CHAPTER ONE

INTRODUCTION
1.1 Background to the Study
The naira will undergo its 16th redesign or revision since 1959 when the
Central Bank of Nigeria (CBN) implements the change by January 31 of this year.
Both the notes and the coins will be affected by the suggested adjustment. It is
asserted that every five to eight years, central banks are allowed to redesign, create,
and circulate new local legal currency in accordance with international best
practice. The naira last had a redesign 20 years ago. (https://thenationonlineng.net)

None of the modifications, however, have generated as much discussion and

interest as the anticipated redesign of the naira in 2023. Some naira denominations
will sport new looks, CBN Governor Godwin Emefiele stated on October 26. The
N200, N500, and N1,000 notes are these. Emefiele stated that the apex bank was
concerned about the handling of the current series of banknotes and cash in
circulation, especially those not connected to Nigeria’s banking system.
(https://thenationonlineng.net).

A major 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
(https://thenationonlineng.net)

1
 What many Nigerians do not know is that the shabby looks of the various
naira notes have resulted in the negative perception of the CBN, which in turn has
increased risks to financial stability. The credibility of the naira and the ability of
the CBN to effectively manage the currency were further put at risk by “increasing
ease and risk of counterfeiting evidenced by several security reports.” According to
Emefiele, “recent development in photographic technology and advancements in
printing devices have made counterfeiting relatively easier. In recent years, the
CBN has recorded significantly higher rates of counterfeiting, especially at the
higher denominations of N500 and N1,000 banknotes
(https://thenationonlineng.net).

Aside from the attacks on the naira, the CBN said it was compelled to
redesign the naira because of the prevailing level of security situation in the
country, especially cases of terrorism and kidnapping with perpetrators holding on
to what Emefiele described as “large volume of money outside the banking system
used as source of funds for ransom.”

By giving the naira a makeover within the timeframe stipulated by the CBN
and given the existing laws around depositing of cash in banks, unscrupulous
individuals keeping naira notes will be forced to deposit these notes in the banks or
forfeit their ill-gotten wealth.(thenationonlineng.net).

The redesign of the Nigerian currency will greatly boost the nation’s cash
flow and is a win in the war against counterfeit money. Recently, the Central Bank
of Nigeria (CBN) issued a statement that it has concluded plans to redesign the
Naira. The CBN Governor cited money hoarding, inflation, and counterfeiting as

2
major reasons for its unusual decision. Also, the Naira is not as secured as it ought
to be, as it is easier to counterfeit theN500 and N1000 denominations
(punchng.com)

This policy has elicited serious debate amongst Economists, Lawyers, and
other policy experts. Many of them hold the view that this policy change holds no
significant economic benefits for the people, and is a distraction in the midst of
serious economic crises buffeting. The Minister of Finance, appearing before the
National Assembly, disowned the policy and slammed it as valueless in fiscal and
monetary terms. But, the President has reaffirmed his approval of the policy and its
benefits, as a tool to control inflation and fight corruption. The question is whether
this policy is the right policy at this time, considering its costs and benefits
(punchng.com).

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 (www.thisdaylive.com)

It is agreed that redesigning currencies could curb counterfeiting, especially

where the existing design is very worn and its security can be easily bypassed. It is

3
also a fact that, redesigning and printing of new currencies will cost billions of
Naira of public funds. CBN should show through credible statistics, the percentage
of counterfeit to each Naira, to warrant this design and printing of new Naira
(www.thisdaylive.com). 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 (thisdaylive.com).

The CBN claims that it is also redesigning the Naira, due to hoarding. This
claim should be scrutinized 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
4
could launder them through luxury purchases, or forex transactions that could
inflate the (thisdaylive.com). Based on this background the researcher wants to
investigate the impact of naira redesign on Nigeria economic development.

