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

Naira redesign and monetary equilibrium.
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.
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.
● Currency redesigns increase a currency’s security by helping nations keep counterfeiting to a minimum and stay one step ahead of threats.
Additionally, it is anticipated to boost the economy, lower cash management costs, advance financial inclusion, and improve the government’s ability to monitor the money supply. Analysts say redesigning the naira has decreased inflammatory pressure and suppressed insecurities in Nigeria. It will diminish the money stock and, as a result, slow the long-term course of inflation by reducing the amount of currency held outside of banks. Interest rate reductions may result from the ensuing deflationary pressure, which will stimulate economic activity in the short to medium term, increase aggregate demand, and improve output growth. Analysts contend that redesigning the naira, which was implemented close to the 2023 general elections, may have lessened the inclination to buy votes.
Economically speaking, the redesign of the naira will strengthen financial institutions even more, lessen corruption, and improve banks’ performance due to a sharp increase in the use of electronic banking channels, more transactions taking place through bank accounts, and more agents being able to access the government’s tax collection system. More agents in the tax net will result in an increase in revenue generation for the Federal Government of Nigeria.
Going forward, there is a need to perhaps begin to scale up to polymer notes that are now better done, harder to forge and probably give a more extended deadline to reduce the immediate shock the urgency of the Naira redesign has caused.
Demerits of the policy:
The poor implementation of the naira redesign policy has had a great toll on the economy and the people. Consequently, the scarcity of the new naira notes has worsened the living condition of Nigerians. Also, the lingering fuel crisis has really not helped matters. Beyond this, Nigerians are grappling with epileptic power supply and rising inflation.
● Though the CBN says that its cashless policy is not designed to starve Nigerians of the new banknotes, but to encourage cashless transactions, the toll on the economy and livelihoods has become unbearable. The reported protests in some state capitals due to the cash crunch prompted some banks to close some of their branches. Also, chaotic scenes are still witnessed at many Automated Teller Machines (ATMs) as thousands of people struggle to access the new naira notes.
● Small, medium and large businesses, in both formal and informal sectors of the economy, are feeling the pinch of the shortage of the new banknotes and the hoarding of fuel. The crippling effect of naira redesign policy will undermine the trade and agricultural subsector. It will also have a knock-on effect on other critical sectors of the economy, especially the manufacturing value chain and the services sector.
● With the scarcity of the new naira notes, the trading end of the chain has been greatly disrupted by the currency swap crisis. The trade sector, for instance, contributes about 14 per cent of the nation’s Gross Domestic Product (GDP), which is valued at N35trillion. The agricultural sector, which contributes about 25 per cent to the GDP is valued at an estimated N62 trillion. Most of the activities in these sectors are either in the rural areas or in the informal sector of the economy. According to statistics from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the informal sector has recorded about 20 per cent drop in sales in consumer goods and 30 per cent for the manufacturing sector since the scarcity of the new naira notes and the shortage of fuel started.
Money market equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of money supplied. All other things being equal, 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.

HEZEKIAH JOY CHIWONKE
2019/245662
ECONOMICS/PHILOSOPHY
INTERMEDIATE MACRO-ECONOMICS
ECO 303

Nigeria has for a long time not redesigned her currencies, which is a violation of Sections 19, subsections a and b of the CBN Act 2007, though the last time was in 2014 during Ex-President Goodluck Ebele Jonathan’s administration that the 100 Naira notes were redesigned to commemorate Nigeria’s centenary. This is not a practice done by only the country, it is rather a practice that both the advanced and developing countries engage in as there are several necessities that give rise to such National engagement.
However, in the minds of Nigerians, there are many schools of thoughts that explains why our dear country sight to carry out this particular policy initiative in this particular times.
Hence, the New Naira Redesign, does it have a National Security Implication or it is just another Political Tactic of the collaboration of the President, GCFR Mohammad Buhari and CBN Governor, Godwin Emefiele? As it is in his ordinary line of business to redesign the National currency to trap Democratic leaders’ embezzled funds in the old Naira notes, in his bid to reduce Corruption.
But analyzing Economic policies is not one-sided, it is rather expedient that the pros and cons of this new policy initiative be looked upon with a critical lens.
Now, the Pros.
Having overstretched the period with which our currencies should have been redesigned opened us to several risks in both our National security and Economic security. According to the CBN Governor in his speech in October 26, 2022 our National security implications are the more reason the Naira Redesign initiative was undertaken. Firstly, there is an excessive hoarding of the National Currency outside the Commercial banks’ vaults as statistics shows that 80% of the 3.2trillion Naira is outside the Banking system. Hence, this policy will mop them up.
Though it is held that not all will be successfully mopped up seeing that, according to Dr. Ikenna Nwosu, a Trade and Investment promotion expert, Nigeria’s currency is seen as a West African currency, as there are businesses in other countries there that trade with the Naira, hence there would be difficulty in depositing that into the Nigerian Banks.
Secondly, there’s a degradation of the integrity of the system as there are increasing absence of fit and proper notes in circulation. Hence, this policy thrives at improving the integrity of our Currency in circulation.
Thirdly, increasing counterfeiting of the currency due to the sophistication of the photographic and printing technology. So this new currency, has improved security features that makes it difficult for the counterfeit Industry to thrive. Notwithstanding, the from some of the people, it is held that the rate of kidnapping will reduce.
In consideration of these reasons, is there a justification for the New Naira Redesign amidst the several pressing national and Economic issues facing Nigerians, the Budget deficit, increasing fuel subsidy, increasing debt servicing, inflation and even the upcoming National Census.
The CBN held that mopping the excessive currency in circulation will deal with inflation, but do they realise that they made contributions to this by violating Sections 38 of the CBN Act, 2007 through funding the delayed Federal Government receipt of Fiscal deficits by the provision of the Ways and Means Financing consistently, despite exceeding 5% of the previous year. They also claim it is to reduce money politics and fight campaign financing especially as the National election draws close.
But this had no effect at all , as the people suffered more than the Targeted Audience. Many had to go hungry for days because there was no access to the new Naira being distributed by the CBN to Commercial Banks. Still corruption had a way of finding its path in this. Notwithstanding, the Banking sector received a directive from the CBN not to receive any cash deposit charge as the masses deposited their old notes. Invariably, the banks would work at their own costs. However, there was a negative effect on the people, as to withdraw due to scarcity of the new notes, POS terminals charged exorbitantly. More time to be spent at the place of business wee spent at the banks, some Banks were destroyed by angry-but-hungry civilians. These are just a portion of the Cons this new policy initiative brought by.

Now, could there be a relationship between this new policy initiative and Money Market Equilibrium? What is the nexus between The Naira Redesign and Money Market Equilibrium? Will this new policy initiative promote Equilibrium in the money market?

But first what is the concept of the Money Market Equilibrium? It is the situation whereby the Demand and supply of Real Money Balances equate. In simple terms, the money supply tells of how the Federal Government controls the circulation of money in the system and the money demand tells of how much the people want to hold money either for transactionary, precautionary or speculative motive. The Money Supply is an exogenous variable determined by the CBN it is not dependent on the interest rate like the Money Demand
According to the new policy initiative, it is in the policy of the CBN not just to mop up the old notes but to also restrict the supply of money in circulation when they are reissued. There is a certain CAP placed on restricting the amount of money that could be withdrawn from the public. The revised cash withdrawal limits policy for individuals is 100,000 Naira per week over the counter, via ATM and POS subject to a maximum of 20,000 daily. This was signed in December, 2022, but recently it was increased to a maximum of 500,000 Naira for individuals and 5,000,000 Naira for Corporate organizations on a weekly basis.
Futhermore, as it pertains to Money Market Equilibrium, Keynes in his classic work, being bent on what determines the rate of interest, held that a consumer face is faced with the challenge of how much of his income to consume and to reserve as an Immediate Command or as a Deferred Command over future consumption. In other words, Keynes described how a consumer would wish to hold his Liquid Command , either as an Immediate Command or Deferred Command. And hence, it is the Interest rate that determines how much people choose to hold. In his work , he held that, Interest rate is the reward for parting with liquidity for a specified period of time. It is the opportunity cost of holding money, i.e. it is either you hold money as an Immediate Command or part with it as a Deferred Command to obtain Interest.
Now, when the Interest rate is increased, people want to hold less of their wealth as an Immediate Command, but the opposite is the case when Interest rate falls. This shows that the slope of the Demand for Real Money Balances is a downward slope from the left to right, unlike the Supply of Real Money Balances(RMB) which is Vertical line as it is fixed, solely determined by the Monetary policy initiated by The CBN.
The Interest rate adjusts to equilibrate the Money Market. For instance as it prevails in our current economy, as the CBN tries to reduce the money supply, the interest rate rises so that people will deem it fit to hold smaller quantity of RMB. This will have a positive effect on Foreign Direst Investments (FDIs), there will be greater investments in our currency. Seeing that, the Nigerian Government, has no much income coming through this corridor other than the Diaspora remmittances and oil receipts , of which a greater portion has been allocated to servicing debts.
The effectiveness of this policy can only be actuaized if closely monitored, if a watchdog is set over this policy and it’s implementation like an administrative mechanism.

NAME: OLIAKU ISRAEL
REG NO: 2015/203653

(1) Following the central bank of Nigeria’s implementation of the Naira Redesign policy on October 22, 2022. We’ll talk about the advantages and disadvantages of the Nigerian central bank’s effort. Some of the initiative’s benefits are covered in the paragraphs below.
The majority of the naira notes that politicians, criminals, and other illegal actors have stored away would be returned to the banking system, assisting the CBN in monitoring the currency in the economy, according to many who have suggested that the new measure could restore confidence in the local currency.
Majority of the ragged naira notes that were previously pushed into circulation are also anticipated to be eradicated by the new notes, and counterfeiters are anticipated to cease operations for a few years as a result.
The policy’s beneficial impact on the nation’s crime rate is another way to see it. Nigeria is currently dealing with terrorists and banditry all over the country, and billions of naira are being paid in ransom to kidnappers.
It is anticipated that the ransom money, which has not yet entered the financial system, will be brought out and swapped for the notes with the new designs. While many people who were unable to explain the sources of their money may end up in legal difficulty, this might also result in criminal identification and possible prosecution.
Also, politicians who have saved money to buy votes in the upcoming election may find it difficult to convert their notes into the new naira, and reintroducing that money into the system would interfere with some of their plans.
Generally speaking, everything that has a benefit also has a drawback. Now that we have covered some of the advantages of the policy, it is time to talk about its drawbacks. Here are some of the policy’s drawbacks that are covered:
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 hurrying to exchange their old currency for new notes in the banking hall, which will put strain on the institutions’ limited ability to process currency.
Armed robberies may worsen as thieves target bullion vans that will be used to distribute the new notes in some remote regions in an effort to reduce their losses on the old naira notes that were previously stashed away to avoid the law.
With the rate of crime in the form of banditry and terrorism increasing throughout the country, both the CBN and the banks would encounter logistical hurdles in the distribution of the new notes across the country. The enormous demand for the new notes would also compromise the security of the banks since criminals might use the transition to do their unlawful business.
The risk exists that counterfeiters would use the delay in distribution to spread their own notes in some regions of the nation, something that might not be adequately countered by attention around the new notes.
(2) The money market equilibrium is made up of the money supply and the money demand. The Naira Redesign policy, in this example, is an exogenous (fixed) policy variable that is set by the central bank. The need for money is endogenous, meaning that it is influenced by the interest rate and is not fixed. The CBN chooses the Naira Redesign Policy as the exogenous policy variable to control the money supply, which forms the link between the policy and the equilibrium of the money market. This shows that the Naira Redesign program’s goal is to use the CBN to reintroduce currency that has been out of circulation into the nation’s financial system. As a result, people will keep less cash, increasing the demand for cash and driving up interest rates.
Will the Naira Redesign Policy cause the money market to reach equilibrium? is a relevant question. Of course, and the following are my reasons:
The Naira Redesign Policy is an exogenous (fixed) policy variable set by the CBN to control the money supply. Prior to its commencement, there was a total of 3.23 trillion in circulation, of which 500 billion was in circulation and 2.7 trillion was out of circulation. As a result of the policy, 2.1 trillion has been collected back and 900 billion is remaining. This shows that the policy is driving back the money market to equillibrium.
Also, there would be less currency flowing in the economy because the naira redesign policy is primarily intended to reclaim the majority of the money in circulation and the out-of-circulation amounts. Due to the increased need for money, interest rates on loans will also increase. The liquidity preference theory predicts that when money supply grows, interest rates would rise as well. This hypothesis is used to explain why the money market is in equilibrium. Consumers currently have to pay POS agents exorbitant interest rates in order to obtain tiny quantities of cash, which makes this quite obvious. The money market will eventually reach equilibrium if this situation persists.

Naira Redesign and Money Market Equilibrium

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,

The policy initiative adopted by the Central Bank of Nigeria (CBN) to introduce new banknotes with enhanced security features can be seen as having both merits and demerits.

One of the main advantages of the new banknotes is that they have advanced security features, making them more difficult to counterfeit. This can help to reduce the circulation of fake currency in the economy and improve the overall integrity of the financial system. Additionally, the new notes are expected to be more durable, which can reduce the need for frequent replacement and lower printing costs in the long run.

On the other hand, the introduction of new banknotes can create a short-term liquidity crunch, as people rush to exchange their old notes for the new ones. This can lead to long queues at banks and ATMs, as well as cash shortages in some areas. Furthermore, the cost of printing and distributing new notes can be significant, which can put pressure on the government’s budget.

The nexus between Naira redesign and money market equilibrium is complex. On one hand, the introduction of new banknotes can promote equilibrium in the money market by increasing the confidence of investors and reducing the risk of counterfeiting. This can lead to increased investment and economic growth in the long run. Additionally, the increased durability of the new notes can reduce the need for frequent replacement, which can lower printing costs and improve the overall efficiency of the money market.

However, in the short term, the introduction of new banknotes can create liquidity crunches, as people rush to exchange their old notes for the new ones. This can lead to fluctuations in the demand for money and interest rates, which can affect the stability of the money market. Additionally, the cost of printing and distributing new notes can put pressure on the government’s budget, which can have wider implications for the economy.

In conclusion, while the introduction of new banknotes with advanced security features can have long-term benefits for the economy, it is important to carefully manage the short-term implications of the policy. The CBN should take steps to ensure that the transition to the new notes is as smooth as possible, including providing adequate notice to the public, increasing the supply of new notes, and managing liquidity in the money market.

Name: Asadu Francisca Somtochukwu
Reg No: 2018/241230
Department: Education/Economics
Eco 303

QUESTION 1

Advantages
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.”

QUESTION 2
A money market refers to the type of market where short-term debt obligations are traded between various financial institutions. It is where banks, businesses and other financial institutions can find short-term loans and other types of financial instruments. Money market equilibrium occurs at the interest rate at which the quantity of money demanded is equal to the quantity of money supplied. In this naira redesign policy we could see that in some areas there was little or no circulation of the new naira notes as promised by the CBN. Some of the financial institutions also aided in hoarding some of these new naira notes. Also as the old naira notes has been submitted to the banks, people had no other cash at hand to buy goods which lead to increased demand for money from the banks and financial institutions. Sadly, the quantity of money demanded was more than the quantity supplied which led to people sleeping in banks to be able to get money the moment daily transactions begin. The connection I see is that the naira redesign policy which was meant to help improve the economy led to some disequilibrium of the money market.

QUESTION 3
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.
The new policy would promote equilibrium in the money market because since equilibrium in the money market occurs when money demand equals the money supply. 

OKORO-PETER OGOEGBU NNENNA
2019/243013
COMBINED SOCIAL SCIENCES (ECONOMICS/POLITICAL SCIENCE)

MERITS OF THE NEW CBN POLICY
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.

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.

“As experiences from other jurisdictions have shown, effective currency redesign can support regulatory reform, increased legislative reach and coordinated fiscal and structural policies,” he said.

DEMERITS of the NEW CBN POLICY

In any given policy there must be an inherent cost that comes with it in the form of
pain to different segments of the community. We will examine the effect of the
Currency redesigning on the Government, and the general public.

The Government
As stated above that the Central Bank of Nigeria spent the sum of N58.618 billion
to print 2.518 billion Naira notes, valued at 1. 063 trillion in, 2020. Many are of the
opinion that if such a huge amount was spent in just reprinting of a few currency
notes one can imagine the cost for replacing the entire 200, 500 and 1000 currency.

The amount spent in redesigning, printing and circulating of the new notes
could have been channeled to other critical needs of the economy.

The politicians who are the main culprits in cash and carry business have already
started kicking against the policy. They are used to carrying high notes
denomination which would be less in circulation soon. The cash for kick back and
the ones to bribe the electorates would be difficult to assembled too as the election
draws nearer. Therefore, to the politicians and some government officials the
policy comes with an inevitable pain that should not see the light of the day.

The General Public
Forex crisis has tray the announcement of the policy since October 26 2022. The
prices of foreign currencies especially Dollas has been soaring in the black market
as a result of rush to convert the hoarded cash to foreign currencies. Our appetite
for foreign commodities that resulted in a heavy reliance on the importation of
virtually everything would negatively have a great burden to those that patronize
them. Assessing forex in a high cost would eventually affect the prices of those
commodities.
Massive depreciation of the naira has been on increase since the
announcement of the policy by CBN. Naira’s decline in the black market
essentially widened the gap between the official rate and the parallel market rate.

The naira crashed to a historical low against one dollar and one Pound Sterling at
N900 and N1000 respectively after the announcement at the black market.
High inflation would likely fall in due to the forex crisis that has been aggravated
by the naira redesign policy, resulting to high cost of goods and services in the
Country. The policy coming in this time of food crises and insecurity especially in
the rural areas where payments for goods are cash dominated would trigger food
shortage. Convincing traders in those areas to accept money transfer to part with
their goods would require a high level of sureties and convictions. The policy to
rural dwellers is a serious pain to battle with.

Implication of the Policy to Rural Dwellers
The CBN policy of currency redesign as announced on October 26, 2022 requires
Nigerians to deposit their existing 200, 500 and 1000 naira currency notes with the

banks latest January 31st, 2023 to have access to the new ones. The policy comes
with much implication to the rural dwellers as examined below.

The information dissemination in rural area poses a great challenge as many do
not have access to radio or television as well as electricity. The CBN must find a
way to communicate the new policy on how to change the old notes to the rural
dwellers to avoid being cut off from the impending changes in the policy. The
Community leaders, Religious leaders, government officials from such areas
should be engaged to help in conveying the development to the communities in
their local languages. The Ministry of Information, the media, Telecommunication
via SMS and the National Orientation Agency would also be of help.

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.

The CBN must persuade Deposit money banks and microfinance banks to create
their presence in these rural areas through opening of branches or agency banking.
Agency banking can be situated in the house of the prominent leaders of the
communities and in the market places where their banking activities can be
attended to. The community leaders should engage expert to educate them on the
use of USSD, Mobile banking and POS for their payment, deposit and transfer
services. They can open account with agency banks in the community. This policy
should bring an upward review to the deposit and withdrawal limit of tier one and
tier two account while a reference letter from the community heads should be
accepted in place of Utility bill for tier three account.

Equilibrium in the money market occurs when the money demand equals the money supply. At that point, the equilibrium interest rate is formed.
The money market contributes to the economic stability and development of a country by providing short-term liquidity to governments, commercial banks, and other large organizations. Investors with excess money that they do not need can invest it in the money market and earn interest.
However, with the development, the CBN can circulate the new notes, controlling the level of liquidity in the system for monetary stability.
 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.
And also because of the short term notice of the redesign, it can cause imminent hardship and crises for thé common citizens.

Eze chidera Aloysious
2018/242420
Economics

CBN believes that the redesign of the currency will help deepen our drive to entrench 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
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.

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.

Specifically, Emefiele pointed out that the CBN intended to make Nigeria operate a cashless economy as obtained in developed countries, where as a result, issues of money laundering are promptly tackled.

In a country where politicians have a penchant for siphoning and laundering public funds in foreign countries, the cashless policy remains a game-changer – no wonder the mounting opposition to the guidelines is enormous.

Unacceptable Level of Cash-carrying

Addressing the diplomatic audience, Emefiele said: “You are all foreign dignitaries representing your countries in Nigeria, and you know, and you would agree that the level at which people carry cash in Nigeria is unacceptable

“In your countries, you do not carry cash anyhow. You are continuously questioned and profiled if you carry cash and are seen.”

He added: “We want to look at your country, and that is why we are saying that Nigeria, the largest economy in Africa and with the largest population, really must go cashless. And we are delighted at the CBN that with the support of President Muhammadu Buhari, we will achieve this.

“We know that at these initial stages, Nigerians will go through temporary pains, and we call it transient because there would be normal pains that would come with those kinds of shocks; indeed, I must describe this shock as unprecedented.”

Temporary Discomfort for Nigerians

The CBN boss said the central bank was mindful of some citizens’ challenges and is currently addressing them.

He noted: “There have been reports of occasional failures in e-channel platforms. Our monitoring suggests that despite an expected surge in electronic transactions, these have not risen to unprecedented levels. The payment system is well-equipped to handle even higher transaction volumes.

“While transaction failures are bound to occur occasionally, the public is encouraged to have full confidence in Nigeria’s globally recognised payment system infrastructure. Banks have also been instructed to ensure 24/7 service availability and promptly address any customer refunds arising from such service failures.”

Emefiele further acknowledges the widespread inconveniences due to the policy.

He said: “We have observed pervasive incidences of hoarding and predatory activities of some vendors and unscrupulous Nigerians. Following the redesign policy, hoarding is the principal cause of hardship for the citizens.

“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 need to store cash.

According to him, 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 the pace of inflation.

Naira Redesign:
Nigerians lament as banks, motorists, others reject old notes, Millions of Nigerians continue to grapple with hardship amid the cash crunch. As tension continued to rise over the scarcity of the newly redesigned N200, N500, and N1,000 currency notes, commercial banks, motorists and major sales outlets across the country have refrained from the collection of old notes.
survey within the week showed that many Nigerians are still in possession of the old naira notes due to poor circulation of the newly designed currency, but are not able to carry out their daily transactions because banks have commenced the implementation of the CBN deadline for the phasing out of the new notes. Across Abuja, Lagos and other major cities visited, our reporters observed that commercial banks, transport workers and some shopping outlets refused to accept the old notes since Monday, despite a Supreme Court order restraining the CBN from phasing out the old notes.

Some business owners who spoke lamented they do not know what to do with the old notes in their possession as banks battle with the scarcity of the new notes amid public outrage.
President Muhammadu Buhari, Thursday announced that the CBN will extend the use of the old N200 notes. But in what analysts consider an affront to the Supreme Court, the president insisted that the CBN directive on the phasing out of the old N500 and N1,000 notes remains.
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 points.
As Nigerians expressed frustration over their inability to access the new notes, the CBN extended the deadline for the phasing out of the old notes from 31 January to 10 February. Yet, many Nigerians have had a hard time getting the new notes. The Supreme Court gave an order restraining the CBN from going ahead with the implementation of the 10 February deadline set for the phasing out of the notes.
But both Mr Buhari and the CBN governor, Godwin Emefiele, refused to adhere to the court order. On Wednesday, the Supreme Court adjourned the suit filed by some state governments to challenge the 10 February deadline set by the CBN to end the use of old naira notes to 22 February later this month. Millions of Nigerians have continued to grapple with hardship amid the cash crunch that has worsened business transactions and stifled trade in the informal economy.
In some parts of the Lugbe axis of Nigeria’s capital city, Abuja, our reporters observed that the old naira notes are being rejected in places like parks, fuel stations and marketplaces among others despite the extension of their validity by the Supreme Court.

“On Wednesday, I entered a cab that was bringing me back to school (UNN), on my way back , The driver of the cab I entered was asking me if I had the new naira note with me. I asked him why he asked and he said he won’t take me to my destination if I’m going to pay with the old note, At first, I thought the taxi driver was joking, but everything changed when we arrived at the destination. When we got to our destination, I gave him the old note, but he outrightly rejected it, insisting on the new note. I was so shocked and I ended up transferring N300 to him, That’s when I got to understand that this money crisis is not funny again. The country has become something else where you have your money and you can’t spend it because of the CBN policy.
CBN brought out a process that if you still have the money, you will bring the money to them individually. They will collect the money from you, they will do some investigation, they will interrogate you (on) why you still have the money, what type of business you are doing and all the rest.
The CBN in its earlier memo communicating the 10 February deadline extension had said a seven-day grace period, beginning on February 10 to 17 February, would be allotted to allow depositing their old notes at the CBN after the February deadline, But many Nigerians are yet to understand how feasible and seamless the procedure would be.
gathered from bank officials and customers Wednesday that the banks are rejecting the old notes in compliance with CBN directives.
A bank staffer who declined to have his name in print emphasised that the currency reform would have a reverse effect in the days ahead, noting that the ramifications may be dire for the populace.
“There are still lots of old notes in circulation apart from the ones some people have stashed away. So stopping it now and not pumping in more new notes I believe will cause a lot of pressure. Starting from Wednesday, the pressure will be so much,” he explained. Come to think of it, most politicians still have that money. So they will want to instigate the masses. If the pressure is huge, there will be an outburst. Also, another cash officer at one of the Stanbic IBTC branches in Lagos who does not want his name in print as he was not authorised to speak on the matter, said he is aware banks like Ecobank, Zenith and Stanbic IBTC have stopped taking the old notes from customers. For now banks are just playing safe since they don’t know the policy direction the CBN might want to take. As of Monday morning, we had to evacuate everything we had in old notes and move everything to the CBN because nobody knows what the CBN is going to do. He said that banks evacuate cash to the CBN only on weekdays, noting that some other banks did it over the weekend to avoid the risk of the cash being rejected by the apex bank
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. On Wednesday in Benin City, Edo State, residents attacked some of the banks in the city, including Ecobank, Firstbank and UBA, according to the police spokesperson in the state, Chidi Nwabuzor. Similarly, groups of protesters have also hit the streets in Delta, Akwa Ibom, Ogun and Oyo states on recent weeks, The protest necessitated some banks to suspend activities and several shops and market stores were shut.
Speaking on the developments, CEO of Dairy Hills Limited, Kelvin Emmanuel, said the decision of the Supreme Court and President Buhari’s Thursday broadcast reflect the lack of coordination in policy making in Nigeria.
“The people who say the deliberate hoarding of new naira notes as well as the hoarding of the old notes by the Central Bank as a strategy to curb vote buying is not covered anywhere in sections 19 & 20 of the CBN Act, and is an invitation to Anarchy. This is because, if pandemonium breaks out across the entire nation, there will be no elections in Nigeria,
On his part, Kazeem Oyinwola, an Abuja-based legal practitioner and consultant, said by virtue of section The decisions of the Supreme court shall be enforced in any part of the Federation by all authorities and persons, and by courts with subordinate jurisdiction to that of the supreme Court.
“Thus, to this extent, the Federal Government, and by extension, the Central Bank of Nigeria, is bound by the interim injunction granted against it by the Supreme Court to the effect that the old naira notes continue to be legal tender pending the determination of the Motion on Notice filed by the Kaduna State Government,
Mr Oyinwola said the refusal of the federal government to comply with the verdict of the Supreme Court in this regard does not only constitute executive lawlessness but also violates the provision of section 287 of the Constitution.
the executive and its agents be seen to be flagrantly violating the constitution by virtue of which they’re in office? The answer is no. And that’s why the decision of Emefiele to the extent to which he insisted that the old naira notes cease to be legal tender from February 10, 2023 is not only irresponsible but constitutes shameless but reckless disregard for the constitution of the federation. Banks must accept old naira notes after 10 February Let me also add that under no circumstance can a party unilaterally modify the decision of a court to suit its own position. The effect of the interim injunction of the Supreme Court is that the old notes of N1000, N500 and N200 remain legal tenders. Can the federal government now modify the decision to say only the N200 notes should remain legal tenders? This is executive lawlessness, a federal government having scornful disregard for the judicial institution. This should only happen in a banana republic
On Thursday, the federal government announced that the old 200 naira note should be accepted as a legal tender for the next 60 days, and that there is no going back on the phasing out of the old 500 and 1000 naira notes, which has already taken effect.
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour. you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.

