balances, reviewing transactions, making payments and transferring funds, whether using USSD, banking apps or online/web-based systems. It is thus a sad commentary on the actual state of the nation’s digital financial infrastructure to see apps and servers collapse under the strain of increased traffic. It shows a lot still needs to be done to strengthen the system.

*Transactions are not completed; alerts fail to arrive and all sorts of strange messages occur for the first time.

*One more thing, the CBN must also look at removing ALL charges for online and POS transactions in the short term. It can later look at a reduced fee for these transactions as volume has risen.

*It gave fraudsters the opportunity to exploit people. They perform transactions and send you fake alert thereby making you release goods,at the end of the day you won’t get the money.

*The nexus between the naira redesign and money market equilibrium*

When CBN releases currency into circulation, it is meant to be used and after effluxion of time, it return to the CBN thereby keeping the volume of money in circulation under the firm control of the CBN.

Currency are redesigned to reduce and maintain the money in circulation.

Money market equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of money supplied. All other things unchanged, a shift in money demand or supply will lead to a change in the equilibrium interest rate and therefore to changes in the level of real GDP and the price level.
The CBN of the country has the sole Authority of controlling the amount of money in circulation.

To my understanding the nexus between the naira redesign and money market equilibrium is the CBN because the are the ones that determines the volume of money in circulation, they also control the supply of money.

*will this lead to equilibrium*

The rate of interest, according to J.M Keynes is determined by demand for money (liquidity preference). The supply of money at a given time,is fixed by the monetary by the monetary authority of the country.

The money market is at equilibrium when the demand for money equals the supply of money.

MS=MD

Since the demand for money (liquidity preference) is determined by the interest rate. We can say that the money market is not in equilibrium, currently because of the high rate of interest involved.

For the money market to be at equilibrium the firms has to hold leas money at a higher interest rate

Innocent Love Ihunanya
2019/251037
Economics Department

On 26 October,2022, Central Bank of Nigeria (CBN) announced the introduction of redesigned #200,#500 and #1000 bank notes and to be in circulation from 15 December,2022, making the old banknotes not a legal tender as of January 31st,2023. The CBN governor, Godwin Emefiele had said that redesign was due to the request from the federal government. According to Mr Godwin Emefiele, the policy will give the CBN control over naira circulation,manage inflation, fight the use of counterfeit and ransom payment.
But since the unveiling of redesiocent Love Ihunanya.
gned banknotes, Nigerians have been struggling to access it from banks. In fact,it is said that Nigerians use naira to buy naira due to the high scarcity of it.
There have been back and forth between the judiciary, the federal government and the CBN about the deadline of the old notes as a legal tender. While, the CBN insist on the two month’ notice, the government and the court (judiciary) also insisting on extension (no particular date fix yet).
The Senate House Speaker,Femi Gbajabiamila had advised the CBN that even when the policy is at its full effect, the apex bank should allow the use of old banknotes at the same time until it completely phased out but it fell on deaf ears.
The demerit of it is that, since the unveiling of the new notes, Nigerians have been struggling to get it, resulting to hardship. People now buy naira with naira.
The policy was meant fight inflation,but it seems like it is not. Inflation is increasing as most business owners who are mostly old women don’t know anything about cashless especially in rural areas, therefore, increasing inflation as people who are into cashless charge more than the price of the goods.
But despite the hardship it has put Nigerians into and the complains of how hard it is to access it, the redesign policy has merits
Reduce Counterfeiting: According to Mr Godwin Emefiele,as of September 2022, a total of #3.2 trillion was in circulation of which#2.73 trillion outside the vaults of the bank . The business of counterfeiting money is as old as man. Counterfeiting contribute to the reduction in the value of money and increase inflation due to more money getting cirlpC@culated in the economy. The naira redesigned is meant to make the counterfeit useless.
Security: Nigeria have been experiencing high rate of kidnapping, robbery and terrorism. The redesign policy is to reduce insecurities since the old banknotes will soon be no legal tender, people are meant to deposite then in the bank and at such process, people with huge money are to answer questions on how they got such money. And since the new naira is scarce, most people are now into cashless, this actually help the government to monitor the flow of money.
Control Money Supply: The major thing the redesign policy does is to help the apex bank and federal government control the circulation of money in the economy. To much money in circulation tends to increase inflation. The redesigning helps to take-in more than half money in circulation and as such help reduce inflation. According to the CBN, the policy has sucked in about #1.81 trillion while crashing currency-in-circulation to #1.4 trillion in January,2023.
I think if the CBN should follow the due process, then, they are going to achieve their goals.