1.2 Statement of the Problem

Money plays a vital role in the economy of a nation. In fact, it can be likened
to the human heart in biology which helps to transport blood to all parts of the
body. Without money, no business both in the private or public sector can thrive
because it is needed for the day to day running of activities. People at the helm of
affairs in the government ministries, parastatals, industries, companies etc with
corrupt mindsets have always device means to hoard the naira notes in their quest
to amass wealth to themselves, their children and generations yet unborn.
This leads to the proliferation of money laundering cases in Nigeria.
 Currency hoarding does not allow enough money to flow and this as a result
impedes the smooth running of economy and also brings about high cost of
living.
 Unlawful duplication of currency which is termed counterfeiting also is a
great menace. The above captured reasons make the Central Bank of Nigeria
CBN to redesign naira.
The question is how does the naira redesign affects the economy of Nigeria?.
1.3 Objectives of the Study
The major objective of this study is toinvestigate the impact of naira
redesign on Nigeria economic development.
Other specific objectives include:
i. To find out whether currency redesign has effects on a nation’s economy.
ii. Examine the effects that currency redesign have on a nation’s economy.

5
iii. Ascertain whether there is any relationship between currency redesign and
improvement on a nation’seconomy.
iv. To investigate the problems that led to the redesigning of the currency
1.4 Research Questions
The central research questions for this study are as follows:
i. How does currency redesign affect the nation’s economy?
ii. What are the effects that currency redesign have on a nation’s economy?
iii. What is the relationship between currency redesign and improvement on a
nation’s economy?
iv. What are the problems that led to the redesigning of the currency?
1.5 Significance of the Study
This research work when completed will be of immense benefit to the
researcher as it serves as part of his fulfillment for the award of Higher National
Diploma (ND) in Public Administration.
The findings of the study will be beneficial to students, lecturers, Government of
Nigeria and policy makers. The findings will educate Nigerians on the negative
and positive impact of redesigning naira notes. The findings will consider the
impact of it on inflation in Nigeria. The study will also serve as a reference to
other researchers that will embark on the related topic.
1.6 Scope and Limitations of the Study
This research work is to will covers impact of naira redesigning on Nigeria
economic development. The information of the study will be gotten from central
bank of Nigeria.
However, quite a number of factors constitute constraints in the course of this
study including the following.

6
 Was faced with so many limitations. The study demands that a lot of
resources, time energy, intellectual ability and carefulness be deployed. Thus these
no doubt erupted limitations, since it is very difficult to actualize them as
supposed.

However, the most difficult or limitation is the time factor, in spite of the length
period allowed, the researcher find it difficult to cope with since he is doing the
study and at the same time still have lectures to attend to. Additionally, is the cost
execute the study which also no doubt poses a threat.

1.7 Definition of Key Terms

There are some technical words used in this project, some of these terms and
concept need to be defined with a view of facilitating understanding.
Currency: This is the Nigeria bank notes used as a legal tender in Nigeria.
Currency redesign: These are the changes made on the naira bank notes by
central bank of Nigeria.
Economy: The system of production distribution, and consumption in an economy.
Economic development: Economic Development is programs, policies or
activities that seek to improve the economic well-being and quality of life for a
community. What “economic development” means to you will depend on the
community you live in. Each community has its own opportunities, challenges, and
priorities.
CBN: This is the acronym for Central Bank of Nigeria which is the body saddled
with the authority to control money in Nigeria.
Naira: This is the currency of Nigeria
Naira redesign: Currency redesign is generally aimed at achieving specific
objectives such as improving security of banknotes, mitigating counterfeiting,

7
preserving the collective national heritage, controlling currency in circulation and
reducing the overall cost of currency management.
1.8 Organization of Study

This study will be arranged in five chapters:

Chapter One: this chapter will be discussing on the Introduction, Background to

the Study, Statement of the Problem, Objective of the Study, Significance of the
Study, Research Questions, Scope and Limitations of the Study, Definition of
Terms, and Organization of Study.

Chapter Two: Conceptual Literature Review, Conceptual Clarification, Evolution

of Local Government and Reforms, Administrative Structure of Local Government
in Nigeria, Constraining Factors to Sustainable Democracy, Role of Local
Government on Sustainable Democracy in Nigeria, Effect of Electoral Violence on
Sustenance of Democracy in Nigeria, Nigerian Local Governments and
Sustainable Development thought MDG Initiatives, Challenges towards achieving
Sustainability and the Millennium Development Goals, Issues and Challenges
Confronting Local Government Administration and Sustainable Development in
Nigeria, Local Government Administration and Sustainable Development in
Nigeria: The Way Forward, Empirical Review, Theoretical Framework,
Application of the theory to the work, Gap in Literature

Chapter Three entail the Methodology: which include, Research Design, Area of
the Study, Population of Study, Sample and Sampling Technique, Instrument of
Data Collection, Validity and Reliability of Instrument, Method of Data Analysis.