MERITS

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.
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.

The cashless policy

Though the CBN cashless policy began in 2012, but the expansion of its scope following the currency redesign has attracted attention and relevance. Following the naira redesign, the CBN had limited cash withdrawals to N500,000 per week for individuals and N5 million for corporate organisations.

The bank had explained 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.

Cashless Policy Benefits

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.”

Speaking on the long-term benefits of the cashless policy, the Central Bank Governor said 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,

According to the apex bank boss, the recent policy interventions would also help Nigerians to access easy loans with affordable interest rates.

DEMERITS
Public perception
High banking charges
Unbanked majority and absence of legal framework.

NAIRA REDESIGN MONEY MARKET EQUILIBRIUM

In this piece, 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.

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 programes
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.

Naira Redesign:
Nigerians lament as banks, motorists, others reject old notes, Millions of Nigerians continue to grapple with hardship amid the cash crunch. As tension continued to rise over the scarcity of the newly redesigned N200, N500, and N1,000 currency notes, commercial banks, motorists and major sales outlets across the country have refrained from the collection of old notes.
survey within the week showed that many Nigerians are still in possession of the old naira notes due to poor circulation of the newly designed currency, but are not able to carry out their daily transactions because banks have commenced the implementation of the CBN deadline for the phasing out of the new notes. Across Abuja, Lagos and other major cities visited, our reporters observed that commercial banks, transport workers and some shopping outlets refused to accept the old notes since Monday, despite a Supreme Court order restraining the CBN from phasing out the old notes.

Some business owners who spoke lamented they do not know what to do with the old notes in their possession as banks battle with the scarcity of the new notes amid public outrage.
President Muhammadu Buhari, Thursday announced that the CBN will extend the use of the old N200 notes. But in what analysts consider an affront to the Supreme Court, the president insisted that the CBN directive on the phasing out of the old N500 and N1,000 notes remains.
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 points.
As Nigerians expressed frustration over their inability to access the new notes, the CBN extended the deadline for the phasing out of the old notes from 31 January to 10 February. Yet, many Nigerians have had a hard time getting the new notes. The Supreme Court gave an order restraining the CBN from going ahead with the implementation of the 10 February deadline set for the phasing out of the notes.
But both Mr Buhari and the CBN governor, Godwin Emefiele, refused to adhere to the court order. On Wednesday, the Supreme Court adjourned the suit filed by some state governments to challenge the 10 February deadline set by the CBN to end the use of old naira notes to 22 February later this month. Millions of Nigerians have continued to grapple with hardship amid the cash crunch that has worsened business transactions and stifled trade in the informal economy.
In some parts of the Lugbe axis of Nigeria’s capital city, Abuja, our reporters observed that the old naira notes are being rejected in places like parks, fuel stations and marketplaces among others despite the extension of their validity by the Supreme Court.

“On Wednesday, I entered a cab that was bringing me back to school (UNN), on my way back , The driver of the cab I entered was asking me if I had the new naira note with me. I asked him why he asked and he said he won’t take me to my destination if I’m going to pay with the old note, At first, I thought the taxi driver was joking, but everything changed when we arrived at the destination. When we got to our destination, I gave him the old note, but he outrightly rejected it, insisting on the new note. I was so shocked and I ended up transferring N300 to him, That’s when I got to understand that this money crisis is not funny again. The country has become something else where you have your money and you can’t spend it because of the CBN policy.
CBN brought out a process that if you still have the money, you will bring the money to them individually. They will collect the money from you, they will do some investigation, they will interrogate you (on) why you still have the money, what type of business you are doing and all the rest.
The CBN in its earlier memo communicating the 10 February deadline extension had said a seven-day grace period, beginning on February 10 to 17 February, would be allotted to allow depositing their old notes at the CBN after the February deadline, But many Nigerians are yet to understand how feasible and seamless the procedure would be.
gathered from bank officials and customers Wednesday that the banks are rejecting the old notes in compliance with CBN directives.
A bank staffer who declined to have his name in print emphasised that the currency reform would have a reverse effect in the days ahead, noting that the ramifications may be dire for the populace.
“There are still lots of old notes in circulation apart from the ones some people have stashed away. So stopping it now and not pumping in more new notes I believe will cause a lot of pressure. Starting from Wednesday, the pressure will be so much,” he explained. Come to think of it, most politicians still have that money. So they will want to instigate the masses. If the pressure is huge, there will be an outburst. Also, another cash officer at one of the Stanbic IBTC branches in Lagos who does not want his name in print as he was not authorised to speak on the matter, said he is aware banks like Ecobank, Zenith and Stanbic IBTC have stopped taking the old notes from customers. For now banks are just playing safe since they don’t know the policy direction the CBN might want to take. As of Monday morning, we had to evacuate everything we had in old notes and move everything to the CBN because nobody knows what the CBN is going to do. He said that banks evacuate cash to the CBN only on weekdays, noting that some other banks did it over the weekend to avoid the risk of the cash being rejected by the apex bank
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. On Wednesday in Benin City, Edo State, residents attacked some of the banks in the city, including Ecobank, Firstbank and UBA, according to the police spokesperson in the state, Chidi Nwabuzor. Similarly, groups of protesters have also hit the streets in Delta, Akwa Ibom, Ogun and Oyo states on recent weeks, The protest necessitated some banks to suspend activities and several shops and market stores were shut.
Speaking on the developments, CEO of Dairy Hills Limited, Kelvin Emmanuel, said the decision of the Supreme Court and President Buhari’s Thursday broadcast reflect the lack of coordination in policy making in Nigeria.
“The people who say the deliberate hoarding of new naira notes as well as the hoarding of the old notes by the Central Bank as a strategy to curb vote buying is not covered anywhere in sections 19 & 20 of the CBN Act, and is an invitation to Anarchy. This is because, if pandemonium breaks out across the entire nation, there will be no elections in Nigeria,
On his part, Kazeem Oyinwola, an Abuja-based legal practitioner and consultant, said by virtue of section The decisions of the Supreme court shall be enforced in any part of the Federation by all authorities and persons, and by courts with subordinate jurisdiction to that of the supreme Court.
“Thus, to this extent, the Federal Government, and by extension, the Central Bank of Nigeria, is bound by the interim injunction granted against it by the Supreme Court to the effect that the old naira notes continue to be legal tender pending the determination of the Motion on Notice filed by the Kaduna State Government,
Mr Oyinwola said the refusal of the federal government to comply with the verdict of the Supreme Court in this regard does not only constitute executive lawlessness but also violates the provision of section 287 of the Constitution.
the executive and its agents be seen to be flagrantly violating the constitution by virtue of which they’re in office? The answer is no. And that’s why the decision of Emefiele to the extent to which he insisted that the old naira notes cease to be legal tender from February 10, 2023 is not only irresponsible but constitutes shameless but reckless disregard for the constitution of the federation. Banks must accept old naira notes after 10 February Let me also add that under no circumstance can a party unilaterally modify the decision of a court to suit its own position. The effect of the interim injunction of the Supreme Court is that the old notes of N1000, N500 and N200 remain legal tenders. Can the federal government now modify the decision to say only the N200 notes should remain legal tenders? This is executive lawlessness, a federal government having scornful disregard for the judicial institution. This should only happen in a banana republic
On Thursday, the federal government announced that the old 200 naira note should be accepted as a legal tender for the next 60 days, and that there is no going back on the phasing out of the old 500 and 1000 naira notes, which has already taken effect.
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour. you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.

MERITS

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.
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.

The cashless policy

Though the CBN cashless policy began in 2012, but the expansion of its scope following the currency redesign has attracted attention and relevance. Following the naira redesign, the CBN had limited cash withdrawals to N500,000 per week for individuals and N5 million for corporate organisations.

The bank had explained 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.

Cashless Policy Benefits

Experts say that there is no doubt the advantages of the currency redesign exercise will enormously benefit the economy in the long run, as emphasized 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.”

Speaking on the long-term benefits of the cashless policy, the Central Bank Governor said 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,

According to the apex bank boss, the recent policy interventions would also help Nigerians to access easy loans with affordable interest rates.

DEMERITS
Public perception
High banking charges
Unbanked majority and absence of legal framework.

NAIRA REDESIGN MONEY MARKET EQUILIBRIUM

In this piece, 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.

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 programes
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.
Naira Redesign:
Nigerians lament as banks, motorists, others reject old notes, Millions of Nigerians continue to grapple with hardship amid the cash crunch. As tension continued to rise over the scarcity of the newly redesigned N200, N500, and N1,000 currency notes, commercial banks, motorists and major sales outlets across the country have refrained from the collection of old notes.
survey within the week showed that many Nigerians are still in possession of the old naira notes due to poor circulation of the newly designed currency, but are not able to carry out their daily transactions because banks have commenced the implementation of the CBN deadline for the phasing out of the new notes. Across Abuja, Lagos and other major cities visited, our reporters observed that commercial banks, transport workers and some shopping outlets refused to accept the old notes since Monday, despite a Supreme Court order restraining the CBN from phasing out the old notes.

Some business owners who spoke lamented they do not know what to do with the old notes in their possession as banks battle with the scarcity of the new notes amid public outrage.
President Muhammadu Buhari, Thursday announced that the CBN will extend the use of the old N200 notes. But in what analysts consider an affront to the Supreme Court, the president insisted that the CBN directive on the phasing out of the old N500 and N1,000 notes remains.
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 points.
As Nigerians expressed frustration over their inability to access the new notes, the CBN extended the deadline for the phasing out of the old notes from 31 January to 10 February. Yet, many Nigerians have had a hard time getting the new notes. The Supreme Court gave an order restraining the CBN from going ahead with the implementation of the 10 February deadline set for the phasing out of the notes.
But both Mr Buhari and the CBN governor, Godwin Emefiele, refused to adhere to the court order. On Wednesday, the Supreme Court adjourned the suit filed by some state governments to challenge the 10 February deadline set by the CBN to end the use of old naira notes to 22 February later this month. Millions of Nigerians have continued to grapple with hardship amid the cash crunch that has worsened business transactions and stifled trade in the informal economy.
In some parts of the Lugbe axis of Nigeria’s capital city, Abuja, our reporters observed that the old naira notes are being rejected in places like parks, fuel stations and marketplaces among others despite the extension of their validity by the Supreme Court.

“On Wednesday, I entered a cab that was bringing me back to school (UNN), on my way back , The driver of the cab I entered was asking me if I had the new naira note with me. I asked him why he asked and he said he won’t take me to my destination if I’m going to pay with the old note, At first, I thought the taxi driver was joking, but everything changed when we arrived at the destination. When we got to our destination, I gave him the old note, but he outrightly rejected it, insisting on the new note. I was so shocked and I ended up transferring N300 to him, That’s when I got to understand that this money crisis is not funny again. The country has become something else where you have your money and you can’t spend it because of the CBN policy.
CBN brought out a process that if you still have the money, you will bring the money to them individually. They will collect the money from you, they will do some investigation, they will interrogate you (on) why you still have the money, what type of business you are doing and all the rest.
The CBN in its earlier memo communicating the 10 February deadline extension had said a seven-day grace period, beginning on February 10 to 17 February, would be allotted to allow depositing their old notes at the CBN after the February deadline, But many Nigerians are yet to understand how feasible and seamless the procedure would be.
gathered from bank officials and customers Wednesday that the banks are rejecting the old notes in compliance with CBN directives.
A bank staffer who declined to have his name in print emphasised that the currency reform would have a reverse effect in the days ahead, noting that the ramifications may be dire for the populace.
“There are still lots of old notes in circulation apart from the ones some people have stashed away. So stopping it now and not pumping in more new notes I believe will cause a lot of pressure. Starting from Wednesday, the pressure will be so much,” he explained. Come to think of it, most politicians still have that money. So they will want to instigate the masses. If the pressure is huge, there will be an outburst. Also, another cash officer at one of the Stanbic IBTC branches in Lagos who does not want his name in print as he was not authorised to speak on the matter, said he is aware banks like Ecobank, Zenith and Stanbic IBTC have stopped taking the old notes from customers. For now banks are just playing safe since they don’t know the policy direction the CBN might want to take. As of Monday morning, we had to evacuate everything we had in old notes and move everything to the CBN because nobody knows what the CBN is going to do. He said that banks evacuate cash to the CBN only on weekdays, noting that some other banks did it over the weekend to avoid the risk of the cash being rejected by the apex bank
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. On Wednesday in Benin City, Edo State, residents attacked some of the banks in the city, including Ecobank, Firstbank and UBA, according to the police spokesperson in the state, Chidi Nwabuzor. Similarly, groups of protesters have also hit the streets in Delta, Akwa Ibom, Ogun and Oyo states on recent weeks, The protest necessitated some banks to suspend activities and several shops and market stores were shut.
Speaking on the developments, CEO of Dairy Hills Limited, Kelvin Emmanuel, said the decision of the Supreme Court and President Buhari’s Thursday broadcast reflect the lack of coordination in policy making in Nigeria.
“The people who say the deliberate hoarding of new naira notes as well as the hoarding of the old notes by the Central Bank as a strategy to curb vote buying is not covered anywhere in sections 19 & 20 of the CBN Act, and is an invitation to Anarchy. This is because, if pandemonium breaks out across the entire nation, there will be no elections in Nigeria,
On his part, Kazeem Oyinwola, an Abuja-based legal practitioner and consultant, said by virtue of section The decisions of the Supreme court shall be enforced in any part of the Federation by all authorities and persons, and by courts with subordinate jurisdiction to that of the supreme Court.
“Thus, to this extent, the Federal Government, and by extension, the Central Bank of Nigeria, is bound by the interim injunction granted against it by the Supreme Court to the effect that the old naira notes continue to be legal tender pending the determination of the Motion on Notice filed by the Kaduna State Government,
Mr Oyinwola said the refusal of the federal government to comply with the verdict of the Supreme Court in this regard does not only constitute executive lawlessness but also violates the provision of section 287 of the Constitution.
the executive and its agents be seen to be flagrantly violating the constitution by virtue of which they’re in office? The answer is no. And that’s why the decision of Emefiele to the extent to which he insisted that the old naira notes cease to be legal tender from February 10, 2023 is not only irresponsible but constitutes shameless but reckless disregard for the constitution of the federation. Banks must accept old naira notes after 10 February Let me also add that under no circumstance can a party unilaterally modify the decision of a court to suit its own position. The effect of the interim injunction of the Supreme Court is that the old notes of N1000, N500 and N200 remain legal tenders. Can the federal government now modify the decision to say only the N200 notes should remain legal tenders? This is executive lawlessness, a federal government having scornful disregard for the judicial institution. This should only happen in a banana republic
On Thursday, the federal government announced that the old 200 naira note should be accepted as a legal tender for the next 60 days, and that there is no going back on the phasing out of the old 500 and 1000 naira notes, which has already taken effect.
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MERITS

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.
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.
The cashless policy

Though the CBN cashless policy began in 2012, but the expansion of its scope following the currency redesign has attracted attention and relevance. Following the naira redesign, the CBN had limited cash withdrawals to N500,000 per week for individuals and N5 million for corporate organisations.

The bank had explained 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.

Cashless Policy Benefits

Experts say that there is no doubt the advantages of the currency redesign exercise will enormously benefit the economy in the long run, as emphasized 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.”

Speaking on the long-term benefits of the cashless policy, the Central Bank Governor said 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,

According to the apex bank boss, the recent policy interventions would also help Nigerians to access easy loans with affordable interest rates.

DEMERITS
Public perception
High banking charges
Unbanked majority and absence of legal framework.

ONYEKPEREM URUDINACHI VICTORY
2019/241536
MACRO ECONOMICS (ECO 303)

THE NAIRA REDESIGN POLICY

The policy of currency redesign by the CBN may hurt the Nigerian economy by creating a distortive impacts in the economy giving previous experience in terms of the cost of undertaking this exercise and the prevailing rates of Nigeria external debt, except the monetary authority is committed to stabilizing the economy. This does not imply that the policy itself is not good but the structural and institutional rigidity or features of the Nigerian economy before and after the introduction of the naira in 1973 has being the one that experienced immense and continuous structural bottle neck in the economy, weak institution, poor regulatory frame work, lack of adequate infrastructures, good roads and communication network and excessive reliance on crude oil since its discovery (mono-economy) which has subjected the economy into lopsided development in the international market. For instance, a fall in the international market price of crude oil without a corresponding decrease in the growth of government expenditure has resulted in high budget deficits that stimulate high external debt with its adverse implication on monetary and price stability.
However, in Nigeria it could certainly be seen that this policy will have more of negative than positive effects on the Nigerian economy, due majorly to the peculiarity of Nigerian political system in terms of its deeply ingrained corruptive nature and the volatility of it political, security and exchange rate policies, therefore the crave for currency redesign may not singlehandedly resolved the bedeviling economic issues but through a more agriculturally productive and broad base domestically secured economy inspired by patriotism and diversifications, therefore the aforementioned policy recommendations should be considered.

THE 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.

Under free banking (so the argument goes), the profit motive guides banks toward monetary equilibrium. The way it has done so in historical cases of free banking is through the clearing system. The clearing system is where the supply and demand for credit meet. If a bank, or other credit-issuing institution, has issued a greater supply of credit than people are willing to hold, it experiences losses of reserves. Losses of reserves lead to monetary losses, because liquidating assets may involve selling them at a loss. On the other hand, if a bank or other credit-issuing institution is issuing less credit than people are willing to hold, it is missing an opportunity to make a profit. Other banks, if sufficiently alert, will seek to fill the gap and capture the profits for themselves.

Name:ugwuoke Kosisochuwu precious
Department: economics
Email:Kosiprecious11@gmail.com
Reg no:2019/243547

Course title: intermediate macroeconomics
October 26, 2022 policy decision by the Central Bank of Nigeria (CBN) to redesign the N200, N500 and N1,000 denominations, and the subsequent announcements including the cash withdrawal limit that have continued to generate reactions.
Merits or positive impact:
It reduced corruption: 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 noses 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.
Reduced crimes: The cashless policy has led to a reduction in banditry and kidnappings which were rampant in the recent past.
Getting rid of counterfeit: The move to redesign the currency was aimed at checking the increasing ease and risk of currency counterfeiting(mostly in #500 & #1000) 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.
Appropriate circulation of currency: 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 the CBN governor, explained that 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.

Demerit or negative impact:
Due to some certain rule given by the CBN to the public and banks, it affected some people, businesses and other organizations; starting with poor network services that delay or fail to make digital transaction efficient.
Those who do not have smart phones find it difficult to adapt to such policy thereby hindering the efficiency of this policy among all.

The naira redesign has a lot to do with money market equilibrium, as citizens deposit their old naira notes to the bank and withdraw less amount of the new naira notes,it will help the bank to control the money in circulation and prevent hoarding of naira notes and counterfeit money.

Yes. With this new CBN policy, it will promote money market equilibrium that is where the interest rate at which the quantity of money demanded is equal to quantity of money supplied and also will aid in accelerating the monetary policy objectives. The policy will positively enhance the monetary and fiscal space as well as improve the profitability of the banking sector. 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 and the policy could address the current exchange rate gaps.

EMETO TRACY TOBECHUKWU
2019/241571

A. THE MERITS OF THE CBN NAIRA REDESIGN POLICY
1. the re-design would enable the apex bank effectively control the liquidity in circulation, thus reducing inflationary pressure in the economy.
2. It will also improve the security features of the new currency which will make it difficult for the counterfeit currency to be in circulation.
3. it Poses a crucial step towards ameliorating the large volumes of money in circulation outside the banking system
4. the policy may likely improve the security situation in the country as ransom payments may be aborted.
5.  It will enable proper investigation of incomes from nefarious sources and many other economic indicators that affect the financial status of a nation.
6. We can also ride on the fact that this policy has brought about financial inclusion in the Black or Shadow economy. This is a situation in an economy where economic activities are not recorded or regulated in the economy. For instance, the shoemaker and okpa seller along the road. With the problems being faced regarding obtaining cash, they are forced to open bank accounts which in turn aids the economic system.
7.

THE DEMERITS OF THE CBN NAIRA REDESIGN POLICY

1. redesigning the Naira is disproportionate to the expected benefits highlighted by the apex bank. Presently, Nigeria is experiencing a high fiscal deficit, high inflation, high unemployment, underemployment, high youth unemployment, and a slowing GDP.
2. People 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 naira value,  as too much naira will be chasing a few dollars.
3. The naira redesign will further increase inflation because of FOREX Crisis, thus food price inflation occurs.
4. Similarities in colours of 500 and 200 Naira can cause a loss of funds during financial transactions in low-power supply areas. 
5. A big issue currently being faced is the lack of cash. The new currency is nowhere to be found. Not in banks and definitely not from traders. It seems as though the elite in the economy has sourced ways into the collection of the few printed notes.
6. Yes, the ideology is to promote a cashless economy as we understood, the money printed is small relative to what is required by the citizens. Although can we say Nigeria is ready for this? We are experiencing network issues from banks all across the country which is making it difficult for people to engage in simple trade or take transportation. So we have a situation where the money is available, and goods are available but an exchange cannot be done.
7. As long as a parallel Market which is the black market exists, one of the goals of the Naira redesign to fight inflation is dead on arrival. 
8. Also, this policy has resulted in the extortion of citizens by their fellow citizens who are POS agents. Most of them have ways in which they gain access to some of the newly designed currency and they sell a unit for almost half of what it’s worth. The in-availability of cash has led to the sale of every N1,000 for N300 not minding how much it is you want to withdraw.
9. This policy encouraged impulse and unnecessary buying through the need for Citizens to get rid of the old notes in their possession before the date it ceases to be legal tender. Maybe this is a plus for the country’s economy, but it’s not one for the masses.
B. THE NEXUS BETWEEN NAIRA REDESIGN AND MONEY MARKET EQUILIBRIUM

According to the Theory of Liquidity Preference by Keynes, it states that the interest rate adjusts, to balance the supply and demand for the economy’s most liquid asset- which is money.
We notice there are three(3) key players in this theory:
1. Interest rate 2. Real money balance demanded 3. Real money balance supplied.
This theory highlights that the interest rate is one of the major determinants of how much money people choose to hold. This means there is a relative relationship between the interest rate and the demand for real money balance. Meaning that with an increased interest rate people will be willing to convert certain assets to money or deposit more money into their accounts and leave it in the bank.
The supply of real money balance is fixed. Which indicates that it does not depend on the interest rate.
Therefore, when there is an inward shift or reduction in the amount of money supplied, the interest rate is expected to increase and the demand for money reduces.

The Naria Redesign Policy caused a sudden decrease in the amount of money supplied. This implies that there is a shortage in the amount of cash available in the economy.
From the theory previously explained we know what is expected in the economy and the actions required by the masses to ensure equilibrium in the money market and a smooth running of the economy.

However, Nigeria proves a confirmed theory to be wrong again!
Bank interest rates do not increase, but rather keep reducing and, there is a high increase in the demand for cash rather than people being satisfied with their money in the banks.

C. WILL THIS NEW POLICY PROMOTE EQUILIBRIUM IN THE MONEY MARKET?

No!
As we have seen, we can say that there is no relationship between the Naira redesign and money market equilibrium.
The players in the money market all have a mind of their own.
The money market is at a great disequilibrium and only God can help us!

Name: Chisalum Emmanuel Chinecherem
Reg no : 2019/249408

The introduction of redesigned 200, 500 and 1,000 naira notes by Nigeria’s Central Bank has both advantages and disadvantages.

Advantages:

1. Improved security features could make the currency more difficult to counterfeit.
2. Enhanced security features could help reduce fraud and improve confidence in the currency.
3. The new notes are designed to be more durable, potentially reducing the cost of producing new notes and saving the government money in the long run.

Disadvantages:

1. Logistical challenges have arisen due to the limited availability of the new currency.
2. Difficulties accessing the new currency could cause frustration for customers and potentially harm the reputation of the Central Bank.
3. Banks and ATMs may not yet have sufficient quantities of the new notes, leading to shortages.

In terms of the nexus between the redesign and the money market equilibrium, it is possible that the introduction of the redesigned notes could impact the supply and demand of money in the economy. If the new notes are seen as more secure and trustworthy, people may be more willing to hold on to them, leading to a decrease in the velocity of money. This could potentially reduce the level of economic activity and slow down growth.

