THE IMPACT OF CURRENCY RE DESIGN ON THE NIGERIA ECONOMY IN BADAGRY LOCAL GOVERNMENT OF LAGOS STATE

ABSTRACT

This research examined the impact of currency re-design on the Nigeria economy  in Badagry Local Government,Lagos State. The survey research was used in this study to sample the opinion of respondents. This method involved random selection of respondent who were administered with questionnaires. The target population of the study comprised selected residents in Badagry Local Government,Lagos State, Nigeria. A total of 300 respondents were recruited as sample size for the present study. The descriptive and analytical approach was adopted using Chi-square to test and analyze the hypotheses earlier stated. Relevant conceptual, theoretical and empirical literature was reviewed.Findings revealed that there is a significant impact of currency re-design on economic development in Badagry Local Government, Lagos State. The finding of the study also reveals that the naira currency redesign causes hardship to the people of Badagry Local Government, Lagos State. The finding of the study also reveals that the naira currency redesign causes the scarcity of money generally to the resedents of Badagry Local Government, Lagos State. The findings of the study reveal that there is a negative relationship between currency re-designs andthe economic development in Badagry Local Government,Lagos State. It was therefore concluded that there is a significant impact of currency re-design on economic development in Badagry Local Government, Lagos State. The Lagos State Government in transition of the Badagry Local Government should ensure that there is no hoarding of money or sales of money by local banks as well as POS attendent to ease money circulation and reduce hardship among the residents of Badagry Local Government.

CHAPTER ONE

INTRODUCTION

Background of the Study

The Central Bank of Nigeria (CBN) revealed a new initiative on October 26, 2022, to revamp the country's three highest denomination banknotes: the 200, 500, and 1000. On December 15, 2022, substitute currency with new colors and security features went into circulation (CBN, 2022). An unusual cash constraint was caused by the Apex Bank's plan to demonetise the old notes by February 10, 2023 and circulate only a certain number of the new notes(Adegboyega, 2023) . Transactions through e-banking channels proved particularly challenging, especially for the poor, unbanked, and unliterate parts of the population, since there was a clear infrastructure shortage for a cashless economy to effectively take off in Nigeria. Therefore, the new initiative elicited responses from Nigerians. A portion of the political class in the nation expressed outrage, claiming that the CBN was being used as an attack dog by the government to bankrupt politicians in advance of the February and March 2023 national elections.Many economic analysts believed that the initiative would have a disastrous impact on Nigeria's economy, especially given how quickly it was developed, organized, and put into action. Many observers who believed the initiative was unneeded criticized it for things as petty as the belief that the new notes were essentially "recoloured" versions of the old notes, not "redesigned," in the manner typical of Nigerian public discourse (Nwanma, 2023).

Currency reforms were seen as the cornerstone for further fortifying the macroeconomic framework. In particular, monetary transmission was viewed as crucial since it gave the government more control over macroeconomic policy the more the populace relied on the local currency as opposed to dollars. Over time, Nigeria has seen the introduction and revamping of its circulating currencies, with the CBN pivoting to maintain stability (Ghalayini, ‘2011). The Central Bank of Nigeria recently stated that the operations and performance of this sector directly affect achieving macroeconomic goals and enhancing the economy (CBN 2022) issued a statement that it has concluded plans to redesign the Naira. The extraordinary decision was made, according to the CBN Governor, in large part due to money hoarding, inflation, and counterfeiting. According to the CBN, of the N3.23 trillion in money in circulation in Nigeria, approximately N2.73 trillion is stored outside of bank vaults. This represents around 85% of the entire amount of money in use. Additionally, the Naira is not as secure as it should be because it is simpler to counterfeit notes worth N500 and N1000.