The policy will not promote equilibrium in the money market . In the short run, people are still struggling to get the money, this actually does not balance the money market. In the long run, people are now getting used to the money, they have access to it but not yet in equilibrium.

NAME: DIKE JOHN CHUKWUDOZIE
REG NO: 2018/241837
COURSE: ECO 303
DEPARTMENT:ECONOMICS MAJOR

1. After the Central Bank of Nigeria’s Naira Redesign Policy was implemented in October 26th, 2022. We will critically discuss the merits and demerits of this initiative by the CBN. The following are a few of the policy’s advantages:
(i) Cutting back on overall money supply: Currency redesigns that are successfully implemented lead to a decrease in the money supply. By reducing the value of money in circulation and slowing the velocity of money in the economy, this will relieve pressure on domestic prices.
(ii) Decrease Inflation: It is frequently expected that the policy will lead to market deflation as less money is circulated and stored outside of banks. So, the parallel decline in the money supply will slow the rate of inflation.
(iii) Reduction in illegal economic activity: Those who have made money illegally could be reluctant to declare it because they risk facing legal action from the Income Tax Department if their income is determined to be legal.
(iv) Straightforward Loans: Borrowing will be less complicated, and interest rates may decrease. Banks will provide more loans as a result of having more money, increasing the amount of money in circulation.
Having spoken about the advantages of the Naira Redesign Policy, it is important to also talk about its disadvantages. Some disadvantages of the policy’s adoption are listed below:
(I)logistical challenge: Since Nigeria borrows to make up for budgetary shortfalls, the logistics of such printing provide a challenge. Also, to navigate the 774 municipal administrations, some of which lack any financial services.
(ii) Keeping an eye on election spending: Some people think that the CBN’s plan to reduce election spending by redesigning the naira notes can only be successful if the new notes are created in a limited number.
(iii) Banking halls will be crowded: There will be a lot of people waiting in long lines. It will generate a tremendous inconveniences for the public. Since most local government regions lack banks, the elderly and unbanked might not be able to manage.
(iv) Factor involving rural residents: Rural residents who live far from banking facilities worry that replacing their old notes and initially obtaining the new ones will be challenging.
(v) The persistent inflation concern: As there are other major factors that contribute to inflation, such as the Currency crisis, which the new measure may exacerbate, and the effects of the security situation on food price inflation.
(2) The supply of money and the demand for money make up the money market equilibrium. Money supply is an exogenous (fixed) policy variable, in this case the Naira Redesign policy, which is determined by the central bank. The desire for money is endogenous (it is not fixed), and the demand for money is determined by the interest rate. The Naira Redesign Policy is the exogenous policy variable that the CBN selects to govern money supply, which is the nexus between the policy and the money market equilibrium. This suggests that the Naira Redesign programme is intended to reintroduce out-of-circulation currency into the country’s financial system via the CBN. People will hold less money as a result, which will boost the demand for money and raise interest rates. As a result, the money market will reach equilibrium as the demand for and supply of money balance each other out.
Will the Naira Redesign Policy lead to a state of equilibrium in the money market? is a related query. Of course, and here are my justifications:
Because the naira redesign policy is primarily designed to recover the majority of the money in circulation and the out-of-circulation amounts, there would be less currency flowing in the economy. The demand for money will rise as a result, which will raise the interest rates paid to lend money. According to the liquidity preference theory, an increase in the supply of money will result in an increase in interest rates. This theory is used to explain why there is equilibrium in the money market. This is fairly visible at the moment, as consumers pay POS agents astronomical interest rates in order to obtain small amounts of cash. If this keeps happening, the money market will eventually return to equilibrium. If there is a change, the CBN may use a different policy variable in the future to raise the amount of money in circulation and restore equilibrium to the money market.