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 the CBN naira redesign policy

Boost macroeconomic goals – strengthen the performance of key macroeconomic parameters and equally combat social improprieties.

Curb insecurity – it 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.

Foster Financial Inclusion – 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.

Tax Collection

DEMERITS OF CHANGING A COUNTRY CURRENCY

Cost: Changing a country’s currency can be a costly endeavor, as it requires updating all the currency in circulation, including banknotes, coins, and digital currency. This can be an expensive process that requires significant investment in printing new currency, updating financial systems, and educating the public about the new currency.

Economic Uncertainty: Changing a country’s currency can create economic uncertainty, as people may be unsure about the value of the new currency and how it will impact their savings, investments, and purchasing power. This uncertainty can lead to economic instability, as people may hoard the old currency or be reluctant to spend the new currency until they are sure about its value.

Counterfeiting: Changing a country’s currency can create opportunities for counterfeiting, as criminals may try to take advantage of the transition to produce counterfeit currency. This can be especially problematic if the new currency is not well-designed and does not have advanced security features.

Public confusion: Changing a country’s currency can be confusing for the public, especially if they are not adequately informed about the transition. This confusion can lead to problems with accepting the new currency, using it in transactions, and distinguishing it from the old currency.

International trade: Changing a country’s currency can also have an impact on international trade, as other countries may be reluctant to accept the new currency or may require additional measures to ensure its authenticity. This can create barriers to trade and may make it more difficult for the country to engage in international commerce.

Relationship between Naira redesign and money market.

The change in the money supply can affect the demand for money. If there is an increase in the money supply, it may lead to a decrease in the demand for money, as people may have more money to spend and may not need to hold onto as much cash for future transactions.

Changing a country’s currency can affect the money equilibrium, which refers to the balance between the money supply and demand in an economy.

When a country changes its currency, the money supply is typically affected. The old currency is taken out of circulation, and new currency is introduced, which can increase or decrease the overall money supply in the economy. If the government prints more new currency than the old currency in circulation, it can lead to an increase in the money supply and potentially lead to inflation.

The money equilibrium can be affected by the public’s perception of the new currency. If people are unsure about the value of the new currency, they may hold onto the old currency, leading to a decrease in the money supply and potentially causing economic instability. However, if the new currency is well-designed, has advanced security features, and is perceived to be stable, it may increase confidence in the economy and lead to an increase in the money supply and economic growth.

In summary, changing a country’s currency can affect the money equilibrium by changing the money supply and demand for money, depending on how well the new currency is designed and perceived by the public.

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 the CBN naira redesign policy

strengthen the performance of key macroeconomic parameters and equally combat social improprieties.

Already over 30,000 super agents had been engaged to carry out mobile services across the country.

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.
Demerits of changing a country currency

Changing a country’s currency can have several demerits or drawbacks, including:

Cost: Changing a country’s currency can be a costly endeavor, as it requires updating all the currency in circulation, including banknotes, coins, and digital currency. This can be an expensive process that requires significant investment in printing new currency, updating financial systems, and educating the public about the new currency.

Economic uncertainty: Changing a country’s currency can create economic uncertainty, as people may be unsure about the value of the new currency and how it will impact their savings, investments, and purchasing power. This uncertainty can lead to economic instability, as people may hoard the old currency or be reluctant to spend the new currency until they are sure about its value.

Inflation: Changing a country’s currency can also lead to inflation, as people may perceive the new currency as being worth less than the old currency, and prices may rise accordingly. This can be especially problematic if the government has to print a large amount of new currency to replace the old currency, which can lead to an increase in the money supply and inflation.

Changing a country’s currency can affect the money equilibrium, which refers to the balance between the money supply and demand in an economy.

When a country changes its currency, the money supply is typically affected. The old currency is taken out of circulation, and new currency is introduced, which can increase or decrease the overall money supply in the economy. If the government prints more new currency than the old currency in circulation, it can lead to an increase in the money supply and potentially lead to inflation.

1)
MERITS OF THE CURRENCY REDESIGN STRATEGY:

i: Enhancing Security Features like anti-counterfeiting mechanisms, which assist shield the public from fraud and other financial crimes, is a benefit of currency redesigns.
ii: Improved Public Awareness: Redesigning a nation’s currency can draw attention to the cultural and historical importance of that nation. Famous people, symbols, and monuments can aid in fostering a sense of patriotism and national identity.
iii: Improved Accessibility: By include elements that help people with visual or other limitations, currency redesign can improve accessibility.

DEMERITS OF THE CURRENCY REDESIGN STRATEGY:
The naira redesign policy in Nigeria, which involves the introduction of new banknotes and coins with enhanced security features, has some potential demerits, including:

i. Cost: The redesign process can be expensive, as it involves the printing and distribution of new banknotes and coins. This cost could be significant, particularly for a country like Nigeria that is already facing economic challenges.

ii. Counterfeiting: Despite the enhanced security features, there is no guarantee that the new banknotes and coins will be entirely counterfeit-proof. Counterfeiters may find ways to duplicate the new notes, undermining the credibility of the currency.

iii. Inconvenience: Introducing new banknotes and coins could be an inconvenience for citizens who are accustomed to the current currency. It may take some time for people to get used to the new denominations and sizes, and some may find it challenging to adapt.

iv. Economic impact: The redesign policy may have a significant economic impact, particularly on small businesses and low-income earners who may have difficulty exchanging their old notes for the new currency. There could also be a temporary shortage of cash, which could affect businesses and individuals’ ability to transact.

v. Environmental impact: The redesign process could have a negative impact on the environment, as it requires the disposal of the old banknotes and coins, which could contribute to waste and pollution.

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

The redesign of a currency like the Nigerian Naira can potentially impact the money market equilibrium in several ways. The money market refers to the market where short-term financial instruments such as treasury bills, commercial paper, and certificates of deposit are traded. Here are some ways that a currency redesign could impact the money market equilibrium:

Changes in demand and supply: When a currency is redesigned, it can change the demand and supply dynamics of the money market. For example, if the new Naira design is widely accepted by the public and considered more trustworthy, demand for it may increase. This could lead to a decrease in interest rates as lenders compete to lend out more of the redesigned currency.

Changes in interest rates: The redesign of a currency may also cause changes in interest rates in the money market. If the redesign leads to an increase in demand for Naira, lenders may be willing to lend at lower interest rates to attract borrowers. Conversely, if the redesign is not well received, interest rates could increase to compensate lenders for the increased risk associated with the currency.

Changes in inflation expectations: A currency redesign may also impact inflation expectations in the money market. If the redesign is perceived as a sign of economic stability and a commitment to sound monetary policy, inflation expectations may decrease. This could lead to lower interest rates in the money market as lenders adjust their rates to match the expected lower inflation rate.

3: Will this new policy promote equilibrium in the money market?

Nigeria’s redesigned naira banknotes are intended to enhance security, enhance aesthetics, and highlight the country’s rich cultural heritage. The new design might excite some people and increase economic activity, but it is unlikely to significantly alter the equilibrium of the money market.

The money market is influenced by a wide range of factors, such as government laws, interest rates, inflation, and foreign exchange rates. The design of the currency notes may not instantly have an impact on these traits. Nonetheless, a well-designed currency may increase public trust in the financial system, which could have an impact on the money market.
.

Notwithstanding the possibility that the new naira redesign policy in Nigeria would have some beneficial benefits on the economy, it is unlikely to by itself encourage money market equilibrium. The money market is likely to be more significantly impacted by other economic forces and policies.

EKECHUKWU IFEANYI PAUL
2019/249227
ECONOMICS EDUCATION
DEMERITS OF REDESIGNED NAIRA POLICY
It brought untold hardship and suffering to many Nigerians as a result Nigerians suffered more hardship as they could not access the new notes while their old bank notes were withdrawn from them.

It issued countless number of deaths as many Nigerians slumped and died while queuing for cash in banks, some undressed themselves in the banking hall to protest their inability to access the cash they surrendered to the banks but which on request, could not be redeemed; some lost their loved ones in hospitals over inability to access cash to pay for services, among others.

Due to major cash crunch and no availability of money to purchase basic needs, people then decided to take laws into their hand which led to extensive street protests, attacks on banks including the CBN and wanton destruction of ATM machines and deposit banks’ facilities.

The president disregard to the supreme court rulings showed that although we are say that we are practicing democracy, we are not really democratized and indeed the executive herebygave the impression that citizens could brazenly disregard lawful orders of any court, and such would only encourage anarchy and lawlessness.

The president conduct amounted to executive rascality and brazen disregard and contempt of the Supreme Court to have separated the denomination of the old notes for legality.

Cashless Policy Merits

Creation of job opportunities and full employment
we can see that there is massive increase in the number of employment opportunities in the economy by the statistics of the number of jobs opportunity 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.
More than over 300,000 super agents had been engaged to carry out mobile services across the country.

ECONOMIC STABILITYEmefiele 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.
The policy was put in place to ensure that there was a huge reduction in 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.

HELP PEOPLE TO KNOW MORE ABOUT BANKING
This policy was put in place to help and provide basic knowledge of banking to people like bank accounts and transfer. Since the inception of this policy there have been an 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.

INCREASE IN GOVERNMENT REVENUE
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.”

The Central Bank policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance.

Currency redesign support regulatory reform, increased legislative reach and coordinated fiscal and structural policies.

ACCESSIBILITY TO LOAN
The recent policy interventions have gone a long way to help Nigerians to access easy loans with affordable interest rates.

The nexus between naira redesigned money market equilibrium and how this policy will promote equilibrium in the money market
Since the inception of the naira designed policy the central bank’s efforts at curtailing rising inflation had proved nearly fruitless amidst growing food and commodity prices and alsoattempts made to stabilize the naira against the US dollar had been difficult partly due to speculative activities and other challenges.

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.

Specifically, the CBN governor said, “We have started to see inflation trending downwards following general price stability in almost all market genres, including for goods and financial products.”

According to him, the effective implementation of the policy could scrap four percentage points off the current level of inflation which stood at 21.34 per cent – as it steadily slows the inflation rate to about 18 per cent by mid-2023.

He said: “This is quite achievable, as data from our market sources indicate that the prices of grains and key staples, around Suleja and Lambata markets, for instance, have generally been on a downward trend since the beginning of the policy. The price for soya beans has dropped from N30,000 to N22,000. Maize from N18,000 to N16,000. The price of a bull fell from N400,000 to N330,000 and ram from N75,000 to N50,000.”
My own point of view is that the new policy promote equilibrium in the market. It was drafted out well to restructure and strengthen our economy but because of poor implementation it could not achieve it desired results.
According to the central bank governor he affirm that the policy had brought stability to the exchange rate regime.

He also explained that before the announcement of the procedure, the huge cash haul outside the banking system had exerted significant pressures on the exchange rate at all windows, but more so at the parallel market as it engendered asset substitution by speculators and rent-seekers.

He said: “While the policy was initially estimated to lead to more speculations due to panic moves as most people try to understand the policy action, it is expected to reduce speculation in the medium- to long-run.

NAME: ELEKWACHI JOHN UDOCHWU
REG NUMBER: 2019/241890
DEPARTMENT: ECONOMICS/PHILOSOPHY (Combined Social Sciences)
LEVEL: 300
COURSE: ECO 303 ONLINE ASSIGNMENT.

Discuss and analyse the merits and demerits of naira redesigned policy initiative adopted by the CBN.

We still remember, that on 26 October 2022, The President of Nigeria named Muhammadu Buhari Signed and approved the Redesign of Some of the Naira Notes (200, 500, 1000) which was carried out by the Central Bank of Nigeria.
By the approval, the redesigned banknotes will circulate concurrently with the old notes , up to 31 January 2023 after which date the old notes loses their legal tender status. However, given the need to improve the level of circulation of the new notes, the President of Nigeria extended the deadline by another 10 days to 10 February 2023 for olds notes to circulate as legal tender.

• Merits Advantage And Reasons of Naira Redesign Policy adopted by the CBN

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.

The Redesign of Currency is general Practice of Central Banks across the globe, a Central bank is expected to redesign it’s Currently within 5-6 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, another important merit of the CBN redesign policy is that it enable so many people who has not open bank account or that are not Interested to look into it learn it and start using the bank which is more safer in transaction and business.

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.

Fourthly, the Redesign Naira has also helped in Price inflation to reduce, some local or retailers were able to accept low price to some of their Products just to be able to get money for business turn up due to less customers.

•Demerit of Naira Naira Note by CBN

One is the scarcity of the new naira Note in Commercial banks which has so much pain and hunger to the citizens, the buying and selling become very difficult due to the lack of the new currency in circulation.

Secondly is the Internet banking malfunction and bad network, after the scarcity of money in circulation due to the lack of the new currency, Nigerians diverted to internet Banking, e.g sending and receiving money through bank transfer by using bank ussd code, and mobile app, but Nigerians were disappointed because of the bad and low network on the side of internet Banking.

Thirdly is the inability to buy and sell goods and services, so many people who has not Bank account cannot transact business at this period due to no means of receiving money for the goods and services.

Fourthly, it was a waste of time resources, many people will have to leave early to go a queue up in the Bank sometime at the end of the day they won’t get or withdraw their money due to scarcity and crowd.

•QUESTION TWO
Secondly, what is the nexus between Naira redesign money market equilibrium? Will this new policy promote equilibrium in the money market?

Yes the new policy will promote equilibrium in the money market, The interest rate of getting real money will determine the supply and demand of money, and if the interest rate rises above the equilibrium level, people will have to adjust their portfolios interest rate, and the demand for Monday will less, and those that lends money like the bank will have to remove the interest rate which will drive the equilibrium price to come back to normal and the money supply and demand will settle in the equilibrium, so it is when the interest rate is below the equilibrium price, which will make the quantity of money demanded to be higher, people will have to demand for real money, and because they need the money, the Banks will increase the interest rate they offer and due to the interest rate of getting the real money, it will drive the demand and supply of the money to an equilibrium level.

According to the theory of Liquidity Preference, it states that the interest rate is one determinants of how money people choose to hold.
And from the interest rate of money supply and demand there will be an equilibrium in money supply.

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 analyze 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.
The question above will be discussed under the following headings.

Section A
1. CBN policy on the introduction of redesigned 200, 500 and 100 on 26 October 2022
“On the 26th of October 2020, the central bank announced the introduction for the naira redesign policy. The policy bothered specifically on the redesign of N200, N500 and N1,000 banknotes. According to the CBN governor Mr Godwin Emefiele, the policy would enable the CBN to take control of the naira in circulation, manage inflation, combat counterfeiting, and ransom payment. 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 “.
The CBN governor set out the following as the objectives of the Naira redesign policy:
i. to reduce the portion of money in circulation outside the banking system,
ii. to increase the supply of clean notes,
iii. to make monetary policy more efficacious,
iv. to limit counterfeiting of the Naira,
v. to deepen the cashless policy and
vi. to support the security forces in fighting terrorism and ransom taking.
2. Merits and demerits of the policy initiative adopted by the CBN.
 Merits
• A shift towards cash-less policy will reduce the high operational cost incurred in a cash-based economy. Such costs emanate from cash management and movement, currency sorting and printing.
• Corporate organizations will benefit by way of faster access to capital, reduce revenue leakages and reduce cash handling cost.
• On the part of the government, it will bring about increased tax collection, greater financial inclusion, reduced revenue leakages and increase economic development.
• Cash-less policy will help minimize the risks associated with the use of physical cash that do arise from burglaries and thefts as well as financial losses in fire outbreaks.
• Furthermore, cash-less economy is capable of reducing corrupt practices like money laundering which is common-place in cash based economy. To the extent that cash is not easily pulled out of the system, it will discourage launders.
 Demerits
• The policy is challenged by financial infrastructure deficit. The cash-less payment channels that are currently available are not adequate to cope with the demand of the policy if it is to be implemented religiously. This means that the policy will require further investment of funds by operators and regulators.
• Given that the system is driven largely by ICT, the policy is exposed to dangers of fraudulent practices as any security lapses can be exploited by the astute fraudster to perpetuate fraud. Internet related crimes like hacking is likely to threaten the cash-less policy in Nigeria.
• To operate successfully in cash-less economy, some level of literacy is required in view of the technology involved. Therefore, Nigeria with high rate of illiteracy will certainly have some challenges. Illiterate population would prefer to keep their money in cash.
• The high charges and fees on some of the electronic channels can generate resistance by the banking public. For example, the recent re-introduction of charges for ATM withdrawals didn’t go down well with the users.
Section B
1. What is the nexus between naira redesign and money market equilibrium?
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 rates 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, despite 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.

Merits of this policy are :
1). It reduce inflation because excess money in the economy leads to continuous rise in price of goods and services.
2) It regulates the excess money in the economy.
3) It promote cashless transactions: people can do transactions with their phones without going to the bank.
4) It helps to Stace – off cash hoarding: CBN recovered some of the money that was hoard.
5) It increases the value of money.
Demerits of this policy are:
1) It becomes hard for people to access their money in the bank .
2) Many people are left with no cash to buy somethings in the market.
3) There are often no network to do transfer or receive alerts which makes it at times difficult to do cashless transactions .
4) Banks sell money to POS vendors who sell it back to the owners at high cost:
It brings lawlessness as POS vendors sell money and banks not releasing money which makes the people to be violence to the extent of destroying bank properties and POS shops
The Nexus between Naira Redesign and Money Market Equilibrium
The Nexus between Naira redesign and money market equilibrium is that the naira redesign is used as a tool to regulate excess money in circulation (which means to collect the old currencies which are many and release a small amount of the new redesigned currencies in the economy) and to recover some of the cash being hoard in the economy. Thereby making the money market to be at equilibrium where demand for money and supply of money are equal.
Will this new policy promote equilibrium in the money market ?
Yes, it will promote equilibrium in the money market because the economy has being undergoing inflation in the economy. when the money is small in circulation, people tend to reduce their spending which will bring about reduction in the general price level. This will make the money market to be at equilibrium.

Name: Anibodi Chiamaka Teska
Department: Economics Education
Reg number: 2019/243747

As it stands currently the redesigned naira note doesn’t have any merits to Nigerians because it’s not as if there has been any increase in its monetary value also the following benefits listed by CBN never came to accomplishment such reasons like:
— That the redesigned naira will help to control inflation. Inflation is an increase in price of a commodity prior to the redesigned naira, there has been a massive increase in price of goods and services and it has not declined even after the redesigning of naira note.
— Another is that the redesigned notes will help in fighting corruption: corruption still plays a huge role in the Nigerian system
Money market equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of Money supplied. Therefore the relationship no between the two because the quantity of the redesigned notes demanded for is not equals the quantity of redesigned naira note in circulation.
Also the new naira policy may not promote equilibrium in the money market in the short run but in the long run it will.

Name: Edwin Chinedu Augustine
Reg no:2019/249508
Department: Economics Major
Course code: Eco 303
Course Title: Macro Economics

The assignment for ECO 303 answered deliberately
The Central Bank of Nigeria (CBN) on Wednesday announced plans to redesign the 200, 500, and 1,000 naira notes.
CBN Governor, Godwin Emefiele, disclosed this during a special press briefing in Abuja.

Emefiele said the redesign will take effect from Thursday, December 15, 2022.

He also said that existing notes would seize to be regarded as legal tender by January 31, 2023.
The CBN said that it is worrisome that 85 per cent of the currency in circulation is being hoarded by Nigerians.

He further urged Nigerians to proceed to their banks to deposit their Naira notes, adding that the deposit fee would be waived for transactions below N150,000.

Emefiele added that the redesigning of Naira notes would help to curb counterfeit notes, as well as hamper ramson payment to terrorists and kidnappers.
Source: TheGuardians News

The Gains
These as discussed below are the benefits the new CBN currency design:

1) Security Currency Against Counterfeiting
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.
Redesigning currencies improve a currency security by enabling the country to keep counterfeiting low and stay ahead of counterfeiting threats. The CBN expects
that this move to redesign Nigeria currency would reduce counterfeiting.
Holding cash is still very popular; in fact, it is not uncommon for traders within
Nigeria to hold hundreds of millions of Naira in cash for their operations. The
CBN claims that it is also redesigning the Naira, due to hoarding with statistics
showing that over 80 percent of currency in circulation are outside the vaults of
Deposit money banks. After the CBN announced the redesign policy, naira notes
that were minted as far back as over a decade ago began to circulate. Photos of the
said naira notes have since gone viral on social media.

2) Deepening of Cashless Policy
Nigerians embracing cashless transaction would be inevitable with the pegging of
cash withdrawal limit over the counter (OTC) by individual and corporate
organizations per week at N100,000 and N500,000 respectively. CBN also
attached process fees of 5% and 10% respectively to individual and corporate body
for cash withdrawal above such limits. Definitely, the policy would force increased
minting of the eNaira and most transactions to go cashless via various electronic

3) payment platforms thereby deepening Nigeria’s push to entrench a cashless
economy.

4) Financial inclusion Strategy
One of the gains of the policy is to encourage financial inclusivity. Financial inclusion means that individuals and businesses have access to useful and
affordable financial products and services that meet their needs – transactions,
payments, savings, credit and insurance – delivered in a responsible and
sustainable way especially those in rural areas. The benchmark on withdrawals
would definitely push banking activities such as agent banking, linkage banking and financial literacy to the rural community and the unbanked to meet their
banking needs. Minimizing cost of Currency Management
Other concerns that motivated the decision include the high cost of currency management. According to Vanguard online publication on November 4, 2021,
The Central Bank of Nigeria spent the sum of N58.618 billion to print 2.518 billion
Naira notes, valued at 1. 063 trillion in, 2020. This was contained in the bank’s
2020 Currency Report posted on its website. It indicated a decrease in the bank’s
expenditure on currency printing, which stood at N75. 523 billion, in 2019 and
N64. 040 billion, in 2018. The CBN by this policy introduction would reduced to a minimal level the cost of retrieving and
disposing of mutilated and dirt currency notes as most transaction would be on e-
payment with less cash to toy with.

5) Curtailing the Act of Terrorism and Other Criminal Activities

The CBN also believed that with the redesigning of the currency and the new cash
withdrawal limit in place it would drastically reduce the act of kidnapping,
terrorism and other criminal activities. This is hinged on the premises that access to
huge cash would be cut off and other activities through banks could be traced to an
account. The CBN noted that the policy is going to help reduce insecurity, ‘if
money outside the banking vault, used to fund ransom payments and terrorism,
begin to dry up.

6) Accurate Policy Predictions and Implementations
The CBN also stand a better chance for accurate policy predictions and
implementations for its various monetary and fiscal policy regulations for the
development of the economy when the currencies in circulation are easily
accountable and assessable in the banks. There is no magic to do when a country’s
over 80% cash in circulation are unaccounted for thus, the need for the policy. The
policy will help control the money in circulation and in the long run have
meaningful impacts on the country’s fiscal stabilization.

7) The change in the notes is also said to aid in lowering the rate of inflation
Source: Vanguard News

There are also some roaming issues concerning the redesign of the new naira note,here are some demerits.

1.The Government
As stated above that the Central Bank of Nigeria spent the sum of N58.618 billion to print 2.518 billion Naira notes, valued at 1. 063 trillion in, 2020. Many are of the opinion that if such a huge amount was spent in just reprinting of a few currency notes one can imagine the cost for replacing the entire 200, 500 and 1000 currency notes. The amount spent in redesigning, printing and circulating of the new notes could have been channeled to other critical needs of the economy.

2) The General Public Forex crisis has tray the announcement of the policy since October 26 2022. The prices of foreign currencies especially Dollars has been soaring in the black market as a result of rush to convert the hoarded cash to foreign currencies. Our appetite for foreign commodities that resulted in a heavy reliance on the importation of virtually everything would negatively have a great burden to those that patronize them. Assessing forex in a high cost would eventually affect the prices of thosecommodities. Massive depreciation of the naira has been on increase since the announcement of the policy by CBN. Naira’s decline in the black market essentially widened the gap between the official rate and the parallel market rate.

3) The naira crashed to a historical low against one dollar and one Pound Sterling at
N900 and N1000 respectively after the announcement at the black market.
High inflation would likely fall in due to the forex crisis that has been aggravated by the naira redesign policy, resulting to high cost of goods and services in the
Country.

4) The policy coming in this time of food crises and insecurity especially in the rural areas where payments for goods are cash dominated would trigger food shortage. Convincing traders in those areas to accept money transfer to part with their goods would require a high level of sureties and convictions. The policy to rural dwellers is a serious pain to battle with.

5) Nigerians who take pride in spreading cash in occasion would have a rethink as the policy would have crippled their assess to huge cash to toy with. The penalty that comes with spreading of the currency if implemented would leave regret to anyone that fall victim. To them the policy is not a favourable one.

6) The information dissemination in rural area poses a great challenge as many do
not have access to radio or television as well as electricity. The CBN must find a way to communicate the new policy on how to change the old notes to the rural dwellers to avoid being cut off from the impending changes in the policy. The Community leaders, Religious leaders, government officials from such areas
should be engaged to help in conveying the development to the communities in
their local languages. The Ministry of Information, the media, Telecommunication
via SMS and the National Orientation Agency would also be of help.

7) 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.

8) lack of coordination in policy making in Nigeria.

9) The hoarding of new naira notes.