Chapter Four: entails the Data Presentation and Analysis which include Data
presentation and analysis, Discussion of Findings, Summary of Finding
8
Chapter Five consist summary, conclusion and recommendations of the study.

9
 CHAPTER TWO
LITERATURE REVIEW
2.1 Conceptual Clarification

Policy as a concept
A policy serves the purpose of ensuring that every official action of an organisation
must have a basis or a backing. Terry (1977: 1989) considers that “a policy is an
overall guide that gives the general limits and direction in which administrative
action will take place”. According to him, “a policy defines the area in which
decisions are to be made but it does not give the decision”.
A policy brings about a meaningful relationship between business objectives
and organisational functions as it discourages deviations from planned courses of
action. A policy ensures consistency of action because an organisation is governed
by approved principles. A policy does not have to be rigid, as there should be room
for adjustment if necessary after its formulation.

Perhaps this is why Hoy and Miskel (1978) believe that “policies are not only
formulated but also programmed, communicated, monitored and evaluated”? The
non-rigid nature of policies is confirmed by Lindblom (1959:86) when he describes
policymaking as a “process of successive approximation to some desired
objectives in which what is desired itself continues to change under
reconsideration”. In fact, a good policy is one that can be reviewed as the need may
arise. Lindblom believes that a wise policy maker cannot expect all their policies to
achieve a one-hundred percent success. Regardless of how good a policy may be,
its implementation may introduce some element of imperfection

10
The concept of educational policy
Educational policies are initiatives mostly by governments that determine
the direction of an educational system (Okoroma 2000). According to Osokoya
(1987): Education is a distinctive way in which the society inducts its young ones
into full membership. So every modern society needs some educational policies to
guide it in the process of such initiation.

In the view of Awokoya (1981), educational policy is directed towards

increasing the quality of life of a people. He believes that the objective of any
policy is to satisfy individual needs, community pressures and the degree of
complexity and sophistication to which socialised personnel must be educated and
trained to meet these demands. The following considerations, according to
Awokoya (1981), are necessary to guide the formulation of adequate educational
policy.
• It should be formulated and adopted through a political process which
acknowledges the reality and legitimacy of conflicting interests and desires
among its participants
• It should portray some elements of guidance for properly directed and
coordinated action towards the attainment of the desired goals
• It should contain information on the broad objectives that should be reached
• It should be a binding guide on the actions of those implementing it
• It should be enforceable and enforced by the society which formulates it.

Kerr (1976) believes that, for a policy to qualify as an educational policy, it

must be distinct from other policies. In his view, educational policies are
distinguishable from other policies by the fact that policies on education are part
and parcel of educational institutions. However, it is important to note that not all
11
policies formulated in educational institutions can qualify as educational po1icies.
Generally, policies must be rational and purposeful to enable them to stand the test
of time.

Uchendu (2000) described policy as a fundamental process through which

an institution attains stability and undertakes order changes as part of its ultimate
goal. Policies are written or unwritten statement that guides the present and future
thinking initiatives. It directs the decision of management (Babalola, 2003). They
are written when there are documents for reference purposes and are unwritten
when made in form of pronouncements, that is, policy statement by people in
power and authority. In other words, policies are guides that usually provide
latitude for operations. (Besong, Fan, Ada and Adalikwu, 2009). Educational
policy of Nigeria is a general statement containing principles, regulations and rules
that govern many of the decision, on how to educate the citizens. It seeks to answer
questions about the purpose of education, the objectives that it is designed of attain
the methods for attaining them and the tools for measuring their success or failure.