NAME:EKE EJIEKE KALU
REG NO: 2019/244150
LEVEL: 300 LEVEL
DEPARTMENT:ECONOMICS

1. After the Naira Redesign policy was put into effect by the Nigerian central bank on October 26th, 2022. We will discuss the benefits and drawbacks of the Nigerian central bank’s initiative. In the sentences that follow, we will talk about a few of the initiative’s advantages first.
The ransom money, which has not yet made it into the financial system, is expected to be hauled out and exchanged for the new-looking notes. While many people who could not explain where their money came from may find themselves in legal trouble, this might also lead to criminal identification and potential prosecution.
Also, politicians may find it challenging to exchange their notes into the new naira, which would obstruct some of their objectives. Furthermore, politicians who have saved money to buy votes in the approaching election may encounter similar difficulties.
Another way to look at it is the policy’s positive effect on the country’s crime rate. Currently, Nigeria is coping with terrorism, banditry, and the payment of billions of naira in ransom to kidnappers.
According to many who have suggested that the new measure could restore confidence in the local currency, the majority of the naira notes that politicians, criminals, and other illegal actors have stored away would be returned to the banking system, aiding the CBN in monitoring the currency in the economy.
The majority of the worn-out naira notes that were previously circulated are also expected to be eliminated by the new notes, which is expected to put an end to counterfeiting for a few years.
After going over the benefits of the Naira Redesign Policy, it is important to also talk about its shortcomings, some of which are covered below.
Having learned from a previous similar occurrence that occurred 39 years ago, the economy will undoubtedly be affected by the currency transition because many small-time traders and merchants will begin rejecting the old notes before the policy is put into effect.
If naira notes for transactions become scarce, the price of food and other goods will rise, and many people may go hungry because they are unable to obtain new naira to make essential purchases.
People will be dashing to exchange their old currency for new notes in the banking hall, which will put strain on the institutions’ limited ability to process currency.
The CBN and the commercial banks would both encounter logistical difficulties when distributing the new notes throughout the nation due to the rise in banditry and terrorism. In addition, the massive demand for the new notes would compromise bank security because of the possibility that criminals would utilise the transition to further their unlawful activities.
There is a chance that forgers will use the delay in delivery to circulate their own notes in some regions of the nation, which may not be adequately covered by the press surrounding the new notes.

2. The money supply and the money demand make up the money market equilibrium. In this instance, the Naira Redesign policy is an exogenous (fixed) policy variable that is determined by the central bank. The desire for money is endogenous, which means that it is not fixed and is affected by the interest rate. To control the money supply, which serves as the link between the policy and the equilibrium of the money market, the CBN selects the Naira Redesign Policy as the exogenous policy variable. This demonstrates that the Naira Redesign program’s objective is to use the CBN to restore currency into the country’s financial system after it has been out of circulation. People will therefore keep less cash on hand, which will increase the demand for cash and raise interest rates.
Will the money market equilibrium be brought about by the Naira Redesign Policy? is an important query. Of course, and these are the reasons I believe it would:
The naira redesign policy is largely meant to recover the majority of the money in circulation and the out-of-circulation amounts, thus there would also be less money circulating through the economy. Loan interest rates will rise as a result of the increased demand for cash. According to the liquidity preference theory, interest rates will increase along with an increase in the money supply. This theory is put up to explain why there is equilibrium in the money market. Customers presently have to pay POS agents high interest rates in order to obtain modest quantities of cash, which makes this fairly evident. If this condition continues, the money market will finally attain equilibrium.
Also,the CBN established the Naira Redesign Policy as an exogenous (fixed) policy variable to manage the money supply. Prior to its start, there were 3.23 trillion in circulation overall, of which 500 billion were in use and 2.7 trillion were not. The policy has resulted in 2.1 trillion being recovered, leaving 900 billion uncollected. This demonstrates how the policy is bringing the money market back to balance.

1.Discuss and analyse the merit and demerit of naira redesign policy by CBN
Merits:
1. It reduces underground or illicit economy:it reduces the amount of cash in underground or illicit Economy. The underground economy refers to economic transactions that are deemed illegal, either because the goods or services traded are unlawful in nature, or because transactions fail to comply with governmental reporting requirements. Statistics had shown that over 80 per cent of the currency in circulation were outside commercial banks’ vaults, which was fuelling illicit financial flow within the nigeria economy. The most immediate impact of illicit financial flows (IFFs) is a reduction in domestic expenditure and investment, both public and private. This means fewer hospitals and schools, fewer police officers on the street, fewer roads and bridges. It also means fewer jobs. So with the naira redesign money are returned back to the bank and there will be few flow of cash which will help prevent illicit cash flow.