10) Millions of Nigerians have continued to grapple with hardship amid the cash crunch that has worsened business transactions and stifled trade in the informal economy.

what is the nexus between Naira redesign money market equilibrium?
Will this new policy promote equilibrium in the money market?
The new note reflects the impact of long-term inflation in Nigeria, if inflation keeps being about
10 percent more than in the US, it Wii probably end up being worth about $1 by 2030, when it
used to be ₦1 equaled 1 dollar in 1983(Charlie Robertson), Nigeria’s inflation increased for the
eight straight month from 20.77% to 20.52% in September 2022, in which the main objectives of
the policy exercise of currency redesign is to enlarge access to money outside the commercial
deposit money banks as explained by the CBN Governor with statistics showing over 85% of the
nation’s currency outside the banks vaults using the instrumentality of currency redesign as a
recoups against the failed financial inclusion policy of the CBN.
However, both inflation and interest rate though fluctuating were higher than dollarization over
the above said period. The question is whether the inflation rate or the interest rate is responsible for the increase in dollarization or dollarization can help to explain the high inflation and interest
rate in Nigeria? This paper tends to provide answers to these questions.
Since the 1980s, the U.S dollar has increasingly been usurping the legal role of the naira as the
medium of exchange within the Nigerian markets for foreign exchange, savings and commodities.
In addition, there is an economic law that explains why the U.S dollars and other financial
convertible currencies of the west can thus encroach quite vicariously in the domestic turf of the
naira in Nigeria. It is called the dollarization theorem. Dollarization in Nigeria is a situation which
occurs where the residents use foreign currency (US dollar) along with their own domestic
currency dollarization is not only applicable to the use of the United States dollar, but also to the
use of any other country’s foreign currency as the accepted means of exchange. The Euro, the
South African Rand, the Russian Rubble, and both the New Zealand and Australian dollars are
other foreign currencies widely accepted outside of their issuing country of origin (Ghalayini,
2011).Various countries, specifically emerging countries and Nigeria inclusive, have already
embraced dollarization to some extent due to the volatility of the purchasing power of their
domestic currencies.
Generally, the loss of the domestic currency’s external value and appeal as a store of value prompt
dollarization and the national currency for the three classic uses as a medium of exchange, a unit
of account, and a store of value, It has been indicated in the literature that one of the reasons
adduce for currency redesign is the need to fight inflation. The literature, has however established
that, the fundamentals of the economy which determine sustainable economic growth are prudent
fiscal and monetary policies. In effect, currency restructuring will work only in concert with an
economic stabilization programme involving exchange rates stability, price level and overall level
of interest rate Macroeconomic stabilization is a condition in which a complex framework for
monetary and fiscal institutions and policies is establish to reduce volatility and encourage welfare
–enhancing growth, achieving this condition requires aligning currency to market levels,
managing inflation, establishing foreign exchange facilities, developing the national budget,
Stabilizing the exchange rate through a foreign exchange market, by establishing and organized
foreign exchange markets that allows countries to buy and sell currency aids stabilization, develop
more transparency policies for participations in foreign exchange auctions and the exchange rate
is often over-valued because of restrictions on imports and other distortions that favor those with
access to the foreign exchange at the official rate
For example, countries like Singapore, Europe, and Japan, China, whose highest denominations
do have low inflation rates, apart from the fact that these are highly industrialized countries,
many of their economic sectors are functioning optimally, giving them multiple streams of
revenue. Yes new policy will promote equilibrium in the money market.
Nigeria, on the other hand, is mono-culture and heavily dependent on crude oil
exports. From the macroeconomic perspectives, the indicators, such as Gross National Product
(GNP) and Human Capital Index, mostly in the developing nations including Nigeria, indicating
that currency management has not brought much economic significance to these countries. Thus,
effective currency restructuring policy must be accompanied by other prudent fiscal and
monetary policy and an increase in the level of production.
Thank you.

Obiora Franklyn
2019/247768
Combine social science
Economics and philosophy

Merits of the redesign of new Naira notes in Nigeria
If anything, the number of employment opportunities already created by the policies further demonstrates that rather than impoverishing , 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.”

Demerits

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. Having good intentions (whichever way that is defined) or securing necessary authorisation or demonstrating the stamina to stay the course is never enough or necessarily optimal. Not every policy can or should be executed with the brute force of the state, even under a dictatorship, but especially in a democracy. 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 can create a spark. This should be avoided. At all cost. By all means.
The President Muhammadu Buhari administration has just a little over three months to go. Compromising the fragile, post-COVID economic recovery, gratuitously crippling businesses and livelihoods, and punishing and further immiserating the populace, especially the poor and the vulnerable, in the name of a policy whose benefits are in the future and may be difficult to quantify is not exactly the impression a president wants to leave in his last quarter in office.
The president’s position as the approving authority on currency change in enshrined in 20 (3) of the CBN Act, 2007. So, even when the CBN is the adviser, the designer and the implementer of the policy, the onus is squarely on the president. President Buhari should step in to eliminate the needless suffering inflicted on Nigerians by the implementation of the policy. He should be bothered less about ego and more about legacy. Both the Supreme Court and the Council of State have given him some ample room to walk back without losing face.

what is the nexus between Naira redesign money market equilibrium? 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. 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.

Nigeria’s economy is shifting from cash to a cashless system and has booked its space on the global business arena where financial inclusion, e-commerce and e-money are the new order.
To ensure Nigeria is not bullied out of the global financial ecosystem, the Central Bank of Nigeria (CBN) is administering a cocktail of strategic monetary policy initiatives to deepen global competitiveness.
Among the strategies is the unwavering determination to wean Nigerians off the addiction to cash spending which comes with a myriad of challenges.So, on October 25, the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, shocked currency hoarders and speculators when he announced the immediate redesigning of the ₦200, ₦500 and ₦1000 banknotes, while the existing notes would be confined to the dustbin of history by January 31, 2023. The last exercise was 20 years ago.
The unsettling annoucement caused ripples in various quarters, including the National Assembly where lawmakers frustratingly asked for extension of deadline.While that simmered, truckloads of decayed naira notes surfaced in various bank counters. Between October 26 and November 18, the CBN said over N165 billion old notes have been absorbed by commercial banks.Though the volume was below compared to anticipated thresholds, the apex bank is hopeful that much more would be deposited as the deadline draws nearer.Economic experts have applauded the CBN for this bold move.
They insist that as a nation battling deep-rooted insurgency, banditry, kidnapping and other crimes, allowing trillions of naira outside the banks will turn Nigeria into a gangsters’ paradise since criminals can transact their nefarious businesses totally eclipsed from the banks and security agencies’ radars
The CBN Governor, insists that the new naira notes would be insulated from risk the risk of counterfeiting by financial vampires.Other concerns that motivated the decision to ditch the old naira is the high cost of currency management.
The CBN Governor listed the benefits of the redesigned naira notes to include; enhanced security, greater durability, attractiveness and promotion of rich cultural heritage.
This effort is expected to yield numerous benefits; including the adoption of electronic channels, which is in tandem with global best practices.the currency redesign will also help the Central Bank of Nigeria’s Monetary policy initiative,it may have the effect of reducing speculative attacks on the naira in the parallel market.
Source:https://www.google.com/amp/s/sunnewsonline.com/harnessing-gains-of-redesigned-naira-notes/%3famp

MERITS OF THIS POLICY INITIATIVE ADOPTED BY THE CBN.

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.

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.

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.

The recent policy interventions would also help Nigerians to access easy loans with affordable interest rates.

DEMERITS OF THIS POLICY INITIATIVE ADOPTED BY THE CBN.

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.

“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,” the Executive Director, Centre for the Promotion of Private Enterprise (CPPE) and former Director-General of the Lagos State Chamber of Commerce, Muda Yusuf, told The ICIR.

“It’s a big distraction. It’s going to impose lots of costs on the economy. It’s not going to be cheap. We are talking about printing N3.3 trillion currency notes.

The government is struggling with a huge debt deficit and would likely borrow massively to fund the currency redesigning, which, the experts argued, would deepen inflationary pressure on Nigeria’s currency.

NAME: MACHEBE CHIOMA STEPHANIE
REG NO: 2019/248922
DEPARTMENT: ECONOMIC EDUCATION
ANSWER
MERITS
• REDUCTION OF BROAD MONEY SUPPLY: Effectivel 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.
DEMERITS
• 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.”

WHAT IS THE NEXUS BETWEEN NAIRA REDESIGN AND MONEY MARKET EQUILIBRIUM.

Naira Redesign:
The Naira redesign policy is to reduce the portion of money in circulation outside the banking system, to increase the supply of clean notes, to make monetary policy more efficacious, to limit counterfeiting of the Naira, to deepen the cashless policy and to support the security forces in fighting terrorism and ransom taking.

Currency redesigns increase a currency’s security by helping nations keep counterfeiting to a minimum and stay one step ahead of threats. Additionally, it is anticipated to boost the economy, lower cash management costs, advance financial inclusion, and improve the government’s ability to monitor the money supply.

The Naira redesign policy of the Central Bank of Nigeria (“CBN”), aimed at driving the objectives of the country’s ongoing migration from a cash-dominated economic environment to an electronic payments market, otherwise known as cashless economy.

Money Market Equilibrium:
Money Market is the interaction among institutions through which money is supplied to individuals, firms, and other institutions that demand money.

Money market equilibrium is 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 nexus between Naira Redesign and Money Market Equilibrium.

The connection between naira redesign and money market equilibrium is the effects of changes in demand and supply of money in circulation. A shift in money demand or supply will lead to a change in the equilibrium interest rate.

Changes in money Demand:
lf the money market is initially in equilibrium with supply curve and a demand curve “A Decrease in the Demand for Money”. Now a decrease in money demand, all other things unchanged. A decrease in money demand could result from a decrease in the cost of transferring between money and non money deposits, from a change in expectations or from a change in preferences 1, the interest rate will fall. To see why the interest rate falls, if people want to hold less money, then they will want to hold more bonds. Thus, the demand for bonds increases. The higher price of bonds means lower interest rates, lower interest rates restore equilibrium in the money market.

Lower interest rates in turn increase the quantity of investment. They also stimulate net exports, as lower interest rates lead to a lower exchange rate. The aggregate demand curve shifts, given the short-run aggregate supply curve the economy moves to a higher real GDP and a higher price level.
An increase in money demand due to a change in expectations, preferences, or transactions costs that make people want to hold more money at each interest rate will have the opposite effect. The money demand curve will shift to the right and the demand for bonds will shift to the left. The resulting higher interest rate will lead to a lower quantity of investment. Also, higher interest rates will lead to a higher exchange rate and depress net exports. Thus, the aggregate demand curve will shift6. All other things unchanged, real GDP and the price level will fall.

Changes in money Supply
lf the market for money is in equilibrium and the Federal government changes the money supply. All other things unchanged, how will this change in the money supply affect the equilibrium interest rate and aggregate demand, real GDP, and the price level.
Suppose the Federal government conducts open-market operations in which it buys bonds. This is an example of expansionary monetary policy. The impact of Federal government bond purchases is “An Increase in the Money Supply”. The Fed’s purchase of bonds shifts the demand curve for bonds, raising bond prices. As we learned, when the Federal government buys bonds, the supply of money increases. “An Increase in the Money Supply” shows an economy with a money supply which is in equilibrium at an interest rate of. Now suppose the bond purchased by the Federal government result in an increase in the money supply to the economy that policy change, shifts the supply curve of the money at the original interest rate. People would not wish to hold the newly supplied money, they would prefer to hold non-money assets. To reestablish equilibrium in the money market, the interest rate must fall to increase the quantity of money demanded. In the economy, the interest rate must fall to increase the quantity of money demanded in the economy.

The reduction in interest rates required to restore equilibrium to the market for money after an increase in the money supply is achieved in the bond market. The increase in bond prices lowers interest rates, which will increase the quantity of money people demand. Lower interest rates will stimulate investment and net exports, via changes in the foreign exchange market, and cause the aggregate demand curve to shift. Given the short-run as well aggregate supply curve, the economy moves to a higher real GDP and a higher price level.

As we have seen in looking at both changes in demand for and in supply of money, the process of achieving equilibrium in the money market works in tandem with the achievement of equilibrium in the bond market. The interest rate determined by money market equilibrium is consistent with the interest rate achieved in the bond market..

Note:
• People hold money in order to buy goods and services (transactions demand), to have it available for contingencies (precautionary demand), and in order to avoid possible drops in the value of other assets such as bonds (speculative demand).
• The higher the interest rate, the lower the quantities of money demanded for transactions, for precautionary, and for speculative purposes. The lower the interest rate, the higher the quantities of money demanded for these purposes.
• The demand for money will change as a result of a change in real GDP, the price level, transfer costs, expectations, or preferences.
We assume that the supply of money is determined by the Fed. The supply curve for money is thus a vertical line. 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.

Nigeria’s economy is mutating. It is shifting from cash to a cashless system and has booked its space on the global business arena where FinTech, financial inclusion, e-commerce and e-money are the new order.
To ensure Nigeria is not bullied out of the global financial ecosystem, the Central Bank of Nigeria (CBN) is administering a cocktail of strategic monetary policy initiatives to deepen global competitiveness.
Among the strategies is the unwavering determination to wean Nigerians off the addiction to cash spending which comes with a myriad of challenges.So, on October 25, the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, shocked currency hoarders and speculators when he announced the immediate redesigning of the ₦200, ₦500 and ₦1000 banknotes, while the existing notes would be confined to the dustbin of history by January 31, 2023. The last exercise was 20 years ago.
The unsettling annoucement caused ripples in various quarters, including the National Assembly where lawmakers frustratingly asked for extension of deadline.While that simmered, truckloads of decayed naira notes surfaced in various bank counters. Between October 26 and November 18, the CBN said over N165 billion old notes have been absorbed by commercial banks.Though the volume was below compared to anticipated thresholds, the apex bank is hopeful that much more would be deposited as the deadline draws nearer.Economic experts have applauded the CBN for this bold move.
They insist that as a nation battling deep-rooted insurgency, banditry, kidnapping and other crimes, allowing trillions of naira outside the banks will turn Nigeria into a gangsters’ paradise since criminals can transact their nefarious businesses totally eclipsed from the banks and security agencies’ radars
The CBN Governor, Mr Godwin Emefiele, insists that the new naira notes would be insulated from risk the risk of counterfeiting by financial vampires.Other concerns that motivated the decision to ditch the old naira is the high cost of currency management.
The CBN Governor listed the benefits of the redesigned naira notes to include; enhanced security, greater durability, attractiveness and promotion of rich cultural heritage.
This effort is expected to yield numerous benefits; including the adoption of electronic channels, which is in tandem with global best practices.the currency redesign will also help the Central Bank of Nigeria’s Monetary policy initiative,it may have the effect of reducing speculative attacks on the naira in the parallel market.
Source:https://www.google.com/amp/s/sunnewsonline.com/harnessing-gains-of-redesigned-naira-notes/%3famp

Ogili Edmond Onyedikachi
2019/244358
Economics/ Philosophy

The policy adopted by the Central Bank of Nigeria is no mere policy knowing that this has a large effect on the economy of the nation in all aspects of life, either positively or negatively.
Now the currency redesign of the 200, 500 and 1,000 legal tenders was due to the critical down turn it the Nigerian economy as a result of so many variables.
The merits of the currency design are :
1. To mop up monies outside the banking system. The normalcy is that when the CBN releases the currency into circulation, it is meant to come back after an outflow over a period of time to the stronghold of the CBN. This will help control the volume of money in circulation.
Moreover, there are informations that certain individuals and hording a great percentage of the money in circulation for various unjust reasons. But with the implementation of this policies they will be forced to return the old naira notes only to be able to get back a reduced amount reasonable enough for legal day-to-day activities. Right no it is said that individuals are allowed to access 500,000 per week while companies, 5million .

2. lessens inflation rate: the currency redesign and the cashless policy will greatly help in the shot- medium run to actually reduce the rate of inflation, which is excess money in circulation chasing fewer goods.

3. Effective and efficient monetary policy decisions: when this policy was in place the policy on withdrawal limit became more effective as he currency been horded was returned back or regarded as illegal tender. The CBN authorities said that “they have started to see inflation trending downwards and exchange rates relatively stable.”

4. Stability in exchange rates: one of the causes (i.e aside export and import effects) of imbalance in exchange rates is when a larger amount of the naira is chasing fewer dollars.

5. To combat social improprieties : for instance the funding of of illegal activities; terrorist acts, banditry, bribery and corruption to say the least can be reduced If and only if it is well executed by other commercial financial bodies.

6. Formalize the parttern of transaction and adopt more formal settlement channels. Just like we have seen everyone is beginning to adapt to the use of making transfers instead of always holding cash which usually can not be tracked by financial regulatory agencies. In other words, reducing the number of unbanked population.

7. lastly it forces economic agents to open bank accounts which will help in the aspect of governors tax net, i.e more tax receipts. Simple put it that it will improve the efficiency of tax collection and would no doubt reduce tax evasion and avoidance.

While the demerits of this policy are:
1. Panic and violence: this is especially if this policy is not followed properly can cause an uproar by the masses who may not understand the reason and importance of it since they are the ones likely to suffer the backsides more. So proper/adequate sensitization is required, if not…

2. Stability in foreign exchange: Prof. Kingsley Moghalu, a former Deputy Governor of the Central Bank of Nigeria (CBN) said “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.” So for me the key negator here is corruption.The The relationship between naira redesign and money market equilibrium is that it is used as a demonetization policy just like the interest rate to balance the demand and supply of money. So on this way the CBN is able to mop up the excess money in supply. to

Furthermore this policy can help promote equilibrium in the money market given that there is a fixed supply of money. when the the CBN is able to bring back a percentage of the volume of money in circulation through the collection of older notes for the new ones they will be able will then be able to regulate the amount been given to the public. The equilibrium in money market is just simply the balance between the supply of money and the demand for money.
The obtainable 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.
By this we see that equilibrium in money market can be promoted by this policy.

Onyisi Sunny Hope
2019/251206
Eco 303
Economics.

INTRODUCTION
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. The the CBN embarked on the redesign of the Naira as well as expanded the implementation of the cashless policy program, which began in 2012. Some section of Nigerians especially those with vested interest have criticized the CBN policies. These section of Nigerians are those has refused to see beyond the little demerit as compared to the much more merit and advantage the policies has to offer.
REASONS FOR THE REDESIGN AND IMPLEMENTATION OF CASHLESS POLICY
According to the CBN Governor, Mr. Emefiele, 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. And as such has the potential to harm monetary policy actions, further leading to higher inflation and currency speculation, thereby exposing vulnerable Nigerians to further economic hardship.
It should be noted that release of money into circulation are to boost economic activities, provide employment and help stabilize inflation. And as such having too much money outside the banking system would hinder economic activities and make the CBN monetary policy less effective.
Secondly, the CBN policy of the redesigning the country note would go a long way to tackle the spread of counterfeit currency note in the country. For that reason the CBN with the approval of the president began the redesigning of the Naira note which includes 200, 500, 1000.

WHAT ARE THE MERITS?
Strengthen the performance of key macroeconomic parameters.
Reduce the amount of cash in circulation that has caused inflation.
Eliminate the activities of business in the black market, by reducing currency outside the banking system.
Encourage those in the informal business sector to have an account and to formalize with the pattern of transaction and adopt more formal settlement channels the the use of the cashless policy.
The reduction of the spread of money outside the banking system would also
Encourage the creation of bank account that would encourage peoples saving behavior.
improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance.

WHAT ARE THE DEMERITS?
The availability of the newly designed note has been relatively scarce and as such has made businesses in the country quite hard.
It has brought hardship to the citizens and affected the informal business sector.

WHAT IS THE NEXUS OR LINK BETWEEN NAIRA REDESIGN AND THE MONEY MARKET
Equilibrium in the Market for Money
Money market equilibrium occurs at the interest rate at which the quantity of money demanded is equal to the quantity of money supplied. Equilibrium in the money market occurs when the money demand equals the money supply. With over 80 percent of currency in circulation which is outside the vaults of commercial banks even as the issue “takes money supply out of the hands of the central bank”.
However, with the development, the CBN can circulate the new notes, and as well control the level of liquidity in the system for monetary stability. Which also would mean an equilibrium in the money market.

WILL THIS NEW POLICY PROMOTE EQUILIBRIUM IN THE MONEY MARKET?
The CBN new Naira design also with the cashless policy would bring about equilibrium in the money market because it would enable the CBN control the supply of money, track financial activity, and most importantly increase the effectiveness of monetary policy.

IHEDURU CHIGOZIE OSITA
2019/241534
Macro Online Quiz/Discussion (Naira Redesign and Monetary Equilibrium)–27-2-2023

The redesigning of the currency which took off on December 15, 2022, and expected to exit the old design by January 31, 2023 was expected to lead to the attraction of huge currency, put at over 80 per cent currently outside the banking system back to the economy.

Merits:

1. The new measures could restore confidence in the local currency as the bulk of naira notes stalked by politicians, criminals and other illegal operators would be returned to the banking system helping the cbn to monitor the currency in the economy

2. When this policy is implemented, the money would be brought out to be exchanged with the newly designed notes, and this could lead to crime detection and prosecution of many.

3. It is also expected that with the new notes, most tattered naira note currency pushed into the system would be eliminated while counterfeit would be refrained for a couple of years.

Demerits:

1. The cost of food and other items will shoot up as the naira notes for transaction will become scare while many people may go hungry because they could not get new naira to make necessary purchase

2. Armed robbery would escalate as they will be targeting bullion vans which will be transporting the new currency

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

Nexus between naira design and money market equilibrium:

In simple terms, when the naira is redesigned, people will have to exchange their old notes in the banks. Hence, all cash in hand is banked.
With this, the CBN can directly control the money put out to circulate. The central bank can supply the money needed to match its demand. With this, there is an equilibrium in the money market.
Money market is in equilibrium at a rate of interest when demand for money is equal to the fixed money supply. Total money supply will be unaffected by individuals decisions to hold more or less money to fulfill transaction and speculative purposes. It can only be determined by the CBN and can be independent of interest rate.

Will this new policy promote equilibrium in the money market:

Yes.
This is because the CBN’s currency redesign will bring about a reduction in the supply of money that is in circulation. This will also help to reduce or even eradicate inflationary pressure and enhance the exchange rate policy of the Central Bank of Nigeria.
In turn, this will result in an equilibrium or balance in the money market. This will happen because of the regulation of the money supply and enhancement of the exchange rate.

NAME:ALOZIE CHINEDU JOEL.
REG NO:2015/201977
COURSE CODE:ECO 303
Assignment on the naira redesign.
1.
The merits.
It would benefit lenders as the interest rate would increase.

Demerits of the redesign policy.

It would affect the cost of living,as the new naira notes would be scarce to use for productive ventures

Business would reduce the quality of their production,due to reduced supply of money for production.

2.
The policy would not promote the equilibrium in the money market,due to the lack of corresponding supply of money to the demand.
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. A change in the interest rate out of equilibrium comes from a movement along the curves rather than a shift in the curves.

The

NAME: Ugwu Oluchi Jacintha
Matrix no: 2020/250319(2/3)
Department: social science education
Unit: Education/ Economics
Email: Oluchiugwu194@gmail.com
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.

Demerit
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.

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.

Divergent views have risen as regards how appropriate or otherwise the policy initiative adopted by the CBN is on the economy.
The Central Bank of Nigeria (CBN), on 25 October 2022, announced that it would redesign the four higher value notes of the naira (₦100, ₦200, ₦500 and ₦1,000). According to the CBN, the new banknotes will become legal tender on 15 December 2022, while the old notes will remain in circulation until 31 January 2023 (a 90-day period from the day it was announced) after which they lose their status as legal tender.

A fundamental source of concern to the CBN is the escalation in scale and sophistication unscrupulous people have abused the naira, from hoarding to counterfeiting the notes. Emefiele said members of the public were hoarding banknotes “with statistics showing that over 85 per cent of currency in circulation are outside the vaults of our commercial banks. To be more specific, as at the end of September 2022, available data at the CBN indicated that N2.73 trillion out of the N3.23 trillion currency in circulation was outside the vault of commercial banks across the country and supposedly held by members of the public.”

According to the CBN, the rationale behind its sudden decision is as a result of the need to address several challenges currently confronting the execution of its currency management function, stating that “these challenges have continued to escalate in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country”. The challenges include:
I. The significant hoarding of banknotes by members of the public
II. The worsening shortage of clean and fit banknotes
III. The increasing ease of currency counterfeiting

Although, there s no justification to the CBN not to redesigning the currency as appropriate. The reason why it must be now is not farfetched especially now that inflation is soaring. However, the truth remains that this singular “ACT” must
cause some pains to genuine business men, investors, petty traders and rural
dwellers.

Several experts, analysts and associations have spoken up to air their views too on the effects of the policy initiative adopted by the CBN.
For instance, The Association of Bureaux Des Change Operators of Nigeria (ABCON), has said that the naira redesign policy of the CBN has fuelled the stability of the naira at the parallel market. Alhaji Aminu Gwadabe, President ABCON, stated this in an interview with the News Agency of Nigeria (NAN) on Sunday in Lagos.
According to him, “The naira redesign and the security surveillance of the financial system have stemmed the volatile demand pressure in the parallel market.The ABCON chief said that the naira had traded within a stable band of N750 to the dollar since the introduction of the policy to date.

He said that the exchange rate had remained stable in the face of the shortage of supply of the dollar in the market. He urged the CBN to continue its advocacy and stakeholder engagement to ensure a seamless transition of old notes to new ones.

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.

Nevertheless, there are ways the policy initiative will affect the economy positively. The following are the merits that stands to be gained from the redesigning of our currency:

1. There Will Be Increased Security Against Counterfeiting:
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. Nevertheless, I do believe that redesigning currencies will improve the currency and security by enabling the country to keep counterfeiting low and stay ahead of counterfeiting threats. The CBN expects that this move to redesign Nigeria’s currency would reduce counterfeiting.

2. Tackling the Issue of Hoarding:
As we are all aware of, holding cash is still very popular; in fact, it is not uncommon for traders within Nigeria to hold hundreds of millions of Naira in cash for their operations. The CBN claims that it is also redesigning the Naira, due to hoarding with statistics showing that over 80 percent of currency in circulation are outside the vaults of deposit money banks. After the CBN announced the redesign policy, naira notes
that were minted as far back as over a decade ago began to circulate. We all can acknowledge that photos of the said naira notes have since gone viral on social media.

3. Deepening of Cashless Policy:
Nigerians embracing cashless transaction would be inevitable with the pegging of cash withdrawal limit over the counter (OTC) by individual and corporate organizations per week at N100,000 and N500,000 respectively. CBN also attached process fees of 5% and 10% respectively to individual and corporate body
for cash withdrawal above such limits. Definitely, the policy would force increased minting of the eNaira and most transactions to go cashless via various electronic payment platforms thereby deepening Nigeria’s push to entrench a cashless
economy.

4. Financial inclusion Strategy:
One of the gains of the policy is to encourage financial inclusivity. By this, I mean that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions,
payments, savings, credit and insurance – delivered in a responsible and sustainable way especially those in rural areas. The benchmark on withdrawals would definitely push banking activities such as agent banking, linkage banking
and financial literacy to the rural community and the unbanked to meet their banking needs.