Experts in policy, including economists, lawyers, and others, have been debating this subject in depth. Many of them believe that these policy changes will have little or no economic impact for the populace and are merely a diversion from the nation's dire economic woes. According to the CBN's most recent report, the 2020 Currency Report, 67,265 counterfeit notes totaling N56.83 million in nominal value were seized in 2020, representing a 20.80% decrease in volume and 12.18% decrease in value compared to 84,934 pieces valued at N64.71 million in 2019. 100 is the global average for counterfeits per million. In 2020, there were 13 pieces of counterfeit currency for every million banknotes in circulation, down from 20 pieces per million in 2019. This demonstrates that the problem of counterfeit money is not as pervasive as would require a modification of the currency. In 2008, Turkmenistan completely and orderly overhauled its currency system, which in many ways serves as a model for other nations. For instance, Afghanistan in recent years, of decline in its currency value, a new Afghanistan designed was introduced, with many zeroes abolished, meant to herald Afghanistan from the emergence of civil war. It takes serious effort to refurbish existing currencies (Kregel, 2010). Hyperinflation, exchange rate collapse, widespread currency counterfeiting, war, anxieties, and political instability are all potential drivers. Or it might be a deliberate move, like deciding to join a monetary union like the European Monetary Union. A highly political choice, changing a country's currency is. The needs of the economy are occasionally not addressed by the current currency. The typical currency reform candidate is a cash-based, heavily dollarized economy with many currencies in circulation.

Numbers are the fundamental unit of currency; at this time, paper money, coins, or plastic cards (such as credit or debit cards) serve as the fundamental units of exchange. Although the difference between money and currency is significant in some contexts, for the purposes of this study, the terms are interchangeable (Gary, 1996). People can trade indirectly for products and services thanks to money. It facilitates the exchange of information regarding product prices and gives people a place to save their money. Money doesn't always have worth, whether it's represented by a seashell, a metal coin, a piece of paper, a string of code, or is electronically mined by a computer. Instead, the value that individuals place on it as a medium of exchange determines its overall global value. Over 180 different currencies are in use worldwide in 197 countries (Isabel, 2020). The United States Dollar (USD), the European Euro (EUR), the Japanese Yen (JPY), the British Pound (GBP), the Swiss Franc (CHF), the Canadian Dollar (CAD), the South African Rand (ZAR), the Ghanaian Cedi, the Nigerian Naira, etc. are some examples of these currencies. There are 162 official currencies in use worldwide, however out of those 162, 47 have fixed exchange rates with one another. This implies that, for instance, the Danish Krone is a currency all on its own, yet it has a fixed rate of exchange with the Euro. Other currencies, like the Bahamian dollar, even immediately exchange 1:1 with the USD. The British Pound Sterling is the oldest currency still in circulation. For more than 1,200 years, it extended across Great Britain and all of its colonies, including Nigeria, Ghana, and others.

There are some reserved currencies in the globe. The US dollar, the pound sterling, and the euro are regarded as the most reserved or anchored currencies in the world. A reserved currency is one that is also utilized to some extent as a means of payment outside of its nation of origin. Central banks or other monetary authorities hold these foreign currencies in sizeable amounts as part of their exchange reserves. The restricted currencies are accepted in all international trade, investment, and economic activities. They are sometimes known as safe haven currencies or hard currencies. The US Dollar has emerged as the most important of the reserve currencies. The Central Bank of Nigeria (CBN) consciously uses monetary policy to increase aggregate demand by adjusting the money supply and interest rate. It is crucial to the redesign of the currency as well. The goal of the currency redesign is to collect the enormous quantity of cash that is currently projected to be outside the banking system, which is 2.73 trillion, or nearly 85% of the total amount of cash in circulation. As 85% of the nation's currency is allegedly stashed away in homes outside of the banking system, economic concerns motivating the redesign of the Naira include cutting inflation, preventing counterfeiting, reducing insecurity, and boosting the amount of money in circulation.