2.Improved Security Features: The redesigned naira is expected to have better security features that would make it harder to counterfeit. Money which plays much crucial roles in a country’s economy such as general price

level, labor and productivity, aggregate national income, balance of payment and

exchange rates, redesigning the currencies will curb intense money counterfeiting by reintensifying its security measures.It will bring about a total decrease in the circulation of fake notes which could undermine the economy.

Demerits:

1.Cost Implications : The redesign policy could be expensive for the CBN, which would have to invest in new technology, materials, and equipment to print and distribute the new notes. This could lead to a strain on the government’s finances. The cost implication of this exercise is the fact that the country is borrowing for over

60% of government expenditure, of where the redesign will be funded, it should be of

high priority to the CBN that by printing of more money not supported with high value

or increased purchasing power is fuelling more inflationary pressure. This borrowing would have been used to bring about more to human capital development for the country which would have led to economic growth of nigeria but is been used for naira redesign, with this underdevelopment is been encouraged.

2.Inflationary Pressure: The redesign policy could put pressure on inflation, especially if the CBN decides to introduce new denominations of the naira. This could lead to a rise in the cost of goods and services, which would affect the purchasing power of Nigerians. The borrowing for the redesign of naira account to over 60% of government expenditure which is not supported with high purchasing power causes inflation

3.Public Acceptance: The redesign policy may face resistance from the public, who may find it difficult to adapt to the new notes.A significant hoarding of banknotes by members of the public, worsening shortage of clean and fit banknotes like some illiterate or old age citizen who prefer to save their money in their houses won’t find it easy and politicians who have stolen public money and his them in their houses etc for the upcoming election etc will not find it easy to accept because it is stressful to change the money in the bank. This could slow down the circulation of the new notes and undermine the objectives of the policy.

2.What is the nexus between naira redesign money market equilibrium

The nexus between naira redesign, money market, and equilibrium is related to the impact that redesigning the naira currency can have on the money market and the overall economic equilibrium in Nigeria.

The naira redesign refers to the process of changing the design of the Nigerian currency, which can include changes to its appearance, security features, and denomination. Redesigning the currency can have an impact on the money market by influencing the demand and supply of money.

Money market equilibrium is achieved when the demand for money equals the supply of money, which determines the interest rates. When the redesign of the naira currency leads to changes in the demand for money, it can shift the equilibrium in the money market.

For instance, if the redesign increases the demand for naira currency, it can lead to an increase in its value and a decrease in interest rates. Conversely, if the redesign decreases the demand for naira currency, it can lead to a decrease in its value and an increase in interest rates.

3. Yes it will
Equilibrium in the money market occurs when the money demand equals the money supply. At that point, the equilibrium interest rate is formed. For the equilibrium interest rate to change, either the money supply curve or the money demand curve should shift. Before the the money market was not at its equilibrium because we had more money supplied than its been demanded for. That is we had more money in circulation than in the banks. Excess withdrawal of money by politicians and illicit hoarding of money by individuals. The legal imposition of the redesign of naira has made many nigerians hoarding money to return them back to the bank,in return for new currency, which will cause the demand for money to shift and will bring about the supply and the demand for money to be at it equilibrium in the money market

Name: Otutu Chisom Judith
Reg no: 2019/242963
Department: Economics
Course: ECO 303

ANSWERS
The governor of the Central Bank of Nigeria, Mr. Godwin Emefiele on October 26th, 2022 announced policy initiatives to redesign the #200,#500 and #1000 denominations and subsequently introduced the cash withdrawal limits to regulate the movements of cash in the system as well as solve other challenges including currency counterfeiting. He said the move was aimed at checking the increasing ease and risk of currency counterfeiting evidenced by several security reports and also curtailing the significant hoarding of naira notes by members of the public.
However, considering the timingof the policies and being an election year, some Nigerians believed that the apex bank’s move was targeted against certain individuals.
Now, let’s look at the merits of redesigned cash policy initiative
*According to Emefiele, the Central Bank principal objective for the currency redesign initiative was to make our monetary policy decisions more efficacious