5. Curtailing the Act of Terrorism and Other Criminal Activities:
The CBN also believes that with the redesigning of the currency and the new cash withdrawal limit in place it would drastically reduce the act of kidnapping, terrorism and other criminal activities. This is hinged on the premises that access to huge cash would be cut off and other activities through banks could be traced to an account. The CBN noted that the policy is going to help reduce insecurity, ‘if money outside the banking vault, used to fund ransom payments and terrorism, begin to dry up.

6. Accurate Policy Predictions and Implementations:
Last but not least on the merits of the policy initiative by the CBN is that the CBN also stands a better chance for accurate policy predictions and implementations for its various monetary and fiscal policy regulations for the development of the economy when the currencies in circulation are easily accountable and assessable in the banks. There is no magic to do when a country’s over 80% cash in circulation are unaccounted for thus, the need for the policy. The policy will help control the money in circulation and in the long run have meaningful impacts on the country’s fiscal stabilization.

In any given policy there must be an inherent cost that comes with it in the form of
pain to different segments of the community. Here are the adverse effects of the
Currency redesigning on the Government, and the general public.

1. The Government
As stated above that the Central Bank of Nigeria spent the sum of N58.618 billion
to print 2.518 billion Naira notes, valued at 1. 063 trillion in, 2020. Many are of the opinion that if such a huge amount was spent in just reprinting of a few currency notes one can imagine the cost for replacing the entire 200, 500 and 1000 currency notes. The amount spent in redesigning, printing and circulating of the new notes could have been channeled to other critical needs of the economy.
Also, some of the government officials that take delight in reckless displaying and dishing out of our public fund to their girl friends and relatives in cash would definitely miss the attraction. The politicians who are the main culprits in cash and carry business have already started kicking against the policy. They are used to carrying high notes denomination which would be less in circulation soon. The cash for kick back and
the ones to bribe the electorates would be difficult to assembled too as the election
draws nearer. Therefore, to the politicians and some government officials the policy comes with an inevitable pain that should not see the light of the day.

2. The General Public
The prices of foreign currencies since the announcement of the policy as at October 26,2022 especially Dollas has been soaring in the black market as a result of rush to convert the hoarded cash to foreign currencies. Our appetite for foreign commodities that resulted in a heavy reliance on the importation of
virtually everything would negatively have a great burden to those that patronize them. Assessing forex in a high cost would eventually affect the prices of those commodities.
Massive depreciation of the naira has been on increase since the announcement of the policy by CBN. Naira’s decline in the black market
essentially widened the gap between the official rate and the parallel market rate.
The naira crashed to a historical low against one dollar and one Pound Sterling at N900 and N1000 respectively after the announcement at the black market.
High inflation would likely fall in due to the forex crisis that has been aggravated
by the naira redesign policy, resulting to high cost of goods and services in the Country.
The policy coming in this time of food crises and insecurity especially in the rural areas where payments for goods are cash dominated would trigger food shortage.
Convincing traders in those areas to accept money transfer to part with their goods would require a high level of sureties and convictions. The policy torural dwellers is a serious pain to battle with.

“We see increased downside risk to the top line and consequently earnings of listed companies, given the reduced activity in February 2023,” said Muyiwa Oni, head of equity research at Stanbic IBTC Bank.

“We see the consumer companies as the most at risk of negatively impacted earnings from the cash crunch, while we see the financials as the least affected from an earnings point of view in the near term,” Oni said in a note to investors. “Barring a sharp reversal of the cash reduction in the system, we could potentially see subdued economic activity in March 2023 as well.”
Only last week, Nigerian Breweries Plc, the local unit of Heineken BV – the world’s second largest brewer, said it had its worst February in 15 years after the central bank drained about N2.1 trillion of cash from the economy and left consumers with less cash to buy beer. Nigerian Breweries depends on cash for about 80 percent of its retail sales, according to Chief Executive Officer Hans Essaadi. The beer maker is but one of several other businesses reeling from the naira crunch in Nigeria where cash is king.

In Conclusion, I agree that the CBN’s decision to issue new banknotes will reduce counterfeits, bring in the unbanked into the system, and address inflation and money supply. However, if not properly handled, the fate of the naira and the Nigerian economy will be better imagined, especially for participants in the informal sector. There can be crisis of cash shortage, and money supply. The CBN must listen and distil the concerns of many stakeholders particularly on issues of timing, the Bank’s credibility, and an effective alternative channels for unbanked Nigerians to seamlessly transit from using the old notes to the new ones.

Daniel Unique Agbenu
2019/246710
Macro Economics assignment
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. Emefiele 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.In November 2022, CBN, Nigeria’s apex bank, informed the citizens that the new notes will be issued from 15 December 2022 onward, and that old naira notes need to be returned to the banking system before 31 January 2023 when they will cease to be legal tender and was implemented.
Following the naira redesign, the CBN had limited cash withdrawals to N500,000 per week for individuals and N5 million for corporate organisations. the vaults of the commercial banks.
This is 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 governor made us understand 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. This policy was introduced to reduce the withdrawal of physical cash.

Advantages of currency redesign

– The currency redesign policy has helped to recover 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.
– The bank had explained 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 will reduce the rate of armed robbery and other associated risks because most times these people are paid cash and with policy there will be limited access to cash

– The number of employment opportunities already created by the policies further demonstrates that rather than weaken and make poor 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
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
It will help in 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.
As experiences from other jurisdictions have shown, effective currency redesign can support regulatory reform, increased legislative reach and coordinated fiscal and structural policies.
According to the apex bank boss, the recent policy interventions would also help Nigerians to access easy loans with affordable interest rates.
Demerits of the naira redesign
– 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.
– It leads to exploitation of the masses, though for a short period of time, those who have access to cash use it for their selfish interest and benefits.
– The cashless policy resulted in citizens making use of bank but still the bank app are not effective enough, alot of instances where the there is failure transactions which is a major problem. There is limited cash and still the bank apps is not encouraging which leads to frustration of the masses.
Small scale businesses owners, those who sell perishable goods and don’t have access to bank account are affected because people don’t have cash to purchase these goods, which leads to loss to the business owners.

Money market refers to the type of market where short-term debt obligations are traded between various financial institutions. It is where banks, businesses, and other financial institutions can find short-term loans and other types of financing. instruments.Therefore, the money market consists of the money demand, which refers to the aggregate demand for money, and the money supply, which is the overall supply of money in the economy. Money market is in equilibrium when at a rate of interest demand for and supply of money are equal.
The interest rate influences the interaction between money supply and money demand in the economy and the quantity of money demanded by individuals and institutions.
The naira design leads to a situation whereby there is a decrease in the supply of money, therefore there will be disequilibrium in the money market because the demand for money will be high.

The interest rate influences the interaction between money supply and money demand in the economy and the quantity of money demanded by individuals and institutions, therefore in the long run, this new policy will promote equilibrium in the money market, when the right measures are put in place by the institution in charge.

1)MERITS OF THE CURRENCY REDESIGN STRATEGY:

a: IMPROVED AESTHETICS: The new Naira notes have more appealing designs, including pictures of important Nigerians, cultural symbols, and national landmarks. The money now has a more upscale and modern appearance, which will increase its attractiveness on a domestic and international level.
b: Enhancing Security Features like anti-counterfeiting mechanisms, which assist shield the public from fraud and other financial crimes, is a benefit of currency redesigns.
c: Improved Public Awareness: Redesigning a nation’s currency can draw attention to the cultural and historical importance of that nation. Famous people, symbols, and monuments can aid in fostering a sense of patriotism and national identity.
d: Improved Accessibility: By include elements that help people with visual or other limitations, currency redesign can improve accessibility.

DEMERITS OF THE CURRENCY REDESIGN STRATEGY:
The naira redesign policy in Nigeria, which involves the introduction of new banknotes and coins with enhanced security features, has some potential demerits, including:

i. Cost: The redesign process can be expensive, as it involves the printing and distribution of new banknotes and coins. This cost could be significant, particularly for a country like Nigeria that is already facing economic challenges.
ii. Counterfeiting: Despite the enhanced security features, there is no guarantee that the new banknotes and coins will be entirely counterfeit-proof. Counterfeiters may find ways to duplicate the new notes, undermining the credibility of the currency.
iii. Inconvenience: Introducing new banknotes and coins could be an inconvenience for citizens who are accustomed to the current currency. It may take some time for people to get used to the new denominations and sizes, and some may find it challenging to adapt.
iv. Economic impact: The redesign policy may have a significant economic impact, particularly on small businesses and low-income earners who may have difficulty exchanging their old notes for the new currency. There could also be a temporary shortage of cash, which could affect businesses and individuals’ ability to transact.
v. Environmental impact: The redesign process could have a negative impact on the environment, as it requires the disposal of the old banknotes and coins, which could contribute to waste and pollution.

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

The redesign of a currency like the Nigerian Naira can potentially impact the money market equilibrium in several ways. The money market refers to the market where short-term financial instruments such as treasury bills, commercial paper, and certificates of deposit are traded. Here are some ways that a currency redesign could impact the money market equilibrium:
A)Demand and supply changes: When a currency is redesigned, it can change the demand and supply dynamics of the money market. For example, if the new Naira design is widely accepted by the public and considered more trustworthy, demand for it may increase. This could lead to a decrease in interest rates as lenders compete to lend out more of the redesigned currency.
B)Changes in interest rates: The redesign of a currency may also cause changes in interest rates in the money market. If the redesign leads to an increase in demand for Naira, lenders may be willing to lend at lower interest rates to attract borrowers. Conversely, if the redesign is not well received, interest rates could increase to compensate lenders for the increased risk associated with the currency.
C)Changes in inflation expectations: A currency redesign may also impact inflation expectations in the money market. If the redesign is perceived as a sign of economic stability and a commitment to sound monetary policy, inflation expectations may decrease. This could lead to lower interest rates in the money market as lenders adjust their rates to match the expected lower inflation rate.

3: Will this new policy promote equilibrium in the money market?
Nigeria’s redesigned naira banknotes are intended to enhance security, enhance aesthetics, and highlight the country’s rich cultural heritage. The new design might excite some people and increase economic activity, but it is unlikely to significantly alter the equilibrium of the money market.
The money market is influenced by a wide range of factors, such as government laws, interest rates, inflation, and foreign exchange rates. The design of the currency notes may not instantly have an impact on these traits. Nonetheless, a well-designed currency may increase public trust in the financial system, which could have an impact on the money market.
Notwithstanding the possibility that the new naira redesign policy in Nigeria would have some beneficial benefits on the economy, it is unlikely to by itself encourage money market equilibrium. The money market is likely to be more significantly impacted by other economic forces and policies.

Merit and demerit of the new naira note policy on the economy.

The new naira note strategy has both benefits and drawbacks for the economy.
The Central Bank of Nigeria (CBN) announced the introduction of new 200, 500, and 1,000 naira notes to the nation’s financial system on October 26, 2022. This action was taken to solve problems with currency management, reduce the cost of producing and distributing money, improve the currency’s security characteristics, and promote the use of electronic payment systems. The benefits and drawbacks of this policy will be discussed in this write up.

Benefits of the Policy:
1. Control over money supply.
It was reported that up to 80% of the money in circulation was with the public before the introduction of the newly designed notes, which led to the rule requiring people to return their old naira notes to the bank. The CBN will now have more control over the money in circulation as a result of this.
2. Promotion of Electronic Payment Systems: The CBN has been attempting to encourage the use of electronic payments in Nigeria, and the release of notes with new designs would assist in this effort. By making it simpler and more comfortable for consumers to utilize electronic payment systems, the new notes will promote their adoption.
3. The value of the naira increased: As it would take time for the new note to circulate, money is supposed to be scarce. As a result, the value of the naira will rise due to an increase in demand.

Demerits of the Policy:
1. Decline in economic activity: As the majority of people have not yet received the new notes, those who still utilize cash for transactions may find it challenging to do so, which will collectively result in a decline in economic activity.
2. Counterfeiting: Although though it is anticipated that the new notes will have better security measures, there is still a chance of counterfeiting because many individuals have not thoroughly inspected the new notes to determine which is which. This can result in financial losses and erode trust in the currency.
3. Cost: The new notes may be expensive to produce and distribute, which may strain the CBN’s resources. The economy of the nation can suffer as a result.

Part 2
What is the nexus between Naira redesign money market equilibrium?
Money market equilibrium and the redesign of the Naira are connected in a complicated way that has the potential to have many different effects on the economy. When the supply and demand of money are balanced on the market, a steady interest rate results. This is known as the money market equilibrium. The supply of money in the economy may be impacted when the Central Bank of Nigeria (CBN) announces a redesign of the Naira, which might then influence the equilibrium of the money market.

The following ways the Naira redesign may impact the stability of the money market:
1. Increase in Money Supply: The amount of money in the economy increases as new currency notes are introduced. When there is more money available for lending as a result, interest rates in the money market may drop.
2. Modification of Money’s Velocity: The velocity of money is the rate at which money moves around the economy. People may hang onto their old notes for extended periods of time as a result of the redesign of the Naira, which would reduce the velocity of money and lower economic activity.
3. Inflation: The redesign of the Naira may result in inflation if it increases the money supply without also increasing the output of goods and services. This occurs as a result of more money competing with the same number of products and services, which raises prices.

Part 3
Will this new policy promote equilibrium in the money market?
Depending on how the policy is executed and how the market reacts, the introduction of redesigned Naira notes into the Nigerian financial system may or may not create equilibrium in the money market. The redesign of the Naira may have a variety of effects on the stability of the money market, including adjustments to the money supply, money velocity, inflation, effects on the financial markets, and currency confidence.
If the redesign of the Naira is successful in enhancing currency management, lowering the cost of currency production and distribution, enhancing the currency’s security features, and encouraging the use of electronic payment systems, it may increase demand for the Naira and support market equilibrium. The Naira’s value might rise as a result of increased demand, which would draw more foreign investment and encourage market stability.
The redesign of the Naira might cause inflation, which would upset the equilibrium of the money market, if it results in an increase in the money supply without a matching rise in the output of goods and services. As interest rates rise as a result of inflation, borrowing and spending become less attractive, which reduces both economic activity and demand for the naira.
In conclusion, how the policy is put into practice and how the market reacts will determine whether the introduction of redesigned Naira notes encourages equilibrium in the money market. The redesign process must be closely managed by the CBN to limit any negative effects on the economy and guarantee that the benefits outweigh the expenses, encouraging stability in the money market.

Question 1: Merits of The New Policy Initiative By CBN
This new policy was implemented by the Central Bank of Nigeria (CBN) to redesign the Naira, our country Nigeria’s currency. The goal of the policy is to increase Naira’s aesthetic appeal while enhancing its security aspects. Even though a lot of people complain about this policy, which I will later discuss in the demerits, it has actually brought about some advantages to us and some of them are:
i) The majority of the naira notes that politicians, criminals, and other illegal actors have stored away would be returned to the banking system, assisting the CBN in monitoring the currency in the economy, according to many who have suggested that the new measure could restore confidence in the local currency.

ii)The majority of the ragged and torn naira notes that were previously put into circulation are also anticipated to be eradicated by the new notes, and counterfeiters are anticipated to cease operations for a few years as a result.

iii) The policy’s beneficial impact on the nation’s crime rate is another way to see it. Nigeria is currently dealing with terrorists and banditry all throughout the country, and billions of naira are being paid in ransom to kidnappers. It is anticipated that the ransom money, which has not yet entered the financial system, would be brought out and swapped for the notes with the new designs. While many people who were unable to explain the sources of their money may end themselves in legal difficulty, this might also result in criminal identification and possible punishment.

iv) Also, politicians who have saved money to purchase votes in the upcoming election may find it difficult to convert their notes into the new naira, and reintroducing that money into the system would interfere with some of their plans.

v)According to statistics, more than 80% of the cash in use is not stored in commercial banks’ vaults, which encourages the movement of illegal funds throughout the economy:
The decision was influenced by widespread public hoarding of banknotes, a deteriorating scarcity of banknotes that were clean and fit for use, rising instances of counterfeiting, and a rising danger of it.
“It’s clear that the CBN intends to push all of those notes back into the financial system. After January 31, 2023, the notes will no longer be legal tender, thus holders must surrender them in order to get new ones.
“As the nation is dealing with excessive inflation, this is also a technique to take money from circulation, an unconventional strategy to restrict the money supply.”

Demerits Of The New Policy Initiative By CBN

i)Given the current state of the economy, the condition of the country’s foreign reserves given that the currency is anticipated to be printed abroad, and the implications for the central bank’s balance sheet, the enormous cost of printing the new note could amount to trillions of naira, which the economy may be least prepared for. In other words, It will take a large expenditure of resources, to print new notes and distribute them throughout the nation which could instead be employed for other economic activities.

ii) 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 get fresh naira to make essential purchases.
People will be scurrying to exchange their old cash for new notes in the banking hall, which will put strain on the institutions’ limited ability to handle currency.

iii)There will be many, lengthy lines in the banking halls due to the overcrowding. That will cause a great deal of difficulty for the populace. Due to the lack of banks in the majority of local government regions, the elderly and unbanked may not be able to manage.

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) Armed robberies may worsen as thieves target bullion vehicles that will be used to distribute the new notes in certain remote regions in an effort to reduce their losses on the old naira notes that were previously stashed away to avoid the law.As a result, With the incidence of crime in the form of banditry and terrorism increasing throughout the country, both the CBN and the banks would encounter logistical hurdles in the distribution of the new notes across the country. The large demand for the new notes would also compromise the security of the banks since criminals may utilize the transition to do their illegal business.

vi) Lastly, Even with the additional security features on the Naira notes are meant to lessen the incidence of fake notes, it might not be sufficient to totally eradicate counterfeiting. False currency might continue to circulate as counterfeiters might discover new ways to imitate the new security measures.

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

In other words, what links the money market equilibrium to the naira redesign?. There are several ways to describe how the Naira redesign, the money market, and equilibrium are related:
NAIRA REDESIGN: The redesign of the Naira currency may affect the stability of the money market by changing the demand and supply of money in the economy. For instance, if the redesign boosts Naira demand, this might increase the price level, which would then upset the equilibrium of the money market.
MONEY MARKET: In the money market, short-term funds are borrowed and loaned. It is the market where certificates of deposit, treasury bills, and other short-term financial products are exchanged. The money market is considered to be in equilibrium when there is an equal amount of supply and demand for money. Changes in the supply or demand for money can affect the equilibrium in the money market, which can then affect the interest rate.

EQUILIBRIUM: The money market is in equilibrium when the supply and demand for money are both equal. When there is an excess of money available, the interest rate will drop; conversely, when there is an excess of money requested, it will rise.

The redesign of a currency, like the Nigerian Naira, can have a variety of effects on the money market’s equilibrium. A currency redesign might have the following effects on the money market’s equilibrium:
I) CHANGES IN DEMAND AND SUPPLY: The dynamics of supply and demand in the money market might change when a currency is altered. For instance, if the new Naira design is widely accepted and regarded as more trustworthy, demand for it can increase. Interest rates may decrease when lenders work to lend out more of the updated currency.
ii) CHANGES IN INTEREST RATES: Redesigning a currency may also affect money market interest rates. If the redesign leads to a rise in demand for Naira, lenders may be prepared to lend at reduced interest rates to entice borrowers.In contrast, if the makeover is not well accepted, interest rates may rise to make up for the higher risk the currency poses to lenders.
iii) CHANGES IN INFLATION EXPECTATIONS: A currency redesign may change inflation expectations in the money market. If the redesign is taken as a sign of solid monetary policy and economic stability, inflation expectations may drop. Lower interest rates in the money market might follow if lenders adjust their rates to meet the projected drop in inflation.

In conclusion, adjustments to interest rates, inflation expectations, and supply and demand dynamics may all affect the equilibrium of the money market. The response of the general public and financial markets will determine the eventual result.
As a result, if the redesign of the Naira alters the demand or supply for money, the equilibrium in the money market may be affected. For instance, if the redesign boosts Naira demand, this might increase the price level, which would then upset the equilibrium of the money market. Also, if the redesign expands the Naira supply, this might lead to a decline in interest rates, which could affect the equilibrium of the money market.

Question 3: Will this new policy promote equilibrium in the money market?
Because it depends on a number of factors, such as how well the public will receive the new design, how stable they perceive the economy to be, and the central bank’s policy decisions, it is difficult to say with certainty whether the new Naira redesign policy will promote equilibrium in the money market.
The redesign may increase demand for the currency and promote market equilibrium if it is well received and perceived as a sign of economic stability. But, if the redesign is not well accepted, it can cause reduced demand and perhaps market instability.
The Naira redesign policy’s impact on the stability of the money market will also depend on how the central bank manages the money supply and interest rates. If the central bank correctly manages the money supply and interest rates, the money market can be kept in balance.

In conclusion, the Naira redesign plan may support financial market equilibrium if it is widely received and the central bank effectively manages the money supply and interest rates. Yet, it is challenging to predict how precisely it will effect the money market’s equilibrium because it would depend on a variety of variable factors that are subject to change.

Name:UKAEGBU NNEOMA ROSELINE
Department:ECONOMICS
Reg number:2019/245510

Since 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 as stated few month ago, But the scarcity of the new notes made the 31 January deadline unfeasible, which resulted to extension the legal tender status of the old notes till 10 February to extend the legal tender status of the old notes till 10 February.
The back and forth extension of this dates of the old notes the government in defiance to the Supreme Court’s order, Mr Buhari on 16 February, restored the validity of the old N200 notes, insisted that the N500 and N1000 notes had ceased to be legal tender and the money redesign stituation goes back and for with the federal government and CBN addressing the issues of monetary policy and their effects.
Some of the gains /merit of the new redesign policy according to Emefiele, the central bank’s principal objective for the currency redesign initiative was to make our monetary policy decisions more efficacious, secondly the policy aim to increase financial inclusion in the country by reducing the number of the unbanked population, Thirdly, is to support the efforts of our security agencies in combating banditry and ransom-taking in Nigeria. The CBN support this fact with 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.
However ,we look at some of the disadvantage/ demerit, 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. Secondly, 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, thirdly we will not deny that the banking hall were 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 not to mention armed robbery who 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.
In additional there is the issues of logistics challenge 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.
THE NEXUS BETWEEN THE NEW CASHLESS AND MONETARY DESIGN POLICY
Over years, Nigeria has experienced the introduction and redesigning of her currencies in circulations with the CBN playing pivoted roles in protecting its stability (Naseem, ‘2012). This sector’s operations and performance have a direct impact on achieving macroeconomics goals
While also improving the economy, recently the Central Bank of Nigeria (CBN 2022) 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 .This policy has elicited serious debate amongst Economists, Lawyers, and other policy experts.
Many of them hold the view that this policy changes holds no significant economic benefits for the people, and is a distraction in the midst of serious ravaging economic issues, 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.

Name: Udeh Mgbechi Mary
Reg. No.: 2019/251473
Department: Economics

(1) Introduction of redesigned currency notes by the Central Bank of Nigeria (CBN) is a policy initiative aimed at improving the security features of the country’s currency, enhancing its durability and curb counterfeiting. However, the challenges in accessing the new currency notes have sparked debates on the merits and demerits of this policy. In this response, we will examine the potential advantages and disadvantages of the introduction of the new currency notes by the CBN.

Merits:

1. Enhanced security features: The new notes come with enhanced security features such as the Optically Variable Ink (OVI), window micro-optics, tactile marks, and other security features that make it difficult for counterfeiters to replicate. This will help to boost confidence in the country’s financial system and improve the integrity of its currency.

2. Improved durability: The new notes are expected to have a longer lifespan than the old ones, reducing the cost of printing new notes and minimizing the impact of inflation on the economy.

3. Economic benefits: The introduction of the new notes can potentially stimulate economic growth and development by promoting increased cash transactions, reducing the cost of doing business, and making it easier to carry out larger transactions.

4. International recognition: The new notes are designed with features that meet international standards and are easily recognizable, which could potentially improve the country’s reputation and recognition in the international community.

5. Employment opportunities: 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.

6. Easy Loans: Loans will become easier and interest rates may come down. As banks will have more money, more loans will be given out which will increase the money supply in the market and create inflation.

7. Cashless policy: The cashless policy has led to a reduction in banditry and kidnappings, which were rampant in the recent past. The policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance.
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. The macroeconomic impacts of currency redesign are multidimensional and could seem uncertain especially at this early stage when its inconvenience is widespread.

Demerits:

1. Accessibility challenges: Since the introduction of the new notes, Nigerians have been struggling to access them from banks and ATM cash points. This has resulted in long queues at some bank ATMs and banking halls, frustration, and inconvenience for many people. This has also resulted in some banks rationing the new notes to customers.

2. Cost implications: The introduction of the new notes involves significant costs, including the cost of designing and printing the notes, training staff, and updating machines to accept and dispense the new notes. This cost is borne by the government, which may not have enough resources to fund such projects at all times.

3. Potentially low adoption: The introduction of new notes may not necessarily guarantee widespread adoption. The high rate of poverty in the country may limit the use of higher denomination notes, making the new notes largely irrelevant.

4. Counterfeiting challenges: While the new notes are designed to be more secure, there is always the risk of counterfeiting. This could potentially undermine the confidence of the public in the country’s financial system.

5. Hoarding: Some members of the public are hoarding the new notes thereby restricting their flow through the economy, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.

6. Damage of Bank Branches and Assault of Bank Personnel: At some branches, customers have become aggressive, verbally and physically abusing bank staff. They have also destroyed bank property, premises, and assets.

7. Incidences of Economic Opportunism: Some Nigerians are now capitalising on the transition to charge excess fees or demand cash payment on the false pretext that POS doesn’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.

However, with adequate measures put in place to address these challenges, the potential benefits of the introduction of the new currency notes could be fully realized.

(2) The Nigerian Naira is the official currency of Nigeria, and it plays a vital role in the country’s economy. The Central Bank of Nigeria (CBN) is responsible for regulating the supply of money and credit in the economy, and one of its functions is the redesign of the Naira. The redesign of the Naira can have a significant impact on the money market equilibrium, which is the balance between the demand for and supply of money in the economy.