There should be a check in frequent changes in the system because policy

inconsistency affects standards. Policies that followed the due process of law and
public acceptability should not be thrown to the wind, by succeeding
administration, instead areas of amendment could be identified and addressed for
the purpose of continuity. Improvement policy implementation in education is a
conspicuous national problem that has taken centre stage in Nigeria. Okoroma
(2006) observed that there is a gap between educational policies and goal
attainment due to inadequate implementation of policies. Formulation of policy

12
sets the stage for implementation which according to Ukeje (2003) is the most
important aspect of planning.

In Nigeria, policy making at times is a mere attempt to rationalize political

decisions. Actions are hastily and expediently conceived. The consequence of this
is that many of Nigeria’s educational policies are not reduced to those goals and
objectives which can easily be attained given the range of problems and
feasibilities involved in the allocation and utilization of available human and
material resources

Concept of Implementation
Ogunode, &Ahaotu (2020) Implementation is the systematic ways of
executing programme, policies and project. Implementation is the act of carrying
out a planned actions and programme. Implementation is the stage by stage of
carrying out a defined and planned programmes. Implementation means carrying
out an assigned task..Manafa, (2011) policy implementation is said to be carrying
out of the policy formulated in concrete terms. Implementation becomes possible
when resources have been committed to it. Implementation stage is the stage where
the preparations made earlier, the plans, the designs and analyses proposed are
tested to see how really they are (Manafa, 2011, Egonmwan, 1991). Ogbonnanya
(2010) defines policy implementation is said to be carrying out of the policy
formulated in concrete terms. From the definition from above, implementation is
the systematic process of carrying out policies, programme or projects as planned.
The implementation of educational policies is determine by the following factors:
the capacity of the implementer, the numbers of teachers available, the numbers of

13
infrastructural facilities available, the funds available, the political will and the
level of monitoring and evaluation system available.

2.1.1 Changes in Nigeria’s Currency Since 1960

The 2022 Naira redesign programme was a continuation of a long-held
tradition of redesigning bank denominations as a means of currency management,
which has featured in Nigeria’s financial history since independence. The
attainment of independence in 1960 was a turning point in the history of the
country, which was originally established as a British colony in 1914, following
the amalgamation of the Southern and Northern Protectorates. The attainment of
independence itself was a result of many factors, among which was an intense
struggle by the leaders of the Nigerian nationalist movement (see Crowder, 1978).
The struggle precipitated the establishment of many institutions as part of the
preparations for the nation’s independence. One of these institutions was the CBN,
established in 1959 (Abubakar
&Wuam, 2021: xiii). The primary mandate of the CBN was the issuance of the
country’s legal tender. Among other functions, the CBN was also saddled with the
responsibilities of safeguarding Nigeria’s external reserves, promoting monetary
stability and ensuring sound financial structure. The metamorphosis of the
Nigerian currency could partially be understood in the light of the evolving nature
of the Central Bank, which produces and regulates it. Originally enacted in 1958,
for instance, the CBN Establishment Ordinance/Act was variously amended in
1962, 1969, 1991 and 2007 (see CBN, 2007).
Sections 18 and 19 of the CBN Act gives the apex bank, among other
provisions, the power to issue, reissue and exchange currency; withdraw currency
from circulation and ensure their safe custody and destruction; and determine the
14
forms and designs of banknotes with the approval of the President, on the
recommendation of the CBN Board (CBN, 2007: 9). In line with these provisions,
the CBN had, for various reasons, redesigned, produced and reissued currency in
Nigeria during various phases of the country’s history. At the time CBN was
established in 1959, the money in circulation were the notes and coins of British
colonial currency, known as Pounds and Shillings, issued by the West African
Currency Board (WACB). When the CBN began operations, it redesigned the
Pounds and Shillings and replaced the existing colonial currency with the new
notes. The redesigned currency was, however, not radically different from the
colonial currency. The first time Nigeria asserted its independent status and
nationality through the currency was in July 1962, when banknotes and coins were
redesigned in line with the notion of monetary sovereignty (Nduwugwe, 2007: 35).