*Available data at the CBN showed that in 2015, currency-in-circulation was only 1.4trillion. As of October 2022, it had risen to 3.23 trillion out of which only #500billion was within the banking system and 27trillion was held permanently in people’s homes.
Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of money in circulation under the firmhold of the CBN. Since the commencement of the programme, the CBN has collected about #2.1trillion leaving us with about #900billion. In essence, the currency redesign policy has helped to mop up monies outside the banking system that has often contributed to rising inflation

*Currency redesign policy are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties

*This policy will further increase bank account ownership and increase the use of accounts by enhancing people’s saving behavior.

The demerits are:
*The government is struggling with a huge debt deficit and would likely borrow massively to fund the naira redesigning
*The redesigning policy will trigger economic dislocation especially considering the short time frame and rush by the people to the banks to dispose old notes

*Rural dwellers who live far from where banking services are available would experience hardship depositing the old notes as well as obtaining new notes

*There will be lots of long queues in the banking hall and it’s going to create lots of inconveniences for the people.

2)Money market equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of money supplied. All other things unchanged, a shift in money demand or supply will lead to a change in the equilibrium interest rate and therefore to changes in the level of real GDP and the price level. The money market is the interaction among institutions through which money is supplied to individuals, firms, and other institutions that demand money. Money market equilibrium occurs at the interest rate at which the quantity of money demanded is equal to the quantity of money supplied. For the money market to be in equilibrium, the quantity of money demanded has to be equal to the quantity of money supplied.
The nexus between the naira redesign policy and the money market equilibrium is the money supply. That is, money supply connects the redesign policy and the money market equilibrium
3)The naira redesign policy was introduced to curtail the money in circulation since more than half of the money in circulation ttwere being kept/hidden by the individuals. Because of this redesign policy, people would have to deposit the hidden money into the bank, which will enable the CBN have firm hold over the money in circulation which will in turn promote equilibrium in the money market

Edwin-Ugodu Stephen Chidi
2019/251264
Intermediate Macroeconomics 1
ECONOMIC 303
Assignment:
Answers,
Firstly, giving a good perspective to the merits and the demerits of the currency redesigning policy by CBN, the following were noted:
MERIT:
1. Many people have suggested that the new measure could restore confidence in the local currency as the bulk of the naira note stacked away by politicians, criminals and other illegal operators would be returned to the banking system, helping the CBN to monitor the currency in the economy. It is also expected that with the new notes, most tattered naira notes currency pushed into the system would be eliminated while counterfeiters would be refrained for a couple of years in carrying their illicit business.
2. Another angle to look at the measure is the positive effect it will have on crime in the country. Currently, Nigeria is having challenges with terrorists and banditry across the country with money being paid to kidnappers as ransom running to billions of naira. It is expected that the ransom money that is yet to find its way into the banking system would be brought out to be exchanged for the newly redesigned notes. This could also lead to crime detection and probable prosecution as many who could not explain the sources of their wealth may find themselves in trouble with law enforcement agencies.
3. Also, politicians who have stacked away money for the purpose of vote buying during the forthcoming election may have a difficult time changing their notes into the new naira while bringing such money back to the system could upset some of their plans.
Other merits include:
4. Statistics had shown that over 80 per cent of the currency in circulation were outside commercial banks’ vaults, which was fuelling illicit financial flow within the economy: a significant hoarding of banknotes by members of the public, worsening shortage of clean and fit banknotes and increasing cases and risk of counterfeiting informed the decision.
“The CBN obviously wants to force all those notes back into the banking system. Those with the notes must surrender them to get new ones or else it becomes illegal tender after Jan. 31 2023. “This is also a way to withdraw currency from circulation, an unorthodox way of tightening the money supply since the country is battling high inflation.
“The flip side is that people who are holding huge amounts of cash outside the banking system for nefarious reasons will go to the parallel forex market to buy hard currency, putting further downward pressure on the value of the Naira as too much Naira will be chasing too few dollars.” Checkmating electioneering spending: A 90-day window will have been better, but one can understand the need to avoid interfering with the elections.
DEMERIT
1. The huge cost of printing the new note could run to trillions of naira, which the economy may be least prepared for with the current state of the economy, the state of the nation’s foreign reserves since the currency is expected to be printed abroad and the implications for the balance sheet of the central bank.
2. Learning from the previous similar occurrence 38 years ago, the economy will surely be upset by the change in the currency as many merchants and petty traders would start rejecting the old notes ahead of the implementation of the policy on December 15. The cost of food and other items will shoot up as the naira notes for transactions will become scarce while many people may go hungry because they could not get new naira to make necessary purchases.
3. The banking hall will be jam-packed with people scrambling to exchange their old currency for new notes, putting pressure on the lean capacity of the banks to process currency.
4. Armed robbery could escalate with criminals targeting bullion vans to be used in the distributions of the new notes in some rural areas in a bid to minimize their losses on the old naira notes stacked away previously in order to evade the law.