When the CBN redesigns the Naira, it can affect the demand and supply of money in the economy, which can impact the money market equilibrium. The demand for money refers to the amount of money that people want to hold for transactions, and the supply of money refers to the amount of money that is available in the economy. When the demand for money exceeds the supply, there is a shortage of money, and the interest rates rise. On the other hand, when the supply of money exceeds the demand, there is a surplus of money, and the interest rates fall.

The redesign of the Naira can affect the demand for money in several ways. For example, if the CBN introduces new Naira notes with better security features, people may demand more Naira notes to replace their old and worn-out notes. This increased demand for Naira notes can lead to a shortage of money, causing interest rates to rise. On the other hand, if the CBN introduces new Naira notes with a lower denomination, it can increase the demand for money, leading to a shortage of money and higher interest rates.

Similarly, the redesign of the Naira can also affect the supply of money. For instance, if the CBN introduces new Naira notes with a higher denomination, it can increase the money supply, leading to a surplus of money and lower interest rates. Conversely, if the CBN reduces the denomination of the Naira notes, it can decrease the money supply, leading to a shortage of money and higher interest rates.

In conclusion, the redesign of the Naira can have a significant impact on the money market equilibrium in Nigeria. It can affect the demand for and supply of money, which can impact the interest rates and the overall economic growth of the country. The CBN must carefully consider the impact of any Naira redesign on the money market equilibrium and take appropriate measures to ensure a stable economy.

(3) The introduction of the new currency notes by the CBN may not necessarily promote equilibrium in the money market on its own, as it is just one of many policy tools that can be used to influence the money market. However, the new currency notes could potentially have some positive impacts on the money market.

For example, if the new notes are widely adopted and lead to an increase in cash transactions, this could potentially lead to a reduction in transaction costs, making it easier for businesses and individuals to carry out transactions. This could increase economic activity and potentially promote equilibrium in the money market.

Additionally, the increased security features of the new notes could potentially reduce counterfeiting, which could help to improve the integrity of the financial system and promote confidence in the currency. This could potentially lead to increased demand for the currency, which could also promote equilibrium in the money market.

However, it is important to note that the impact of the new currency notes on the money market will depend on various factors such as the level of adoption, the effectiveness of other policy tools, and the overall state of the economy. Therefore, while the new policy initiative may have some positive impacts on the money market, it is not a guarantee that it will promote equilibrium on its own.

Other factors that could potentially influence the impact of the new currency notes on the money market include the level of inflation, interest rates, and the overall level of economic activity. For example, if inflation is high, the introduction of the new currency notes may not necessarily lead to equilibrium in the money market, as the high inflation rate could offset any potential benefits of the new notes.

Similarly, if interest rates are high, businesses and individuals may be less likely to hold cash and may instead opt for investments or other financial instruments, which could limit the impact of the new currency notes on the money market.

Therefore, while the introduction of the new currency notes by the CBN could potentially have some positive impacts on the money market, it is important to consider the broader economic context in which the policy is being implemented. To achieve equilibrium in the money market, a combination of policies and measures may be necessary, including fiscal and monetary policies, as well as structural reforms aimed at promoting economic growth and development.

In summary, while the new policy initiative adopted by the CBN may have some positive impacts on the money market, it is not a panacea for achieving equilibrium in the money market. The success of the policy will depend on various factors, including the level of adoption, the broader economic context, and the effectiveness of other policy tools.

Name:Omeje Sharon Amarachi
Reg No: 2019/244241
Level: 300L
Dept: Combined Social science
( Economics/Political science)

DEMERITS OF CBN POLICY
1 INFLATION
During the implementation of the CBN policy a deadline was set for the usability of old currency. Due to the deadline, there was increased pressure in the demand for money (New notes). However there was no corresponding increase in the supply of money (New notes) because as at 27th January 2023 which was four days to the stipulated deadline of 31st January 2023, banks were still disbursing old currency. Increase in the demand for money without a corresponding increase in supply of money leads to scarcity of money. This scarcity thus increased the price of money, goods and services thus Inflation.
2 . POOR ECONOMIC GROWTH
One of the reasons why people hold money is for transactional purposes or motives. The transactions motive relates to the demand for money or the need for cash for the current transactions of individual and business exchanges. Individuals hold cash in order “to bridge the interval between the receipt of income and its expenditure.” In other words cash at hand is needed to carry out transactions. Unfortunately there’s little money in circulation thus no effective transactions. The inadequacy of online banking and digital payment platforms had further stifled transactions, making it difficult for trade to take place. An economy without effective trade could face Poor or no economic growth.
3 DISPROPORTIONATE HURT TO THOSE WITH LOWER INCOME
As aforementioned the CBN policy led to Inflation and during inflation the purchasing power of money reduces. Thus, Lower-income consumers tend to spend a higher proportion of their income overall and on necessities than those with higher incomes. Some low income earners cannot afford the extra charges attached to the prices of goods and services. It is no longer news that POS charges skyrocketed in some cities in Nigeria. Thus, Lower- income earners who could not afford the charges including those without bank account slept at banks in a bid to exchange their old currency for the new Naira notes.

MERITS OF CBN POLICY

1 REDUCTION OF VOTE BUYING: Because of the little money in circulation, vote buying has significantly reduced in the country.
2. RELEASE OF CASH: Before the policy, cash was hoarded by people. However this policy has made these hoarders to release the money thus revealing people who are money launderers, embezzlers etc

Money market equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of money supplied. Thus this policy will not promote equilibrium in the morning market as the demand for money is greater than the supply of money causing market shortage or disequilibrium.

NAME:ALOZIE UCHE DANIEL
REG NO:2019/245679
COURSE CODE:ECO 303
Assignment on the naira redesign.
1.
The merits of the naira redesign policy.
The naira redesign policy,would benefit financial institutions,which include banks.
This would benefit them due to the fact that as more people deposit their old notes into the bank and also withdraw new notes for use interest rates from the banks will aid in more profits to these commercial banks.

Demerits of the redesign policy.
The said Old naira currencies that would be replaced with new notes are scarce in circulation, in this case the supply of money in the Nigerian economy has not marched the demand of such.
This in turn caused further inflation as firms and businesses would seek to earn more profit,this would be an effect of cost-push inflation,where the inflation in the economy is as a result of an increase in the cost of acquiring capital inputs for production, Once the cost for such increases the producers would increase prices of their products to make up for the cost of producing them.
This is due to the rise in interest rate when acquiring the new naira notes,by firms and individuals.

2.
Money market is in equilibrium when at a rate of interest demand for and supply of money are equal.

It is worth noting that in the money market people increase or decrease the money they hold by selling short-term bonds that carry a fixed rate of interest. These bonds may be of corporate companies, generally called corporate bonds or debentures or may be securities of government, which are called treasury bills.
The new policy of the naira redesign would not cause an equilibrium in the money market due to the lacking balance in the demand for and the supply of money. The equilibrium in the money market usually changes because there is a shift in demand or supply of money in the economy,the naira redesign in this case made an increase in the demand of money but not a corresponding increase in the supply.the

Adigwe Chibuikem Anthony
2019/245463

1.
Merits

To make monetary policy decisions more effective
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.

Limit the use of cash for illicit activities: The bank had explained 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.

To strengthen the performance of key macroeconomic parameters and equally combat social improprieties

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.

Speaking on the long-term benefits of the cashless policy, it is said that the policy improves the sophistication of tax collection and would no doubt reduce tax evasion and tax avoidance.

Demerits

The impact on small businesses: Small businesses, especially in rural areas, may face difficulties disposing of old notes and obtaining new ones, not to mention dealing with long lines at banks. The elderly and unbanked business owners may have a tough time adapting to the new system. And let’s not forget about the risk of counterfeits as people get used to the new notes.

High cost of printing: 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.

Increased cases of theft: 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.

2.As cashless policy, Naira redesign turn potent monetary policy tool. The theory of liquidity preference states that the interest rate is one determinate of how much money people choose to hold, i.e interest rate adjust to equilibrate the money market.
How does this interest rate gets 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, alters the interest rate. For instance, if the interest rate is above equilibrium level, the quantity of real money balances supplied exceeds the quantity demanded. Individuals holding the excess demand of money try to convert some of their non interest bearing money into interest bearing bank deposits or bonds. Bank and bond issuers will prefer to pay low interest rate, respond to the excess supply of money by lowering the interest rate they offer. If the interest rate is below equilibrium level, so that the quantity of money demanded exceed the quantity supplied individuals try to obtain money by selling bonds or obtaining bank withdrawals. To attract scarce funds, banks and bond issuers respond by increasing the interest rate they offer. Eventually, the interest rate reaches the equilibrium level at which people are content with their portfolio of monetary and now monetary assets.
Now that we know how interest rate is determined, let’s look at the connection between the naira redesign policy ( which has brought about low supply of money) and Money market equilibrium ( which depends on interest rate). Suppose for instance the federal government through the CBN suddenly decreases the supply of money, interest rate rises and the higher interest rate makes people satisfied to hold the smaller quantity of real money balance and vise versa. Therefore, since the naira redesign policy is to decrease money supply in economy. Then just as theory states that a decrease in the supply of money increase interest rate, so that people will not be bothered because they get more money and so they are satisfied and when there is satisfaction then the market is at equilibrium.
Therefore, the naira redesign policy will promote equilibrium in the money following what the theory of stated.
Though in Nigeria the Hope of this policy bringing about equilibrium in the money market is low due to the fact that the necessary plans were not made before embarking on the naira redesign policy.

Name: Onyia Ugochukwu Sullivan
Reg Number: 2019/249490
Department: Economics

Question 1: Discuss and analyse the merits and demerits of this policy initiative adopted by the CBN.

Advantages of the Redesign Policy:

Reduced Money Circulation Outside the Banking System: One of the primary benefits of the redesign policy is that it seeks to reduce the amount of money in circulation outside the banking system. The CBN hopes that issuing new notes will encourage people to deposit their old ones in the banking system, making it easier for the government to track money movements and reduce corruption.

Increased Supply of Clean Notes: The redesign policy will also increase the supply of clean notes in circulation. This will aid in the reduction of germs and bacteria spread through the exchange of dirty notes while promoting good hygiene practices.

Limit Naira Counterfeiting: The new notes have advanced security features that make it difficult for counterfeiters to produce fake notes. This will help to reduce counterfeiting and protect the currency’s integrity in Nigeria.

Deeper Cashless Policy: The currency redesign is also expected to deepen Nigeria’s cashless policy. The policy aims to improve payment system efficiency and reduce the costs associated with cash handling by making it easier for people to use electronic payments and decreasing their reliance on cash.

Disadvantages of the Redesign Policy:

Cost: The cost of printing and distributing the new notes could be significant, making it unprofitable for the CBN. For example, if the cost of producing the new notes exceeds their face value, the economy may suffer a net loss.

The redesign policy may have a limited impact on reducing corruption because it only addresses cash circulation outside the banking system. Corruption may still exist within the banking system, and the policy may be ineffective at reducing illicit financial flows.

Public Inconvenience: One of the significant disadvantages of the redesign policy is the inconvenience it causes the public. When new notes are introduced, people must exchange their old notes for new ones, which can be time-consuming and frustrating.
The deadline for depositing old notes of the same denomination, combined with the inability to withdraw new notes, resulted in a shortage of physical cash in circulation in Nigeria. As a result, the use of electronic payment systems such as mobile money, internet banking, and point-of-sale (POS) terminals has increased significantly.

While the increased use of electronic payment systems is generally regarded as a positive development because it promotes financial inclusion, the abrupt shift in payment mode had its drawbacks.

One of the difficulties was a need for more infrastructure to support electronic payments. There are still many people in Nigeria who do not have bank accounts, and the infrastructure for electronic payments is still being built. As a result, the abrupt shift to electronic payments strained the existing infrastructure, resulting in network outages and lengthy transaction times. This caused users of electronic payment systems to be inconvenienced and frustrated.

Another issue was the high cost of electronic transactions. Electronic payment systems typically charge transaction fees, which can be substantial for low-value transactions. This may be a barrier for those who are unfamiliar with electronic payments or do not have much disposable income.

Furthermore, the scarcity of physical cash harmed small businesses that rely heavily on cash transactions. The shortage of physical cash particularly hard hit small businesses because they frequently lack the infrastructure to support electronic payments, and their customers prefer cash transactions.

Overall, while introducing the new notes had potential benefits, such as improved security features and the facilitation of more significant transactions, the short-term scarcity of physical cash caused by the inability to withdraw the new notes and the deadline for depositing old notes caused some economic disruptions. The shift to electronic payments was a positive development, but it also highlighted the need for improved infrastructure to support electronic payments and the importance of including small businesses’ needs in policy decisions.

Question 2: what is the nexus between the Naira redesign money market equilibrium? Will this new policy promote equilibrium in the money market? Discuss this comprehensively.

Answer:
A money market equilibrium is a situation in which the demand for money equals the supply of money. In other words, it is a condition in which the amount of money demanded by economic agents such as households, businesses, and the government equals the amount of money supplied by the central bank. The interest rate is the cost of borrowing money and is stable and does not fluctuate significantly in this state.

However, the impact of the Naira redesign on money market equilibrium is complex and depends on other factors, such as the central bank’s monetary policy, fiscal policy, and the overall state of the economy. For example, if the central bank expands the money supply to meet the increased demand caused by the redesign, the equilibrium interest rate may remain stable. However, if the central bank does not adjust the money supply, increased demand may result in inflationary pressures and interest rates.

Finally, the redesign of the Naira can have an indirect effect on the money market equilibrium by changing the demand for money. However, the impact depends on various factors, and thus the policy’s success in promoting money market equilibrium will be determined by how well the monetary authorities manage the money supply and other economic policies.

NAME: OSAYANDE PROSPER OSARUMWENSE
REG NO 2019/247547
ECO MAJOR
osayandeprosper5@gmail.com
Merits:

1. Enhanced security: The redesigned notes are expected to have improved security features that make them difficult to counterfeit, thereby reducing the incidence of fraudulent activities and promoting the integrity of the country’s currency.

2. Promote cashless transactions: Introduction of higher denomination notes can help to reduce the amount of cash transactions, thereby promoting a cashless economy, which is beneficial in reducing the cost of managing cash and the risks involved.

3. Boost confidence in the currency: The introduction of new notes can create a sense of optimism and trust in the country’s financial system and currency, which can improve foreign investors’ interest and encourage domestic savings.

4. Improved efficiency in banking operations: The introduction of higher denomination notes can help to reduce the number of note counts and processing time at banks, thereby reducing their operating cost and improving efficiency in banking operations.

Demerits:

1. Increased inflation: The introduction of higher denomination notes can lead to inflation, as people may be tempted to spend more due to the availability of more cash in the economy, which can increase demand and eventually drive up prices.

2. Encourage cash hoarding: The availability of higher denomination notes can encourage cash hoarding, which can limit the amount of cash in circulation and reduce its velocity, thereby slowing down economic activities.

3. Accessibility issues: The challenge of accessing the new notes from banks and ATMs can cause inconvenience to the public, especially those in remote and rural areas who may have limited access to banking facilities.

4. Costs of printing: The cost of printing and distributing the new notes can be high, which can be a burden on the country’s financial resources, especially when they are needed for other developmental projects.

In conclusion, while the introduction of higher denomination notes can have some benefits, the CBN needs to address the accessibility issues and potential negative effects to prevent the implementation of this policy initiative from outweighing its positive attributes.

2.
The introduction of redesigned 200, 500, and 1,000 naira notes into the Nigerian financial system by the CBN has the potential to impact the equilibrium in the money market. Money market equilibrium occurs when the demand for money equals the supply of money, and interest rates remain relatively stable.

The redesigned notes will increase the supply of money in the economy, which may lead to a decrease in interest rates. This decrease in interest rates can stimulate investment and overall economic growth. If the introduction of these notes increases the supply of money without a corresponding increase in demand for money, it may result in inflation, which can disrupt the equilibrium in the money market.

The accessibility challenges faced by Nigerians to access the new notes from banks and ATMs are also likely to affect the equilibrium in the money market. This is because if the public cannot access the new notes, it may limit their demand, causing the supply of money to increase without an increase in demand, which can push up inflation.

Additionally, the costs associated with printing and distributing the new notes can also put pressure on the money market equilibrium, especially if the funds used for these activities could have been used for other developmental projects.

In conclusion, while the introduction of redesigned 200, 500, and 1,000 naira notes has the potential to stimulate economic growth, it is important to address the accessibility and distribution challenges to avoid disrupting the equilibrium in the money market. The CBN’s policies on the supply and demand of money must be carefully managed to ensure that inflation is controlled, and interest rates remain stable to promote investment and overall economic growth.

NAME: OMEJE JACINTA UKAMAKA
REG NO:2017/250122
DEPARTMENT: ECONOMICS

With the introduction of the Naira Redesign policy by the Nigerian central bank on October 26,2022. The benefits and drawbacks of the Nigerian central bank’s initiative will be discussed. The paragraphs that follow discuss a few of the initiative’s advantages.
The majority of the naira notes that politicians, criminals, and other illegal actors have stashed away would be returned to the banking system, aiding the CBN in keeping track of the currency in the economy, according to many who have suggested that the new measure could restore confidence in the local currency.
The new notes are expected to eliminate the majority of the worn-out naira notes that were previously circulated, which will likely cause counterfeiters to stop their activities for a few years.
Another way to look at it is how the programme will help lower the country’s crime rate. Currently, billions of naira are being paid as ransom to kidnappers, and Nigeria is coping with terrorism and banditry throughout the nation.
By encouraging more people to open bank accounts, which will improve people’s saving habits, this project will increase account use and ownership. Some previously unofficial business owners might be motivated to standardise their transactional processes and use more official methods of payment as a result.
Also, the short-term decline in cash holding and the rising formalisation of commercial activity would both enhance fiscal policy as more economic agents were forced by the cashless policy to open bank accounts. When more transactions occur through e-channels and bank accounts, more agents are drawn into the tax net of the government. This increases the possibility of larger tax revenues for all levels of government by extending the list of activities that are taxed.
Usually, anything that has a benefit also has a drawback. After briefly discussing the benefits of the programme, let’s concentrate on the strategy’s drawbacks. The following are a few of the drawbacks that the policy covers:
The CBN and the banks would have logistical difficulties while distributing the new notes around the country due to the rise in terrorism and banditry nationwide. Since criminals might use the change to carry out their nefarious activities, the high demand for the new notes would also put bank security in danger.
In some regions of the country, there is a possibility that counterfeiters will use the distribution delay to spread their own notes, a possibility that might not be sufficiently deterred by attention surrounding the new notes.
If there is a shortage of naira notes available for transactions, the cost of food and other goods will rise, and many people may go hungry since they won’t be able to purchase new naira to buy basic goods.
People will be in a rush to exchange their old notes for new ones in the banking hall, which will
pu strain on the institutions’ limited ability to handle currency.
In certain rural regions, bullion vans that would be used to transport the new notes could become targets of armed robberies as thieves try to make off with the old naira notes that had been stashed away to avoid the law.
(2) The money market equilibrium is created by the balance between the supply and demand for money. The Naira Redesign policy, which is set by the central bank, is in this case the exogenous (fixed) policy variable. The desire for money is endogenous since it depends on the interest rate, which is variable. The CBN controls the money supply through the Naira Redesign Policy, which establishes a connection between the policy and the equilibrium of the money market. This highlights how the CBN will be used by the Naira Redesign effort to bring back currency that had been out of circulation. Less cash will be kept on hand as a result, which will increase the need for cash and drive up interest rates.
Will the Naira Redesign Policy cause the money market to stabilise? It’s a crucial question. Of course, as will be explained further below:
The main objective of the naira redesign strategy is to recover the majority of the currency that is now in circulation as well as the amounts that have been removed from it, hence lowering the amount of money in the economy. Loan rates will increase as a result of the increased demand for credit. According to the theory of liquidity preferences, interest rates will increase as money in circulation does. This theory aims to clarify why the money market is at equilibrium. If this holds, the money market will eventually attain equilibrium.

Merits and demerits of this policy adopted by can
Name : ilonze chimeremma perpetua

Registration Number:2018:242311

Department: Economics major

Course code :Eco 361

Advantages
1.it is expected to reduce the amount of cash in underground or illicit economy,truncate the activities of racketeers and obligate the rate seeking business in the black market
2.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
3. Assisting 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 would be tracked

Disadvantages

1. The government is struggling with a huge debt deficit and would likely borrow massively to fund the currency redesigning which the experts argued would deepen inflationary pressure on Nigeria currency
2. It brought about high inflation recently compounded by external food and fuel price shocks and phasing out existing naira notes over a short period of time
3. Demonetization can generate significant short term cost 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 transactions

Nexus between naira redesign money market equilibrium
1. Introducing the naira redesign which brought about decreased gross domestic product (GDP) of a country which brings about disequilibrium in the money market cause the money market is not stablized as the old naira notes was not in use and the new naira notes was not properly distributed at a time
Question 3
Will the new policy promote equilibrium in the money market ?
Answer
The policy change holds no significant economic benefits for the people and is a distraction in the midst of serious economic crises buffeting . It won’t promote equilibrium cause it actually increase inflation as those with loads of naira unlawfully acquired could launder them through luxury purchases,or forex transactions that would inflate the economy.
Thank you

OKHUEIGBE CHARITY OMONYE
2019/244711
ECONOMICS
Advantages and disadvantages of the new Naira note policy
Advantages
less circulation of money in the economy
It encouraged savings: a rise in aggregate savings would yield larger investments associated with higher GDP growth.
and less spending
Reduced interest rate which encourages loan for investments because theirs more money in the bank to give out.
Reduced money hoarding, inflation and counterfeiting as indicated by the Central Bank of Nigeria.
According to the central bank governor, the main objectives of the new Naira redesign is to promote cashless policy were to make monetary policy decisions more effective, deepen financial inclusion in the country to curb terror financing and banditry, and discourage voter buying by politicians (especially during the coming elections) and money laundering, among others.

Disadvantages
The new Naira resign policy though in a good way it is beneficial but it disadvantages has affected a lot of Nigerians in different ways
No cash available for daily transactions
Reduction of sales in the market
Reduced consumption by consumers which led to damaging of especially perishable goods in the market
Reduced purchasing power:because I can’t pay cash for what I need I reduce my purchases because I’m unable to pay for them
Purchase of cash
it caused the bank apps not to work too(very frustrating)
It is feared that rural dwellers who live far from where the banking services are available would experience hardship dumping the old notes as well as initially obtaining the new ones.
it is observed that bank officials don’t give this money freely and hoard it and sell it to those whose pay to get it.
POS agents buy money from the bank and sell to the public at an estimated charges of 400% per note from the formal charges.

2. Irrespective of the interest rate, it is the government that controls the supply of money.
Irrespective of the interest rate the quantity supply will still remain the decision of the federal government.
one of the initiative of the policy is to ensure that their is little as possible circulation of money in the economy.that is the agenda of the policy is to increase the store of money in the bank, to have a better control of the quantity of money available in the economy.
Since the above their is reduction in the circulation of the money in the Economy which is caused by a deliberate deduction by the central bank of Nigeria. These changes are made possible through
1. Ensuring that the minimal withdrawal for per customer a day is #20,000 and per week #100,000(An obvious reduction of money in circulation)
2. Every since the central Bank of Nigeria enacted the policy there have been over 85% money in the bank and their is contraction in the supply of money;meaning there will be a backward shift of the supply curve admits this the demand for money has well increased out of different reasons such as out of speculation
People knew at the initial that the money will be scarce and tried to hoard it before it does.
2ii. The policy would as regards liquidity management, check counterfeiting, and moderate lots of currency in circulation.this policy would bring many people into banking services and regulate financial flow across the country.
A research conducted by SBM intelligence Nigeria, a notable research outfit, noted that it is typical for monetary authorities to redesign currency notes to make them difficult to counterfeit.it however appeared to have greatly reduced the money in circulation to curb inflation.According to research,more and more transactions are being consummated through transfers especially at the business-to-business level.however at the business to consumer level, the economy is still largely cash-based.
The policy is seen as a means of bringing currency from outside the banking system into the banking system, thereby making monetary policy more effective in combating inflation .
The report regarded the apex bank’s chosen method of approach as still curious for one major reason.“Overall money supply in Nigeria’s economy stands at ₦45 trillion, of which only seven per cent (₦3.2 trillion) is in cash. In other words, Nigerians are increasingly shunning cash for electronic settlements – the value of instant payment electronic transactions was ₦32.84 trillion in September 2022 alone, according to the Nigerian Interbank Settlement System (NIBSS). Year-to-date, the value of electronic transmissions stands at ₦271.5 trillion. The value of point-of-sale (POS) transactions for the first nine months of 2022 (₦6.05 trillion) has almost outpaced the total value for all of 2021 (₦6.4 trillion),” it stated

1: Introducing the new series will help check counterfeiting
1:1It is also expected to strengthen the economy, reduce the expenditure in cash management, promote financial inclusion and enhance the CBN’s visibility of the money supply
2: DEMERITS
* Chiefly , it is expected to reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers and obliterate rent seeking
business in the black market

3:The money market refers to the type of market where short-term debt obligations are traded. On the other hand Equilibrium in the money market occurs when the money demand equals the money supply. At that point, the equilibrium interest rate is formed. Either the money supply curve or the money demand curve should move for the equilibrium interest rate to change. Instead of a shift in the curves, a change in the interest rate out of equilibrium results from movement along the curves. The equilibrium rate in an economy is determined by the money market. While The economy is anticipated to improve as a result of the new naira makeover. The goal of the policy is to give the Nigerian Central Bank control over the amount of money in circulation. The central bank of Nigeria spearheaded the redesign of the Naira and the cashless policy in an effort to reduce or prevent the circulation of cash while maintaining monetary policy.

4: The new policy can actually promote equilibrium in the money market. The reason being that When the money demand curve shifts to the right, the interest rate increases. On the other hand, when the money demand shifts to the left, the interest rate in an economy decreases. But the quantity of money supplied doesn’t change. The reason for that is that the quantity of money supplied can change only when there is a change as determined by the Federal Reserve. For the equilibrium to hold, the money demand has to equal the money supply. So, Whenever there is a change in government legislation that impacts the preference of individuals for cash, it will cause the demand curve to shift to the left or the right. Chiefly, the policy 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.