According to Antinolfi et al. (2018), monetary policy is a crucial tool that may be utilized to create price stability, control currency, and boost investment growth. According to studies, redesigning the currency is an excellent way to control the amount of money in circulation (International Monetary Fund, 2022; Kregel, 2010). In order to discourage vote-buying and the bribing of election officials, it is sought to reduce the effect of money on the nation's electoral process. The timing of this exercise in Nigeria, as many experts have contended, is consistently incorrect, and this report cannot agree more. The CBN always intends to implement the currency redesign in order to efficiently manage the flow of the currencies, according to the literature that is available(CBN, 2015). Additionally, the brief notice is in place to punish people who launder or hoard Nigerian cash. A central bank implements monetary policy to ensure economic stability, keep unemployment low, safeguard the value of the currency, and promote economic growth, which is why the naira was redesigned.  It is based on this background that the present study seeks to examine the impact of currency re design on the Nigeria economyin Badagry Local Government,Lagos State.

Statement of the Problem

From November 2022 to March, 2023, the rate of money scarcity in Nigeria due to the naira re-design by the Central Bank of Nigeria (CBN). A lot of people including entrepreneurs, financial organizations as well as other financial strata faced the issues of inflations and general hardship.    Studies have shown that the urgent need to redesign and take control of the currency in circulation in a country is to address the problem of hoarding of banknotes outside the banking system, the lack of clean and fit banknotes in circulation, the increase in counterfeiting of high-denomination banknotes, interest rates and inflation, trade, laundering, market expectations, among others. This may have led to the redesign of the naira note. This study is set out to evaluate the impact of currency redesign on the economy of Badagry Local Government,Lagos State, Nigeria.

Aims/Objectives of the Study

The major aim of the study is to impact of currency re-design on economic development in Badagry Local Government,Lagos State. Other specific objectives are as follows;

1. To ascertain the impact of changes in currency re-designs on the economic development in Badagry Local Government,Lagos State.
2. To examine the negative impact of changes in currency re-design on the wellbeing of residents in Badagry Local Government,Lagos State.
3. To determine the impact of currency re-design changes on inflation among the people of Badagry Local Government,Lagos State.
4. To examine if there is a negative relationship between currency re-designs andthe economic development in Badagry Local Government,Lagos State.

Significance of the Study

The significance of this study is to examine the impact of currency re-design on economic development of Nigeria. These will also analyze naira currency as a mono-cultural product base of the Nigeria economy, knowing how much have being earned, the amount invested in other sector of the economy to boost the economic activities and its resultant multiplier effect. Again, the advantages as well as the disadvantages of the currency re-design will also be discussed.

The study would be of immense help to the government, monetary authority, individuals, economists, students, planners, financial analysts, stock brokers and others who might be interested in researching into the field in the future, by shedding more light into the widely held view about the relationship between financial development and economic development.

The results of this study would be significant for the stakeholders in the oil and gas industry and the Nigerian economy at large. It will help to further enrich the literature in this very important area of macroeconomics and finance in Nigeria. Economic planners, policymakers and macroeconomic managers will find this work as a valuable tool for improved economic planning.

Scope of the Study

The scope of this study is limited to the impact of currency re-design on economic development in Badagry Local Government,Lagos State. Respondents of this study will be limited to the residents of Badagry Local Government,Lagos State, Nigeria.

Research Questions

          The following questions guided the present study;

1. What is the impact of changes in currency re-designs on the economic development in Badagry Local Government,Lagos State?

2. What is the the negative impact of changes in currency re-design on the wellbeing of residents in Badagry Local Government,Lagos State?

3. What is the impact of currency re-design changes on inflation among the people of Badagry Local Government,Lagos State?

4. Is there a  negative relationship between currency re-designs andthe economic development in Badagry Local Government,Lagos State?

Research Hypotheses

The following were hypothesized;

Hypothesis One

H0: There is no significant impact of changes in currency re-designs on the economic development in Badagry Local Government,Lagos State.

H1: There is a significant impact of changes in currency re-designs on the economic development in Badagry Local Government,Lagos State

Hypothesis Two

H0: There is no significant relationship between currency re-designs andthe economic development in Badagry Local Government,Lagos State.

H1: There is a significant relationship between currency re-designs andthe economic development in Badagry Local Government,Lagos State.