5. Both the CBN and the banks will face logistic challenges in the distribution of the new notes across the country with the rate of crime in form of banditry and terrorism across the country escalating. Also, security around the banks would be threatened because of the huge demand for the new notes as criminals could also take advantage of the change-over to commit their illicit trade.
6. There is the possibility that counterfeiters may take advantage of the lag in distribution to circulate their own notes in some parts of the country, which may not be effectively covered by the publicity around the new notes.
Other demerits include:
7. Logistics challenge: The challenge of logistics of such printing due to the fact that Nigeria is borrowing to fund the budget deficits. In addition, to navigate the 774 local governments when some of them don’t have banking halls present in the local governments.
8. Checkmating electioneering spending: CBN dream of checkmating electioneering spending by redesigning the naira notes could only be achieved if the new notes were limited in supply, a task he considered would be quite tall for the apex bank.
9. Overcrowding in the banking halls: There will be lots of long queues in the banking hall. It’s going to create lots of inconveniences for the people. The unbanked and the elderly may not be able to cope since we don’t have banks in most local government areas
10. Rural dwellers factor: It is feared that rural dwellers who live far from where banking services are available would experience hardship dumping the old notes, as well as, initially, obtaining the new ones. Fear of persistent inflation: the step would solve inflation, “because there also are other major reasons for inflation such as the forex crisis, which this new move can exacerbate, as well as the impact of the security crisis on food price inflation.”

CONCLUSION
It’s imperative that the CBN should embark on massive public enlightenment across the country to sensitize Nigerians to the new measure and its implications for their daily lives. There are millions of Nigerians living in rural areas who may never get to know about the new development while criminals may also likely exploit such ignorance to deprive them of their hard-earned money. The CBN should also come clean on the cost implications of the new measure to the economy and ensure that it tightens up all loopholes that may impact negatively on the implementation of the new policy.
Also, security agencies such as the Economic and Financial Crime Commission (EFCC), the Nigerian Financial Intelligence Unit (NFIU) and other relevant security agencies should ensure that ill-gotten money is traced and the criminals are punished for their maleficence against the collective interest of the Nigerians. The regulatory bank should also work hard to ensure that its currency management team is properly scrutinized to ensure that they do not compromise the security and efficiency of the new process.
Secondly, before understanding the nexus between the Naira redesigning and the money market equilibrium, what is money market equilibrium?
Money market equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of money supplied. All other things unchanged, a shift in money demand or supply will lead to a change in the equilibrium interest rate and therefore to changes in the level of real GDP and the price level.
The recent currency redesigning policy of the Apex bank has altered the initial interactions between demand and supply of money in the economy, as supply can not match up with the panic demand for money, thereby causing a negative impact on the money market equilibrium.
Lastly, the policy can only promote equilibrium in the long run; if not, its impact on the money market would cause a disequilibrium because the supply of money is in shortage compared to the demand for it. Which has resulted to high interest rate in the market.
REFERENCES
Central Bank of Nigeria, CBN Circular on Project CURE, http://www.cenbank.org.ng
Chukwu, D.O. (2022), ‘Trends and Changes in the Nigerian Currency System, Colonial Period – 2022
https://www.thisdaylive.com/index.php/2022/10/31/benefits-of-planned-naira-redesign/
Photo of Peter Lawson
Peter Lawson
Peter Hezekiah Lawson (Sir Pee). The CEO of onlineproject.com.ng.
https://open.lib.umn.edu/principleseconomics/chapter/25-2-demand-supply-and-equilibrium-in-the-money-market/#:~:text=Money%20market%20equilibrium%20occurs%20at,GDP%20and%20the%20price%20level.