Name:Ugwuala Faith Oluchi
Reg:2019/251298
Dept:Economics
Course:Economics 303
1:Advantages Of Naira Redesign Policy
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.
a.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.
b.currency redesign policies (sometimes called demonetization policies) are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties.
C.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.
d.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.
e.According to the apex bank boss, the recent policy interventions would also help Nigerians to access easy loans with affordable interest rates.
Disadvantages Of Naira Redesign Policy
a.High cost of cash: There is a high cost of cash that comes with volume cash handling from the CBN to commercial banks and Nigerians too.
b.High risk of using cash: Volume cash handling encourages robberies, theft and other cash-related crimes. It also can lead to loss in the case of fire and flooding incidents.
C.Inefficiency & Corruption: Volume cash handling as well as high cash usage enables corruption, embezzlement, money laundering and other cash-related fraudulent activities. poorest households.
2. The nexus between naira redesign and money market equilibrium?
Money market is in equilibrium at a rate of interest the demand for money policy and supply of money are equal. The naira redesign policy in Nigeria has recorded a hard time experienced by Nigerians in different part of the country in accessing their money in banks and ATM machines. This frustration can be seen mostly in the business sector,the cash dependent informal economy. Findings have shown that while the poor circulation of new notes stifle activities, POS operators have also have a hard time setting both old and new notes from the bank which has resulted in exploitation of means as they dispense new notes at skyrocketing prices, bringing about a naira to naira economy where Nigerians have to buy the new currency exorbitant prices. Despite the recurrent extension of the deadline by CBN ,the informal sector have had to scramble for new notes while others have lamented over their inability to withdraw their hard earned money from their bank accounts.
There have also been recordings of hording by bank agent who have connived with policies that stacked old notes and wish to re- exchange them for the new currency and due to the limited new naira currency, the citizens are left to bear the burden. This has also led to the informal sector using mobile banking as a means of transaction, this has also brought about bank apps increase their transaction fee by over 50 percent.
With the frustration experienced by Nigerians over their hard earned money, it is safe to say that the have redesign money market is not at equilibrium.
3: In as much as currency redesign is good for an economy, in the sense that it can help control money supply in an economy, in the case of Nigeria,with the recordings so far,and the lacklusteredness in backing up the policy with effectiveness and control the new naira policy cannot promote equilibrium in the money market as the demand for naira and supply of naira is not in equilibrium.

The major purpose of the currency redesign is to ensure the removal of the old currency note with the hope of ease in tracking the amount of money in circulation as well as accuracy in the indicators of various monetary aggregate. Even with the supposed good intentions behind the policy, a lot of controversy have surrounded this new policy. There are no unanimities on how advantageous the policy is.
ADVANTAGES
1. Reduce the impotency of monetary policy. The new naira notes will increase the ability of the central bank to improve national economic condition through effective monetary policy as various components of the money supply can be easily tracked ensuring that the right policy can be made in response to the nation’s economic condition.
2. Reduce inflation: in recent years, the rate of inflation have been volatile to say the least . This was worsen by the global coronavirus pandemic, policy failure and the crash of the stock market in 2009. If the rate of money supply and demand can be tracked , this will reduce policy mismatch and ease the fight against inflation.
3. Reduce corruption: the rate of corruption in Nigeria has been bad in Nigeria for a long time. This even led to the nation being tagged the most corrupt nation in the world. The currency redesign will reduce the rate of corruption as it will reduce the amount of currency available to be used as an instrument of bribery, corruption and so on. This is so as the new redesigned currency can be easily tracked.
4. Increase financial inclusion and formalization of the financial system: An analysis of the advantages of the currency redesigned is incomplete without an emphasis on the policy that was made along with it; The revised cash withdrawal policy. These policy were efforts to initiate a cashless policy system and increase the amount of people that gains from improvement in the financial system
DISADVANTAGES
1. Lack of access to the financial system: Even with the good intentions of the policy, it doesn’t change the fact that most member of the population do not have access to the financial system especially in the rural area. This policy in fact just tries to solve a problem by increasing the inconveniences that comes with having the problem without providing any viable solution. The reason for the inaccessibility of these services is usually due to systemic and infrastructural factors beyond the control of the populace as these (rural areas) are seen as unprofitable because of the low income of the populace.
2. Cash Crunch: The scarcity of the new currency increases the “shoe leather cost” associated with withdrawal of fund from the banking system as the queue in the bank have been noticeably longer as the banks do not have enough money to meet the demand for currency by the general populace.
3. Artificial scarcity:Despite admitting to the supply constraints, Mr Emefiele also lamented the activities of saboteurs in the banking industry, who, he said, are hoarding the new notes. At least two unnamed bank branches have been busted for hoarding new notes while customers endured long queues and were unable to withdraw their money.
4. Poor Financial system: Another reason for the low rate of financial inclusion in Nigeria is the low level of financial development in the nation. The banking system are unable to attend to the growing needs of the customers that came with the cash redesign policy. The problem is exacerbated by the country’s apparently fragile electronic transactions infrastructure, which has seen a spike in failed transactions as more people resort to e-banking amid cash shortage.
Secondly, 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 new naira redesign has increased the demand for money with a very low supply flow of money and this will lead to a change in the equilibrium interest rate.
Yes it will.

UGWU KAOSISOCHUKWU IMMACULETA
2019/241226
ECONOMICS DEPARTMENT

INTRODUCTION
On 26th October 2022, the Central Bank of Nigeria (CBN) governor, Mr Godwin Emefiele announced introduction of the redesigned 200, 500, and 1000 naira notes into the country’s financial system. The new naira banknotes were launched by the CBN governor with the approval of president Muhammadu Buhari on 23rd November, 2022 with the deadline for depositing all old 200, 500, and 1000 notes stipulated to be no longer in circulation by 31st January 2023, though this deadline was still adjusted later on. The global standard period for redesigning a country’s currency is within 5-8 years as should be the case in Nigeria meaning that Nigeria is long overdue for a redesign according to its constitution. The new naira notes by 15th December 2022 were made available for withdrawal from commercial banks, however, since its introduction there has been arising issues that have further affected the social, economical and political affairs the country though it is not without its merits.
The Naira design policy of the CBN is aimed at driving the objectives of the country’s ongoing migration from a cash-dominated economic environment to an electronic payment market, otherwise known as cashless economy. In other words, it will allow transactions in the Nigerian economy to be done using a digital payment method so as to be able to properly keep records of the day to day transactions being made as well as reduce the volume physical cash in market. The idea of the cashless policy started in 2012 due to a rising need to deepen the Nigerian payment system’s infrastructure and since then various policies were put in place to support the transition into a cashless economy like the decrease in withdrawals from N500,000 daily in 2012 to N20,000 daily in 2022 for individuals while coporate firms were strictly limited to N5million cash withdrawals per week. Another would be the linking exercise in 2020 where Nigerians were asked to link their SIM numbers to their National Identification Number (NIN), thus allowing those hidden from the system and records come back to the system compulsorily further strengthening the nation’s security while accounting for every citizen in the country. There have also been an increase in various digital payments method like the use of USSD code, increase in banking agents, the ATMs as well as POS terminals (which increased from around 155,000 in 2017 to 1.1 million as at April 2022). Thus, the redesigning policy is one of the many policies put in place for smooth transition into the cashless economy.

MERITS
One of the most important merits of redesigning naira is to strengthen or improve a country’s security by preventing the threat of counterfeiting the currency in use. Thus, by redesigning Nigeria’s currency there would be a decline in amount of counterfeits which in turn stabilizes the amount of money in circulation and make the CBN have better control over money demand and supply in the economy.

Another merit of this policy would be that it would encourage financial inclusivity thus enabling citizens have access to the wide range of financial products and services as well as increase their financial awareness. As of 2018, financial exclusion was about 36.8% which later fell to 35.9% in 2020 which means that in 2018, 36.6 million adults were excluded while in 2020, it increased to 38.1 million adults out of the estimated population of 106 million adults (18 years and above). This was quite discouraging as the 2012 strategy of the CBN aimed for a 20% or below exclusion rate by 2020. Thus, in response to this redesigning policy financial exclusion has reduced by quite a lot.

Another merit of this policy is that it will increase the base of taxable activities throughout every sector of the economy so as to generate a liable source of revenue for the government that can be used for further development of the country. With this policy, issues of tax avoidance would be easier controlled and handled.

Another merit of redesigning naira was to address the problem of corruption, cash hoarding and economic sabotage by certain privileged individuals who are taking advantage of the system’s leaks to engage in illegal practices. According to CBN Governor, Emefiele, currently the currency in circulation as at 2022 had only N500 billion within the banking system while about 2.7 trillion were held permanently in people’s homes and since the commencement of this scheme, CBN has collected about N2.1 trillion with about N600 billion remaining, thus showing that about 80% of the currency in circulation was outside vaults of the banks and as such putting Nigerian’s monetary policy actions at risk as this led to higher inflation rate and currency speculation which exposed Nigerians to more economic hardships.

Another merit would be the reduction in inflation rates. Nigerians have been suffering from high rates of inflation which was as a result of post Covid-19 economic situation along with other reasons. According to the National Bureau of Statistics, Nigeria’s inflation rate eased to 21.34% in December compared to November 2022 inflation rate of 21.47%, this is a decline of 0.13% which is quite encouraging.

Other merits would be that the new naira has curbed vote buying, terrorism, kidnappings, encouraged digital payments, strengthened the value of Naira against other currencies thereby reducing the pressure foreign exchange. It has also made funds open to proper tracking and monitoring providing greater transperancy and accountability by CBN. It also helped to plug fiscal leakages, boost government revenues, as well as benefit the country as whole.

DEMERITS
Not withstanding the fact that motive behind the naira redesign policy was one that was expected to bring positive improvement in the economic situation of Nigeria, there are also unavoidable demerits of the policy.

One of the demerits is that prior to its distribution, the manner in which it was announced caught Nigerian’s unawares though this project is expected to be beneficial to the country as a whole, the time frame given was not feasible and rather constricting which led to unwarranted panic and challenges that could have been reduced to the barest minimum if proper methods were used.

Another demerit is that since the policy’s launching there have been so many complaints about failed transactions and this has led to loss of money in varying numbers which quite devastating as some people cannot afford such loss especially traders whose profits rests solely on these daily transactions. The reason for this problem could lie in the amount of infrastructure unavailable in some areas, which we were expected to give room and time for adjustments and updates but due to the time frame huge financial risks are being undertaken by different individuals. Nigerians are yet to recover from the pressure of the prolonged inflation as well as the fuel price shocks, yet the burden phasing out existing naira notes is being added which is devastating for most.

Another demerit was that this policy was not actualised in patnership with the public rather it was handed down using authority bestowed by law to issue orders that could have been strategized to bring feasible solution for any hardship being faced but 4 months since its lauch the burden on citizens keep growing because the masses were left in ignorance.

Another demerit is that this policy greatly affected the poor and many Small and Mediums Scale Entreprises (SMEs) who rely heavily on day to day transactions and this problem was actually pointed out by the UN to exist and that the CBN should provide solutions before it hits hard, however, due to lack in proper preparations most are currently unable to pull through the day due to the scarcity of the new notes.

Another demerit is the fact that this redesigning would cause huge deficit cost because the government is very likely to borrow massively in order to fund the redesigning which would further increase the burden on the country’s fiscal strength. This policy is critically affecting Nigerians as the CBN has been unable to meet up to the demand for the new notes, thus, due to the limited resources available the CBN cannot print enough new naira notes causing supply constraint and this led to the frustrating order of CBN to let the commercial banks dispense old naira notes to the citizens as at 7th march, 2023 which is being met with aggressive protest.

REDESIGNING AND MONEY MARKET
Due to failing efforts to curtail the rate at which inflation was rising in Nigeria and despite the conventional policies being used by CBN none were able to fully salvage the damage done to the economy, thus the CBN took a drastic unorthodox measure to address some of the issues. This redesigning policy, (also called the demonetisation policy) is expected to help make monetary policy decisions more effective which should stabilize the current state of Nigeria. It is also estimated that the policy would bring stability the foreign exchange market thus reducing the pressure on this market while increasing the monetary value of Naira amidst other foreign currencies.
Effectively implemented currency redesign is expected to cause deflation as there would be a fall in money supply leading to a reduction in the value of money in circulation and a deceleration of the velocity of money in the economy, thereby bringing less pressure on domestic prices. The ensuing deflationary pressure would bring cuts in interest rate that will in the short to medium term boost economic activities, spur aggregate demand and enhance output growth. All the would help aid the money market become more stable and efficient and these changes are very beneficial to the Nigerian economy but such changes cannot occur without better infrastructure in place as well as the cooperation among every citizen from the lower to the upper level, thus it is advisable to tread carefully during this period so as to not cause irreparable damage to the economy but rather cure the problems ravaging the economy so as bring financial growth and development throughout all the sector of the economy. Therefore all in all the expectations for this new policy to promote equilibrium in the money market is quite high.

REFERENCE
Can Nigeria economy go cashless (2022)
https://www.google.com/amp/s/businessday.ng/amp/technology/article/can-nigerias-economy-go-cashless/

Facts behind financial inclusion figures in Nigeria (2021)
https://businessday.ng/financial-inclusion/article/facts-behind-financial-inclusion-figures-nigeria-2021 indices/#:~:text=Below%20are%20the%20facts%20behind%20Nigeria’s%20financial%20inclusion%20figures.&text=38.1%20million%20of%20the%20country’s,adults%20remain%20completely%20financially%20excluded.

Anthonia Ochei (18 November 2022). Naira redesign – the law and global best practices. https://businessday.ng/news/legal-business/article/naira-redesign-the-law-and-global-best-practices/#:~:text=Redesigning%20currencies%20improve%20a%20currency's,and%20stave%2Doff%20cash%20hoarding.

James Emejo (2022). Many benefits of naira redesign cashless policy.
https://www-thisdaylive-com.cdn.ampproject.org/v/s/www.thisdaylive.com/index.php/2023/01/30/many-benefits-of-naira-redesign-cashless-policy/amp/?amp_js_v=a6&amp_gsa=1&usqp=mq331AQIUAKwASCAAgM%3D#aoh=16783517596397&referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.thisdaylive.com%2Findex.php%2F2023%2F01%2F30%2Fmany-benefits-of-naira-redesign-cashless-policy%2F

Taiwo Hassan Adebayo (10 February, 2023). https://www.premiumtimesng.com/news/top-news/581070-exclusive-naira-crisis-emefiele-discloses-why-currency-redesign-policy-is-failing.html

Hope Moses Ashike (14 February 2023). https://businessday-ng.cdn.ampproject.org/v/s/businessday.ng/amp/banking/article/currency-outside-banks-drop-9-51-on-naira-redesign/?amp_js_v=a6&amp_gsa=1&usqp=mq331AQIUAKwASCAAgM%3D#aoh=16783800544658&referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fbusinessday.ng%2Fbanking%2Farticle%2Fcurrency-outside-banks-drop-9-51-on-naira-redesign%2F.

Nnaji kelechi
Reg no:2019/245744
Economics dept
Eco 303 assignment

Merits
1) Monitoring the currency in circulation
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.
2) To remove counterfeit
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.
3) collapse of illegal economic activities
. 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 people who could not explain the sources of their wealth maybe dectected by the law enforcement agencies. The policy have also helped to mitigate some of social vices in the society such as kidnapping, arm robbery, terrorism and others as a result of the low cash in circulation.
4) To avoid vote buying in this election
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.
5) Reduction of Broad money supply
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. Effective implementation of the currency redisign causes a fall in money supply this will led to the reduction of money in the economy leading to less pressures on domestic prices. 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.
6) Lowering inflation
The policy is typically expected to cause deflation in the market as less cash holding reduces currency outside banks and retards money in circulation. The decline in money supply that follows will slow the pace of inflation. This is also a way to withdraw currency from circulation, an unusual way of tightening the money supply since the country is battling high inflation.
Demerits
1). Hoarding
Some members of the public are hoarding the new notes thereby restricting the flow of the new currency through the economy. Caseh that is kept at home will not circulatie but will fuel the perception of scarcity which leads to higher demand for the currency. The CBN and the mass Media should sensitce and encourae the public to use alternative channel as much as possible for the transaction and hold minimal cash in line with the cashless policy.
2). Incidence of economic opportunism
Some Nigerians are capitaliaing on the transition to charge exorbitant fees or demand cash payment on the false pretext that the POS’s don’t work especially at petrol stations. People are even involved in selling the new currency to the public as a result of the unavailability and low cash in circulation. These selfish actions for personal monetary gain is creating hardship for Nigerians and is coming at the expense of fellow citizens lives and livelihood.
3). Overcrowding in the banking halls: There is lots of long queues in the banking hall. Which is creating lots of inconveniences for the people because the people want to withdraw the new note since they have been asked to deposit their old currency lest it becomes an illegal tender after the final day of they were asked to deposit themThe unbanked and the elderly may not be able to cope since we don’t have banks in most local government areas
4). Damage of bank branches and assault of bank personal.
Some bank branches have been damaged and customers have become aggressive, verbally and physically abusing bank staff. Bank properties, bank assets and bank premises have been destroyed as a result of overcrowding in banks and the aggressiveness of the members of the public in getting their money.
5). Huge cost
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.

No2
The nexus between the naira redisign and the money market is negative ( it has a negative relationship)
The naira redisign is going to bring equilibrium in the money market because as the The relationship between them is that there is a decrease in the supply of money ( money scarcity) and in return their is an increase in the demand of money because people want to hold their money for transportation and investment rather than holding it in bond since their is a decrease in the interest rate on bonds. So because of that the interest rate will increase because they will be a decrease of money in bank vault because of that reason there will be an increase in the interest rate which will further lead to low investment because people will demand for less amount of money thereby pushing the demand curve back to equilibrium.

Regarding the implementation of naira redesign in Nigeria around last year there has been tough struggling among individuals in order to get a hold of the new naira first off the redesign if the new naira notes will take lots of cost millions and billions of tax revenue and country’s fund. After the redesign of the new naira notes it has become a major war to get hold of them as some major banks still pay out in old naira notes ,POS agents of this recent are now selling money which is very outrageous the huge cost you’ll be spending on withdrawals will likely take up a meal for a week and they do these with so much pride. Well getting cash at banks seems to be an endless journey as the queue will encompass whole of the base with people still struggling and fighting to get in the bank, frustrated individuals now lay attacks on the banks in order to express their anger and frustration even students are not left out in this whole mess this has caused a tremendous increase in the cost of goods and services due to much demand and less supply prices now hike up so much even transportation expenses are very much worse recently in regards to all this naira redesign has caused lots of turmoil in the economy basically trying to scatter the economy . Corruption now graves deep due to this changes banks now sells money to POS agents and POS agents sells at higher cost to people and most of the time there won’t be any cash to dispense leading to much scarcity of money but in all these everything must have a good and a bad side. The Nigeria policy to redesign naira notes also has its own good benefit, 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.

The nexus of all this leads to disequilibrium in the money market due to much demand and less supply . Equilibrium has to equate both demand and supply but recently we can see that the demand for money is higher than the supply for money leading to disequilibrium and a turmoil in the money market . This new policy has lead to less money hoarding, increased corruption, counterfeits money, scarcity of money it also Lead to increase in demand and less supply
In my view there’s no equilibrium in the money market.

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,

The naira redesign policy according to the CBN governor Mr Godwin Emefiele, the central bank have reasons for it. He stated the policy would enable the CBN to take control of the naira in circulation, manage inflation, combat counterfeiting, and ransom payment. It is also expected to reduce the amount of cash in the underground or illicit economy, cut short the activities of racketeers and reduce black market activities and also reduce the amount of money outside banks, the CBN governor 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 late 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 therefore, this policy is expected to shrink money stock, and also reduce the long-run path of inflation.
However, the policy has led to the scarcity money, following the instructions given by the CBN, Nigerians tried to be on a safer side by depositing their old money in bank. Unfortunately the new notes was scare, the scarcity continues to disrupt business activities in markets, restaurants, banks, and major sales outlets across Nigeria as some local vendors do not accept payment by transfer.In the midst of the operational challenges being faced by small businesses especially in rural areas.
Point of Sale (PoS) transaction charges also increased to 400 per cent in most cities across the country. The charges ranges from #500, #400 to #300 etc per thousand. According to POS operators “It’s difficult to get cash, whether old or new notes, at the bank” “In some instances, they will have to beg and bribe bank people and we also have to factor in those extra fees into our charges. Even PoS outlets were shut as they struggle for cash.
The scarcity of money worsened the hardship inflicted on Nigerians due to a lingering fuel crisis. In recent months, the scarcity of petroleum products across the nation has interrupted the operations of businesses that depend on generators for power supply despite the government’s repeated claims that the nation has enough supply, the scarcity has persisted amid a poor supply of electricity across the country.

In addition to the massive disruption in economic activities, the crisis has led to an unprecedented hike in the cost of essential goods and transportation services across states in the country. Nigerians have continued to suffer from scarcity of petrol in the country, especially in the nation’s commercial cities of the country like Lagos, Onitsha etc.
The connection between naira redesign and money market equilibrium is that it would help to bring some of the huge cash outside the banking system into the financial system for more effective monetary policy intervention, to increase the supply of clean notes and make monetary policy more efficacious.
The rate of production of the new currency seemed a lot slower than the rate of demand, and so some Nigerians started taking advantage, exchanging old notes for new ones for a huge premium. Therefore there is disequilibrium in the money market. In addition another problem created by the currency swap exercise is the fact that the income divide seems to have widened. People queued up en masse at ATMs where they are available to withdraw very negligible or withdrawing over the counter which sometimes is limited to #2000 or #5000 per day. Also poverty problem was further laid open as those who were more comfortable have no cash to give those who had little. Even when they had, they were naturally slower in spending.

Attama Lilian Ogechukwu
REG NO: 2019/243411
DEPARTMENT: ECONOMICS
COURSE CODE: ECO 303
Assignment: Naira redesign and monetary equilibrium.

NAIRA REDESIGN: WHAT IT IS
Naira redesign is a plan or specification or system or do to the implementation of an activity or process or the result of that plan to change either the colour or the size or the process of developing that legal tender called naira in Nigeria in the form of bank notes : #5,#10, #20,#50,#100,#200,#500,#1000, the naira is the currency of Nigeria.
The central bank of Nigeria is the sole issueserof legal tender money through out the federal republic of Nigeria . The body has the right to redesign and control the volume of money supply in the economy in other to ensure monetary and price stability.
Over the years, the Nigerian legal tender has been redesigned four (4) times; the first time was in 1965 when Nigeria became a republic, and the main reason why it was redesigned was so that it could reflect that it was now being issued by the Federal Republic of Nigeria. The Nigerian currency was redesigned yet again in 1968, following a civil war. Nigeria chose to modify the currency notes it printed in 1965 as a war tactic to counteract the misuse of the country’s currency notes during the period. Nigeria implemented a genuine monetary system in decimal form in 1973, replacing the imperial system inherited from the British colonial administration, which resulted in a currency redesign then, as part of the economic reforms implemented in 2007, new banknotes with new designs were reissued. The central bank of Nigeria announced last year the redesign of #200 #500and#1000 naira note and plan to end the use of the old note by 31 January 2023. The central bank gave reason for the naira redesign. According to Mr. Emefiele the central bank governor the naira redesign would enable CBN to take control of the naira in circulation, manage inflation, combat counterfeiting and ransom payment.

MONEY MARKET EQUILIBRIUM IT’S MEANING.

Money market equilibrium occurs at the interest rate at which the quantity of money demanded is equal the quantity of money supply. All other thing unchanged a shift in money demand or supply Wil lead to a change in equilibrium interest rate and therefore a change in level real GDP and price level.

NAIRA REDESIGN AND MONEY MARKET EQUILIBRIUM.
Monetary equilibrium is where the supply of money equal the demand looking at the economy today about naira redesign the supply of the naira redesign is not equal to the demand. Naira redesign has no way equal to the monetary equilibrium, the scarcity of the redesign currency has made the economy to be at disequilibrium. Meaning that the supply of money is not equal to the demand. This is a country where people will queue in the bank from morning to evening and go home with #2000. The redesign currency has no way equal to the monetary equilibrium. Even though the central bank is trying to control the inflation and also the money in the circulation but the gap between the naira redesign and monetary equilibrium is too wide for now.
NAIRA REDESIGN IT’S’ EFFECTS: THERE ARE POSITIVE EFFECT AND NEGATIVE EFFECT.
These are the positive effect(merit)
1) The naira redesign will address the issues of individuals who have made currency fraud their main source of income .people who have hidden money they have stolen, for instance would either find a way to change it by taking the money out or would not need it given the change in the value of the naira.
2) The currency change also aims to deal a fetal below to the growing kidnapping and ransom industry.
3) The change in the note is also said to aid in lowering the rate of inflation.
4) The change in the naira notes is also intended to control the amount of money in circulation
THE NEGATIVE EFFECT(demerit)
1) Due to the naira redesign people are upset by the change in the currency and many merchant and business men are rejecting old note.
2) Cost of food and other item raise because of naira notes for transaction will become scare and many people may go hungry because they could not get new naira to make necessary purchase.
3) The banking hall be jam packed with people scrambling to exchange their old currency for new notes putting pressure on the loan capacity of the banks to process currency.
4) Those who were doing POS business are now using money to buy money . It is in our country Nigeria that such criminal act will happen, imagine when you want to withdraw 1000naira POS will collect 400naira from the money.
5) A lot of people has loss two much money in the name of debit, when you want to make transfer for a commodity the owner of the business will add their own chargers on top of the actual amount of the goods, some thing you would have bought at cheaper rate if you are with cash.
CRITICAL EVALUATION AND CONCLUSION
From the way things are in the economy I will say that there is need for our country to reduce the way things are raising and also to control the money in the circulation and the only way to control inflation is through contractionary fiscal policy that is by reducing the money in the circulation and the only way to do that is by redesigning the currency so as to gather the money in the circulation and monitor how they supply money in the circulation. In conclusion I will say that if it is through of currency that will curb inflation let move ahead so that peace rain in our country Nigeria.