Six years later, amidst the chaos of the Nigerian Civil War, the then Federal
Military Government (FMG) under the leadership of Lieutenant Colonel Yakubu
Gowon redesigned Nigerian currency. The Civil War was a fierce military
confrontation between the Nigerian armed forces and the forces of Nigeria’s
former Eastern Region, which was unilaterally declared as the Republic of Biafra
by Lieutenant Colonel ChukwumekaOdumegwuOjukwu. The war, fought for over
30 months (1967-1970), led to colossal loss of lives and properties across the
country (Adejo, 2008: 1-2). As a war strategy and a means to contain the crises, the
FMG announced a currency redesign in January 1968 with the view of weakening
the economic base of the proclaimed Biafran state. At that time, the primary
objective of the currency redesign was to render all the banknotes amassed by the
Biafrans, to fund war and run their government, useless. Therefore, the CBN
simply changed the colours of existing denominations. £5 (five pounds), for
instance, was changed from blue/purple to mid-brown, £1 (one pound) was
15
changed from red to dark brown, 10s (ten shillings) from green to dark blue and 5s
(five shillings) from purple to green (Nduwugwe, 2007).

As noted earlier, Nigeria’s march towards monetary sovereignty began as early as

1962. In that year, the Decimal Currency Committee was set up and the Committee
submitted its report in 1964. The Committee recommended the revolutionising of
the Nigerian currency, not only by renaming and redesigning it, but also by
decimalizing it. This was not implemented until nine years later, in 1973. Nigerians
saw the change coming in 1971 when the Head of State, Yakubu Gowon, now a
Major General, announced that decimal currency would be introduced in 1973.
Thus, in 1973, the FMG launched what could be called the true currency of Nigeria
as an independent nation state—the Naira and Kobo. This was the pioneer currency
unique to Nigeria in terms of name and design. It was also a decimal currency. The
decimalization of currency denomination was a means of converting from a
traditional currency denomination to a “decimal” system, marked by the use of two
units differing by a factor of 100 (Nwaoba, 2010).

The major currency unit was the Naira (₦), which was equivalent to the
erstwhile ten shillings; and the minor unit was the kobo, a hundred (100) of which
was equivalent to one Naira. The name, Naira, was derived from the country’s
name, and its minor unit, Kobo, was the popular name for which the British coin of
‘one penny’ was known among locals in Nigeria (Fayemiwo, 1991: 14). At the
time of the introduction of the Naira and Kobo in 1973, four denominations of
banknotes were issued by the CBN. These were 50k (fifty kobo), ₦1 (one Naira),
₦5 (five Naira), and ₦10 (ten Naira). The CBN also introduced coins in the values
of 1/2k (half kobo), 1k (one kobo), 10k (ten kobo) and 25k (twenty five kobo)
(Chuckwu, 2010: 93-94).

16
 The next change in the Nigerian currency was the infamous canjin Buhari
which came in 1984 masterminded by the military regime of General Muhammadu
Buhari. Against a backdrop of inflation, budget deficit and corruption which had
their origins during the oil boom and oil glut of the 1970s and early 1980s, the
regime embarked on a sudden and swift currency redesign programme. Existing
banknotes, with the exception of 50k, were withdrawn from circulation and new
notes released to the public in new colours, within two weeks. ₦1 note was
changed from red to yellow, ₦5 from green to deep pink, ₦10 from pink to red,
and ₦20 from yellow to green. Since the main objective of the currency redesign
was to combat corruption and inflation, the policy achieved its objectives to an
appreciable level because many corrupt politicians, who hoarded huge amounts of
the old notes, as well as money launderers, could not change the huge amounts
they had amassed before the deadline. On the other side, however, the currency
redesign of 1984bankrupted many business owners, especially in the North where
people’s finances were mostly outside the banking system (Abubakar, 2016).