Name: ASOGWA IJEOMA AGATHA
Reg no: 2019/251105
Department: ECONOMICS
Course title: INTERMEDIATE MACROECONOMIC THEORY 1
Course code: ECO 303

ASSIGNMENT
On 26 October, 2022, Nigeria’s CBN announced the introduction of redesigned 200, 500, 1000 naira note into the country’s financial system. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this, you are required to-
Discuss and analyze the merits and demerits of this policy initiative adopted by the CBN.
Secondly what is the nexus between Naira redesign and money market equilibrium?
Will this policy promote equilibrium in the money market? Discuss this comprehensively.

1.
Nigeria’s financial system generally has a rich history of monetary reforms and currency withdrawal/redesigning has occurred at different times in the country’s history. Different redesign events have occurred over the years since independence. In 2022 the Central Bank of Nigeria (CBN) issued a statement that it has concluded plans to redesign the Naira.
Purported merits of this policy as cited by the CBN include tackling rising inflation, combating money hoarding, strengthening the macroeconomic parameters and equally combating social improprieties, reducing currency outside banks vault, increasing financial inclusion by banking the unbanked population and supporting the efforts of our security agencies in combating banditry and ransom taking in Nigeria. The CBN governor also claims that about N2.73 trillion of the N3.23 trillion currency in circulation in Nigeria, is outside the bank vaults.
However, the policy has elicited serious debate across different parts of the country. Many people accuse the policy of being a mismatch to current economic realities on ground such as severe inflation and high rate of unemployment and underemployment. As such, it is just a distraction in the midst of serious ravaging economic issues and carries no significant economic benefits for the average Nigerian.
The policy has also been criticized for its bad timing. According to the daily newspaper published by Business Day, the timing subverts the naira redesign policy’s good intentions and inflicts hardship on the people. The cash scarcity associated with the currency redesign policy has motivated a slowdown in economic growth as many productive activities have been halted due to the inability to access cash. “The plummeting of productivity has implications for GDP and a domino effect on other economic indices.”
Other negative implications of the policy include restrain local trade and regional trade, constrain the informal sector’s trust in the financial system and erosion of investment confidence.

2
Money market equilibrium is a situation where demand for real money balances equates the supply for real money balances. It consist of the money demand, which refers to the aggregate demand for money, and money supply, which is the overall supply of money in the economy. The interest rate influence’s the interaction between money supply and money demand in the economy a d the quantity of money demanded by institutions and individuals.

Equilibrium in the money market occurs when the money demand equals the money supply. There is a relationship between the redesign of Naira and the money market equilibrium, because naira redesign is a contractionary monetary policy. The aim of the CBN is to bring money market equilibrium in the economy and ensure stability in the general price level of the economy.

Central banks are charged with the responsibility of ensuring the stability of the general price level through monetary policy. This is achieved by Censuring sustainable levels of money supply and indirectly, money demand. In a bid to ensure the stability of prices, central banks employ policies, which work through the action of several tools of monetary policy. These include the use of open market operations, bank reserve requirements, and nonconventional monetary policies. Although there is a relationship between money market and naira redesign there has not been any positive or visible effect of the policy on the money market. Also there has not been any equilibrium because there is no stability in general price level of goods and the amount of money demanded do not equal the amount the commercial banks supply to the public.
The policy was implemented during a period when Nigeria is facing some socio economic crisis and global backwardness, she is experiencing budget deficit, effect of the fall of oil price domestically she faces all sort of attacks, making the policy not so necessary at this point. The economy of Nigeria is fragile making any policy which is not properly implemented will have an adverse effect even if the policy is good as in the case of Nigeria and the current financial policy.

The policy in some way have affected sales negatively, some sellers still practice cash based sales policy they have no bank account to run their business transaction, simultaneously production is affected negatively, appropriate consideration were not given as regards the economic situation of the country before the policy was enacted, the policy makers only looked at the narrow picture without looking at the macro effect of the policy.
The economy of Nigeria is currently in stagnation until considerable changes are made the economy will not grow and money market will not be at equilibrium.