NAME: NWOKAFOR CHIDERA CLARE
REG NO: 2019/249161
DEPARTMENT: ECONOMICS
Merits
1. Generally people now spend wisely as a result of the introduction of new naira notes and catalyst name in many of our affairs. They tend to calculate more and manage expenses.
2. Many businesses that depend on cash have now learnt to practice the cashless style which is safer, reduces corruption due to naira scarcity and leaves permanent records, which could be recalled in the future.
3. 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.
4. Reports of armed and highway robberies have reduced drastically in different parts of Nigeria because people no longer hold cash as much as before.
5. Online and mobile banking apps and platforms that were left unused are now being put to maximum use. In that way, the effectiveness of Nigerian Banks to handle online transactions on their respective ICT platforms are now being put to test. Those banks that had thought their internet and mobile banking setups and structures were stable and effective are now beginning to see weaknesses in their platforms. This would lead each bank to undertake massive upgrades of its ICT platforms with a view to serving the public better.
6. People with the habit of keeping unnecessarily huge amount of cash in boxes at home have now been made to open and operate accounts in Banks and to deposit their monies in the Banks which is safer. In this way, the risk of such cash being stolen at home is no longer there. Besides releasing these cash, the amount of cash held kept home and stopped from circulation is now reduced.
Demerits
1. With the naira redesign and the cashless policy, people find it hard to withdraw as little as 1,000 naira to transport themselves from one place to another or to do things that do not require online transactions. This is as a result of naira scarcity.
2. The new note scarcity has led to POS agents extorting money from people because according to them, it was bought. Due to this, they charge higher than what they normally charge. Before the note redesign, to withdraw money from POS agents for example, if you want withdraw 5000 naira, the charge will be hundred naira but since the new naira notes scarcity, some of them charge 400 for every 1,000 naira, so that means if someone wants to withdraw 5,000 naira, the charge will be 2,000 naira. And this affects a lot of people especially students.
3. 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, according to World Bank.

2. The Nigerian government announced plans to redesign the country’s currency, in order to address issues such as counterfeiting, inflation, and promote economic growth. The money market is a segment of the financial market where short-term financial instruments such as treasury bills and commercial papers are traded. The equilibrium in the money market is achieved when the demand for money equals the supply of money at a certain interest rate. The interest rate serves as a price for money, and changes in demand or supply can cause changes in the equilibrium interest rate. With the Naira redesign, there is a potential for changes in the demand and supply of money, which can impact the equilibrium in the money market. For example, if the redesign is successful in addressing the issues stated above, this could increase public confidence in the currency, leading to an increase in demand for Naira, and therefore, an increase in the supply of money in the economy. This could lead to a decrease in the equilibrium interest rate, making borrowing cheaper and potentially promoting investment and economic growth. On the other hand, if the redesign fails to address inflationary pressures in the economy, this could lead to a decrease in the demand for Naira, leading to a decrease in the supply of money and an increase in the equilibrium interest rate. This could make borrowing more expensive, potentially leading to a decrease in investment and economic growth. Overall, the impact of the Naira redesign on the money market equilibrium will depend on the effectiveness of the policy in addressing various economic challenges such as counterfeiting, inflation, and economic growth.

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.
The CBN regulates monetary policy. It is a quintessential regulatory agency. The benchmark for regulatory decisions like it is proposing with regard to the redesigning of the currency, is that the regulator can only act if the benefits of the proposed policy are more than the costs. A good cost-benefit analysis will include social and political costs and benefits, not just financial and commercial costs and benefits.

We should note that, money plays a crucial role in a country’s economy. It determines such things as the general price levels, aggregate national income, production and productivity, labour and capital employment levels, exchange rates. and the balance of payments.
The CBN claims that it is also redesigning the Naira, due to hoarding. This claim should be scrutinised because, currently, Naira-Dollar devaluation is so high CBN has to employ artificial valuation. Between 2021 and 2022, Naira has been devalued at least three times, and with the look of things, there is a likelihood of further devaluation, coupled with an increasing inflation rate, which means that the purchasing power of Naira is weakened. It makes little economic logic that a currency whose value is highly decreasing is being massively hoarded, as claimed by CBN. Those who have the capacity to hoard such huge amounts are the political class, and would also have had the capacity to convert it to Dollars. The conversion argument further makes the claim of the CBN Governor, that a redesign in currency will hamper ransom payment, not altogether convincing. Naira redesign in itself will not remedy rising inflation in this country, especially given the fact that this policy has no way to appreciate the value of Naira in the real sense. It could actually increase inflation, as those with loads of Naira unlawfully acquired could launder them through luxury purchases, or forex transactions that could inflate the economy.
MERITS OF REDESIGNED NAIRA NOTES
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.
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 OF REDESIGNED NAIRA NOTES
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.
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.

Firstly, this question consists of three parts which include;
1. Discussing and analysing the merits and demerits of Naira redesign policy by the CBN and it’s scarcity among Nigerians.
2. What is the nexus between Naira redesign money market equilibrium?
3. Will this new policy promote equilibrium in the money market?
1a.). The Merits of Naira redesign and the cashless policy
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. As we all know the objective of the CBN with the implementation of Naira redesign is to reduce the amount of money in circulation, so individuals in an economy are left with no money thereby the cashless policy leading 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.
Less criminal activities: Reports of kidnap-for-ransom by terrorists and other criminals, have gone down drastically in parts of Nigeria. Where would anyone get huge cash to give kidnappers as ransom? The result is that kidnappers appear to be in search of other/alternative source of revenue or means of livelihood, leading to drastic reduction in cases of kidnapping and criminality. Also reports of armed and high way robberies has reduced.
The advantages of the currency redesign is overwhelmingly enormous will benefit the economy in the long-run. We will take all the necessary steps to ensure that there will be a smooth flow of currency swap and minimize the inconvenience in the short-term.This is good for the economy. Besides, we need to grow and not remain in the archaic modes of life which carrying huge cash depicts.Yet, since these polices are in the interest of the people, the people themselves should not be made to suffer unbearable or excessive suffering; the people need to be alive in order to enjoy the benefits of the policies.
1b.) The Demerits of the Naira redesign and the cashless policy
Pervasive incidences of hoarding and predatory activities of some vendors and unscrupulous Nigerians: Following the redesign policy, hoarding is the principal cause of hardship for the citizens. 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 fuels a perception of scarcity which leads to higher demand for the currency, signalling to those who don’t have an urgent or immediate need to store cash.

2.) The Nexus between Naira redesign 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 theory of liquidity preference states that the interest rate is one determinant of how much money people choose to hold. The reason is that the interest rate is the opportunity cost of holding money, it is what you forgo by holding some of your assets as money, which does not bear interests, instead of as interest bearing bank deposits or bonds. On the short run,the demand for real money will shift to the left causing a low demand for money in the money market causing a new Equilibrium. 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.Specifically, the CBN governor said, “We have started to see inflation trending downwards following general price stability in almost all market genres, including for goods and financial products.”
According to him, the effective implementation of the policy could scrap four percentage points off the current level of inflation which stood at 21.34 per cent – as it steadily slows the inflation rate to about 18 per cent by mid-2022. The central bank governor also noted that the policy had brought stability to the exchange rate regime.
He explained that before the announcement of the procedure, the huge cash haul outside the banking system had exerted significant pressures on the exchange rate at all windows, but more so at the parallel market as it engendered asset substitution by speculators and rent-seekers. He said: “While the policy was initially estimated to lead to more speculations due to panic moves as most people try to understand the policy action, it is expected to reduce speculation in the medium- to long-run.Today, the limited circulation of the new Naira notes has forced the hands of speculators, and we are beginning to witness some stability. The initial pressure is projected to further moderate as the implementation of the policy takes off, and a wider understanding pervades the system.”

3.) Will this new policy promote equilibrium in the money market?
This policy of naira redesign and the cashless policy was supposed tol promote equilibrium in the money market because the CBN’s interior motive was to curb high inflation in the Nigeria economy. The supply of money decreased, while the demand for money increased which will lead to a fall in the prices of goods and services in the market.
But this is not the case, as the cashless policy instead brought about hyper inflation in the Nigerian economy. You pay to withdraw your own money from Point of Sales Operations (POS) to buy expensive goods

NAME:: Francis chinedu Michael
REG NO: 2019/244161
DEPARTMENT: ECONOMICS MAJOR

Following the central bank of Nigeria’s implementation of the Naira Redesign policy on October 26th,2022. We will talk about the advantages and disadvantages of the Nigerian central bank’s effort. Some of the initiative’s benefits are covered in the paragraphs below.
The majority of the naira notes that politicians, criminals, and other illegal actors have stored away would be returned to the banking system, assisting the CBN in monitoring the currency in the economy, according to many who have suggested that the new measure could restore confidence in the local currency.
majority of the ragged naira notes that were previously pushed into circulation are also anticipated to be eradicated by the new notes, and counterfeiters are anticipated to cease operations for a few years as a result.
The policy’s beneficial impact on the nation’s crime rate is another way to see it. Nigeria is currently dealing with terrorists and banditry all over the country, and billions of naira are being paid in ransom to kidnappers.
This programme will enhance account use and ownership by encouraging more individuals to open bank accounts, which will improve people’s saving habits. It might inspire some hitherto unofficial business owners to standardise their transactional procedures and choose more official routes for payment.
Additionally, when more economic agents are required to create bank accounts by the cashless policy, the short-term drop in cash holding and the increasing formalisation of commercial activity would both strengthen fiscal policy. More agents enter the government’s tax net as more transactions pass through e-channels and bank accounts. This broadens the range of activities that are taxable and raises the prospect of higher tax revenues for all levels of government.
Anything that has an advantage typically also has a negative. Let’s focus on the strategy’s disadvantages now that we’ve quickly covered the program’s advantages. Some of the disadvantages that the policy covers include:
The price of food and other items will increase if naira notes for transactions become limited, and many people may go hungry since they won’t be able to get new naira to buy necessities.
In the banking hall, people will be rushing to exchange their old currency for new notes, placing stress on the institutions’ limited capacity to handle currency.
Armed robberies might become more common as robbers try to cut their losses on the old naira notes that were previously hidden away to evade the law by targeting bullion vans that would be used to deliver the new notes in some rural areas.
Both the CBN and the banks would have logistical challenges in the distribution of the new notes across the nation due to the rise in banditry and terrorism across the entire nation. The massive demand for the new notes would also jeopardise bank security since criminals might utilise the change to conduct their illicit activities.
There is a chance that forgers will take advantage of the delay in distribution to disseminate their own notes in some areas of the country, something that might not be sufficiently deterred by publicity around the new notes.
(2) Money supply and money demand together make up the money market equilibrium. Here, the exogenous (fixed) policy variable is the Naira Redesign policy, which is determined by the central bank. As the interest rate affects it and is not fixed, the need for money is endogenous. The Naira Redesign Policy is the exogenous variable that the CBN uses to control the money supply, creating a link between the policy and the equilibrium of the money market. This demonstrates that the CBN will be used by the Naira Redesign programme to restore currency into the country’s financial system after it had been out of circulation. People will so keep less cash on hand, increasing the demand for cash and raising interest rates.
Will the Naira Redesign Policy result in a stabilisation of the money market? It is a pertinent enquiry. Of course, and discussed below is why:
The primary goal of the naira redesign policy is to recover the bulk of the currency that is now in use as well as the quantities that have been taken out of circulation, hence reducing the quantity of money that is in the economy. Because there is more demand for credit, loan rates will go up. The theory of liquidity preferences predicts that when the amount of money in circulation rises, interest rates will as well. The purpose of this theory is to explain why the money market is in equilibrium. This is very obvious considering that customers now have to pay POS agents exorbitant interest rates in order to obtain little quantities of cash. The money market will finally reach equilibrium if this circumstance holds.

NAIRA REDESIGN AND MONETARY EQUILIBRIUM.
On October 26, 2022, the Governor of the Central Bank of Nigeria announced that the bank will be pulling out the old design of the N200, N500 and N1000 notes starting from December 15 of the same year. This process, he said, will culminate on January 31, 2023, when the old currency will no longer be legal tender. In recent years, the CBN has recorded significantly higher rates of counterfeiting especially at the higher denominations of N500 and N1,000 banknotes… the management of the CBN sought and obtained the approval of President Muhammadu Buhari to redesign, produce, and circulate new series of banknotes at N200, N500, and N1,000 levels. The Governor went ahead to list the worsening shortage of clean and fit banknotes, the increasing ease and risk of counterfeiting evidenced by several security reports and recent developments in photographic technology and advancements in printing devices have made counterfeiting relatively easier, as part of the reasons for the move. On the sidelines were other reasons – a need for the central bank to have a better handle on money in circulation, reduce inflation by reducing money hanging around everywhere where the banking sector cannot account for them, reduce speculation against the Naira, and also target criminals whose stock in trade is raw cash by promoting a less cash-heavy economy.The advantages of this naira redesign 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.Also as part of measures to mop up excess cash in circulation, ransom payment for kidnapping, terrorism financing, counterfeiting, among others.And the disadvantages of the naira redesign is that it haseffect on economic activity especially poor Nigerians due to its timing and short transition period.Many individuals presently are not having access to cash and therefore cannot make transactions at will.Also,the government wants to drive the use of online banking, which is good for our economy. Unfortunately, there have been so many complaints about failed transactions.”“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? No.
Looking at Monetary equilibrium,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.
The relationship between the naira redesign and this monetary policy is in the fact that the aim of the Government aim is to create an equilibrium between the supply and Demands for money where the demand for money is equal to the supply of money.Over the years there’s been an issue the Government has always tried to curb…a situation where the total money in Supply is higher than the money in Demand as a result of the counterfeiting notes in circulation.This was one of the aim of the CBN ..to create an equilibrium between the two,which explains why they had to withdraw the old notes and create new notes where there can be a control In the money in Circulation.

NAME: IROEGBU BLESSING ONYINYECHI
REG NO: 2017/249518
DEPARTMENT: ECONOMICS MAJOR

(1) We will evaluate the advantages and disadvantages of the Naira Redesign Policy after its implementation by the Central Bank of Nigeria in October 2022. A few of the benefits of the policy include the following:
Currency reform’s macroeconomic implications are complicated and may not yet be fully understood, especially at this early stage when it is already causing a lot of inconvenience.
Also, the short-term decline in cash holding and the rising formalization of commercial activity would both enhance fiscal policy as more economic agents were forced by the cashless policy to open bank accounts. When more transactions occur through e-channels and bank accounts, more agents are drawn into the tax net of the government. This increases the possibility of larger tax revenues for all levels of government by extending the list of activities that are taxed.
Countries typically employ demonetization programs, also referred to as currency redesign techniques, to enhance the performance of critical macroeconomic indicators while simultaneously addressing social issues. These actions are expected to reduce the amount of money utilized in the illegal or shadow economy, stop racketeers from operating, and shut down rent-seeking businesses in the black market. By lowering the quantity of money stored outside of banks, it will reduce the money stock and decrease the long-term trend of inflation. The resulting deflationary pressure may lead to interest rate cuts, which will in the short to medium term boost economic activity, raise aggregate demand, and enhance output growth.
By encouraging more people to open bank accounts, this campaign will increase account use and ownership, which will promote people’s saving practices. It might encourage some currently unregistered business owners to standardize their transactional processes and select more reputable payment methods.
In the long run, the plan would surely reduce tax avoidance and evasion while improving the sophistication of tax collection. In the long run, the plan would surely reduce tax avoidance and evasion while improving the sophistication of tax collection.

Typically, everything that has an advantage also has a disadvantage. Let’s move on to the strategy’s disadvantages after briefly examining the program’s advantages. The policy includes the following drawbacks, among others:
If the supply of naira notes for transactions is reduced, the cost of food and other products will rise, and many people may go hungry because they won’t be able to receive new naira to purchase basic goods.
Due to the increase in banditry and terrorism over the entire country, both the CBN and the banks would face logistical difficulties in distributing the new notes throughout the country. The enormous demand for the new notes would put bank security at risk since criminals might use them to carry out their illegal activities.
People will be racing to exchange their old currency for new notes in the banking hall, putting pressure on the institutions’ constrained ability to handle currency.
There is a possibility that counterfeiters will use the delay in distribution to spread their own notes in some regions of the nation; this possibility may not be sufficiently deterred by attention around the new notes.
Robbers may target bullion vans that would be used to transport the new notes in some remote areas in an effort to cut their losses on the old naira notes that were previously stowed away to circumvent the law, which might lead to an increase in armed robberies.
(2)The supply and demand for money determine the equilibrium of the money market. In this case, an exogenous (fixed) policy variable is the central bank’s Naira Restructuring policy. This is because interest rates are endogenous and not fixed, they have an effect on the need for money. The Naira Redesign Policy, which serves as a link between the policy and the equilibrium of the money market, was chosen by the CBN as the exogenous policy variable to control the money supply. This demonstrates how the Naira Redesign Programme would employ the CBN to reintroduce cash into the country’s financial system after it has been taken out of circulation. Since fewer people would have cash on hand, there will be a greater need for it and interest rates will rise as a result.
The money market will stabilize as a result of the Naira Redesign Policy. The inquiry is pertinent. Indeed, and the reasons behind this are as follows:
In order to reduce the quantity of money circulating in the economy, the naira redesign policy is primarily intended to reclaim the majority of the money that is now in circulation and the out-of-circulation amounts. The increasing demand for credit will result in higher lending rates. The liquidity preference hypothesis predicts that when the money supply grows, interest rates will as well. This hypothesis attempts to explain why the money market is in equilibrium. Given that customers now have to pay POS agents exorbitant interest rates in order to obtain little amounts of cash, this is very obvious. If things stay this way, the money market will eventually reach equilibrium. If something changes, the CBN can increase the amount of money in circulation and bring the money market back into balance by using a different policy variable in the formula.

1. Discuss and analyse the merits and demerits of this policy initiative adopted by the CBN.
The merits
Many individuals have proposed that the new measure could reestablish trust in the neighborhood cash as the majority of the naira note stacked away by lawmakers, hoodlums and other unlawful administrators would be gotten back to the financial framework, assisting the CBN with observing the money in the economy.

It is likewise expected that with the new notes, most worn out naira notes cash drove into the framework would be disposed of while forgers would be refrained for several years in doing their illegal business.

One more point to take a gander at the action is the constructive outcome it will have on wrongdoing in the country. As of now, Nigeria is having difficulties with fear mongers and banditry the nation over with cash being paid to ruffians as payoff rushing to billions of naira.

It is normal that the payment cash that is yet to find its direction into the financial framework would be brought on a mission to be traded for the recently upgraded notes. This could likewise prompt wrongdoing recognition and plausible arraignment as numerous who couldn’t make sense of the wellsprings of their abundance might end up in a difficult situation with policing.

Likewise, legislators who have stacked away cash with the end goal of vote purchasing during the impending political decision might struggle with changing their notes into the new naira while taking such cash back to the framework could agitate a portion of their arrangements.

other benefits include:

Measurements had shown that north of 80% of the cash available for use were outside business banks’ vaults, which was fuelling illegal monetary stream inside the economy:

A critical storing of banknotes by individuals from the general population, deteriorating lack of spotless and fit banknotes and expanding cases and chance of forging informed the choice.

“The CBN clearly needs to drive that large number of notes once again into the financial framework. Those with the notes should give them over to get new ones or, in all likelihood it becomes unlawful delicate after Jan. 31 2023.

“This is likewise a method for pulling out cash from flow, a strange approach to fixing the cash supply since the nation is fighting high expansion.

“The other side is that individuals who are holding gigantic measures of money outside the financial framework for accursed reasons will go to the equal forex market to purchase hard cash, coming down on the worth of the Naira as a lot of Naira will pursue too couple of dollars.”

Checkmating electioneering spending: A 90-day window will have been something more, yet one can comprehend the need to try not to impede the races.

The demerits
The immense expense of printing the new note could rush to trillions of naira, which the economy might be least ready for with the present status of the economy, the condition of the country’s unfamiliar stores since the money is supposed to be printed abroad and the ramifications for the accounting report of the national bank.

Gaining from the past comparable event a long time back, the economy will certainly be resentful about the adjustment of the money as numerous shippers and negligible merchants would begin dismissing the old notes in front of the execution of the strategy on December 15.

The expense of food and different things will shoot up as the naira notes for exchanges will turn out to be scant while many individuals might go hungry on the grounds that they couldn’t get new naira to make vital buys.

The financial lobby will be jam-loaded with individuals scrambling to trade their old money for new notes, coming down on the lean limit of the banks to handle cash.

Furnished burglary could raise with hoodlums focusing on bullion vans to be utilized in the disseminations of the new notes in a provincial regions in a bid to limit their misfortunes on the old naira notes stacked away already to dodge the law.

Both the CBN and the banks will confront calculated difficulties in the conveyance of the new notes the nation over with the pace of wrongdoing in type of banditry and psychological oppression the nation over heightening. Likewise, security around the banks would be undermined on account of the gigantic interest for the new notes as lawbreakers could likewise exploit the change-over to commit their illegal exchange.

There is the likelihood that forgers might exploit the slack in appropriation to circle their own notes in certain pieces of the country, which may not be successfully covered by the exposure around the new notes.

other disadvantages include:

Strategies challenge: The test of planned operations of such printing because of the way that Nigeria is acquiring to finance the spending plan shortages. Furthermore, to explore the 774 neighborhood legislatures when some of them don’t have banking lobbies present in the nearby state run administrations.

Checkmating electioneering spending: CBN fantasy about checkmating electioneering spending by overhauling the naira notes must be accomplished in the event that the new notes were restricted in supply, an errand he considered would be very tall for the zenith bank.

Stuffing in the financial corridors: There will be bunches of long lines in the financial lobby. Making bunches of burdens for the people is going. The unbanked and the old will be unable to adapt since we don’t have banks in most neighborhood government regions

Provincial occupants factor: It is expected that rustic inhabitants who live distant from where banking administrations are accessible would encounter difficulty unloading the old notes, as well as, at first, getting the new ones.

Apprehension about tireless expansion: the step would tackle expansion, “since there likewise are other significant explanations behind expansion, for example, the forex emergency, which this new move can compound, as well as the effect of the security emergency on food cost expansion.”

2. what is the nexus between Naira redesign money market equilibrium?
Implementation of cash redesign causes a fall in cash supply. Official information has shown that it is has prompted decrease of worth of cash available for use and a deceleration of the speed of cash in the economy prompting less tensions on homegrown costs. Essential financial precepts under the amount hypothesis of cash proposes that the fall in money related speed could hinder value development and tighten ostensible cash supply.

The strategy is currently creating the ideal outcome. The costs of grains and key staples have by and large been on the descending pattern starting from the start of the approach. The cost for soya beans has dropped from N30,000 to N22,000. Maize from N18,000 to N16,000. The cost of a bull tumbled from N400,000 to N330,000 and slam from N75,000 to N50,000.

According to a well known economist, Rewane he noted that the money supply is in four broad categories M1 is Cash in circulation (Demand deposits); M2 is M1 + Time deposits; M3 is M2 + Credit in the Banking system and M4 is M3 + Pseudo money.

According to him, it is under M1 that currency in circulation falls and total money supply in Nigeria is approximately N49 trillion.

Of this amount, Rewane in corroborating CBN stand said only 8.50 per cent (appr. 4.1trillion) is the currency in circulation.

“We also observe that 10 years ago, the currency in circulation (if accurate) was about the same (3.2trn).

“Therefore currency in circulation 10 years ago was only 9 per cent of the total money supply whilst today it is 6.6 per cent. Also, electronic payments were a fraction of what it is today. Today 90 per cent of total transactions are electronically settled and the velocity of circulation is infinitely higher than what it was back then. He further said that new regulations do not allow the issuance of any cheque above N10 million and there is a cashless policy in Nigeria. This means that the potency of cash as an economic destabilising variable is limited,” he added.

Therefore, the supposed importance of cash in circulation in Nigeria is greatly exaggerated. On what will be the impact on the value of the Naira in the forex market, Rewane explained that theoretically, it should have no effect whatsoever.

3 Will this new policy promote equilibrium in the money market?
For the most part, cash redesign strategies (at times called demonetization approaches) are planned by nations to reinforce the exhibition of key macroeconomic boundaries and similarly battle social mistakes.

Predominantly, it is normal to lessen how much money in the underground or unlawful economy, shorten the exercises of criminals, and crush lease looking for organizations in the bootleg market. By lessening cash outside banks, it will contract cash stock and as needs be bring down the long-run way of expansion.

Effectively implemented currency redesign generally causes a fall in cash supply. This will prompt decrease of worth of cash available for use and a deceleration of the speed of cash in the economy prompting less tension on homegrown costs.

The approach is commonly expected to cause emptying in the market as less money holding diminishes cash outside banks and retards cash course. The going with decrease in cash supply will in this way slow down the speed of expansion.

The first key weakness exposed is that the CBN appears to have grossly underestimated the economy’s actual cash needs. By the economy here we mean just regular people who need cash for their livelihoods on a daily basis. As most economists are aware, Nigeria is a sort of dual economy with a significant informal sector. This is important because informality and cash use tend to go hand-in-hand. How large is the informal sector? A report by the National Bureau of Statistics (NBS) estimated that informal activities accounted for 41.43% of all activities, or of GDP, in 2015.
The World Bank similarly suggested that up to 80.4% of employment in Nigeria in 2021 was in the informal sector.

The summary is that informality in Nigeria is a norm and hence the financial needs of the informal sector, notably cash, would be just as significant.

Surveys on use of cash in the day-to-day lives of ordinary Nigerians corroborate those accounts. From the Multiple Indicator Cluster Surveys (MICS) published by the NBS last year, only 35.4% of women and 47.2% of men aged 15 – 49 as at 2021 had bank accounts or any other similar set up in any financial institution. The implication of this is that the non-account-holding population use/need cash to survive on a day-to-day basis. In fact, in states such as Bauchi, Jigawa, and Kebbi, less than 8% of women had bank accounts. The most popular reason given was that they did not have a stable income, and apparently they were using cash daily for survival.

The use of cash is not limited to just the lower income segment though. Another survey in 2021 by Enhancing Financial Innovation in Africa (EFINA) asked a subset of adults if they had used cash for payments in the last year. 100% said they had. Only 24% said they had used digital means for making payments in the preceding year. Similarly, 86% said they had received some income in cash in the preceding year. Only 13% said they had received income by digital means. In summary, almost all available information pointed to cash being ubiquitous in the daily life of Nigerians. 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.

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.