Name: ASOGWA IJEOMA AGATHA
Reg no: 2019/251105
Department: ECONOMICS
Course title: INTERMEDIATE MACROECONOMIC THEORY 1
Course code: ECO 303

ASSIGNMENT
On 26 October, 2022, Nigeria’s CBN announced the introduction of redesigned 200, 500, 1000 naira note into the country’s financial system. But since the notes were unveiled, Nigerians across different parts of the country have been struggling to access it from banks and ATM cash point. In view of this, you are required to-
Discuss and analyze the merits and demerits of this policy initiative adopted by the CBN.
Secondly what is the nexus between Naira redesign and money market equilibrium?
Will this policy promote equilibrium in the money market? Discuss this comprehensively.

1.
Nigeria’s financial system generally has a rich history of monetary reforms and currency withdrawal/redesigning has occurred at different times in the country’s history. Different redesign events have occurred over the years since independence. In 2022 the Central Bank of Nigeria (CBN) issued a statement that it has concluded plans to redesign the Naira.
Purported merits of this policy as cited by the CBN include tackling rising inflation, combating money hoarding, strengthening the macroeconomic parameters and equally combating social improprieties, reducing currency outside banks vault, increasing financial inclusion by banking the unbanked population and supporting the efforts of our security agencies in combating banditry and ransom taking in Nigeria. The CBN governor also claims that about N2.73 trillion of the N3.23 trillion currency in circulation in Nigeria, is outside the bank vaults.
However, the policy has elicited serious debate across different parts of the country. Many people accuse the policy of being a mismatch to current economic realities on ground such as severe inflation and high rate of unemployment and underemployment. As such, it is just a distraction in the midst of serious ravaging economic issues and carries no significant economic benefits for the average Nigerian.
The policy has also been criticized for its bad timing. According to the daily newspaper published by Business Day, the timing subverts the naira redesign policy’s good intentions and inflicts hardship on the people. The cash scarcity associated with the currency redesign policy has motivated a slowdown in economic growth as many productive activities have been halted due to the inability to access cash. “The plummeting of productivity has implications for GDP and a domino effect on other economic indices.”
Other negative implications of the policy include restrain local trade and regional trade, constrain the informal sector’s trust in the financial system and erosion of investment confidence.

2
Money market equilibrium is a situation where demand for real money balances equates the supply for real money balances. It consist of the money demand, which refers to the aggregate demand for money, and money supply, which is the overall supply of money in the economy. The interest rate influence’s the interaction between money supply and money demand in the economy a d the quantity of money demanded by institutions and individuals.
Equilibrium in the money market occurs when the money demand equals the money supply. There is a relationship between the redesign of Naira and the money market equilibrium, because naira redesign is a contractionary monetary policy. The aim of the CBN is to bring money market equilibrium in the economy and ensure stability in the general price level of the economy.

Central banks are charged with the responsibility of ensuring the stability of the general price level through monetary policy. This is achieved by Censuring sustainable levels of money supply and indirectly, money demand. In a bid to ensure the stability of prices, central banks employ policies, which work through the action of several tools of monetary policy. These include the use of open market operations, bank reserve requirements, and nonconventional monetary policies. Although there is a relationship between money market and naira redesign there has not been any positive or visible effect of the policy on the money market. Also there has not been any equilibrium because there is no stability in general price level of goods and the amount of money demanded do not equal the amount the commercial banks supply to the public.
The policy was implemented during a period when Nigeria is facing some socio economic crisis and global backwardness, she is experiencing budget deficit, effect of the fall of oil price domestically she faces all sort of attacks, making the policy not so necessary at this point. The economy of Nigeria is fragile making any policy which is not properly implemented will have an adverse effect even if the policy is good as in the case of Nigeria and the current financial policy.
The policy in some way have affected sales negatively, some sellers still practice cash based sales policy they have no bank account to run their business transaction, simultaneously production is affected negatively, appropriate consideration were not given as regards the economic situation of the country before the policy was enacted, the policy makers only looked at the narrow picture without looking at the macro effect of the policy. The economy of Nigeria is currently in stagnation until considerable changes are made the economy will not grow and money market will not be at equilibrium.