While many Nigerians were yet to recover from the negative consequences
of the currency redesign of 1984, the CBN appointed a firm, Thomas De La Rue
Limited, to undertake a comprehensive assessment of the Nigerian currency in
1989. This was part of the efforts of the apex bank to ensure continuous
management of the Nigerian currency system. The firm recommended the
redesigning of the entire banknotes of ₦5, ₦10 and ₦20; the introduction of new
₦50, ₦100 and ₦500 notes; and new 10k, 5k, ₦1, ₦5 and ₦10 coins (Abubakar,
2016). These recommendations were, however, not fully implemented; the CBN
could only introduce ₦50 in 1991. The new denomination, which became the
banknote with the highest value, was coloured light blue and had the portraits of
Yoruba, Hausa and Igbo men, representing the three major ethnic groups in the
17
country. As regards the coins, the 1991 redesign saw the conversion of 50k and ₦1
into coins and 10k was changed in shape and colour. Old five kobo (5k) was
scrapped. Although the authorities claimed that the introduction of ₦50 was to
enhance the efficacy of the currency system due to increase in public and private
spending, many Nigerians criticised the 1991 changes in the currency. Many
people thought that the demonetization of a smaller denomination and the
introduction of a higher one was a means to depreciate the value of the Nigerian
currency, which was an important objective of the Structural Adjustment
programme initiated by the then FMG under General Ibrahim BadamasiBabangida,
in 1986 (Abubakar, 2016).

By the mid-1990s, the CBN introduced yet another step toward changing the
Nigerian currency. This was known as the millennium package, organized against
the backdrop of the expansion of population and economic activities in the country.
This programme led to the introduction of ₦100 note in December 1999, ₦200
note in November 2000, ₦500 note in April 2001 and ₦1000 in October 2005
(Bello, 2007: 49). From these periods to date, ₦200, ₦500 and ₦1000 remain the
three highest denomination banknotes in the country. In May 2007, another change
was initiated by the CBN to redesign ₦5, ₦10, ₦20 and ₦50. It began with the
printing and circulation of ₦20 polymer notes in 2007 and was not completed until
2009 when ₦5, ₦10 and ₦50 were equally printed in polymer. The aim was to
make the money more enduring and resistant against counterfeiting. The currency
redesign between 2007 and 2009 was not simply from paper to polymer, but also in
size, hue, particulars and security features. Their colours, however, remained the
same (Nwaoba, 2010). At the same time, a new ₦2 coin was introduced, while ₦1
and 50k coins were redesigned and reintroduced. 1/2k and 25k coins were also
withdrawn from circulation.
18
 As Nigeria was about to celebrate its 50th Independence Anniversary in
2010, the ₦50 commemorative note was launched by President Goodluck Jonathan
on 29th September, 2010 (CBN, 2010). A similar initiative was replicated in 2014
when a redesigned ₦100 note was introduced to commemorate one hundred years
of Nigeria’s existence as a nation, from 1914 to 2014. The note, which was
unveiled on November 12 and began circulating on December 19, was designed
with enhanced the security features with the view of resisting counterfeiting. At the
time of their introduction, the release of these commemorative notes did not lead to
the withdrawal of existing ₦50 and ₦100 notes. They circulated simultaneously
(Abubakar, 2016).

Table 1: Changes in the Nigerian Currency since 1959

New
Year Currency Remarks
Denominations

July 1, 1959 Pound and CBN issued Nigerian notes and

Shillings coins and withdrew the WACB
notes and coins.

July 1, 1962 Pound and Legal tender status was changed to

Shillings reflect Nigeria’s independence.

1968 Pound and Notes were changed as a war

Shillings strategy.

January Naira and 1/2k, 1k, 5k, 10k, Decimal notes and coins were first
1, Kobo 25k coins ₦1, ₦5, issued. ₦1 replaced £1 as the major
1973 ₦10 notes. unit of currency.

19
February Naira and ₦20 (i) Highest denomination of ₦20
11, 1977 Kobo note was first issued.
(ii) First currency note bearing
the portrait of a Nigerian citizen.

July 2, 1979 Naira and ₦1, ₦5 and ₦10

Kobo

1991 Naira and Smaller 1k, 10k, The new notes bore the portraits of
Kobo 25k, three Nigerian citizens.
50k, ₦1 coins and
₦50 notes

1992 Naira and ₦1 notes were coined.

Kobo

December Naira and ₦100 Introduced as the highest

1, 1999 Kobo denomination of the time.

November Naira and ₦200 Introduced as the highest

1, 2000 Kobo denomination of the time.

April Naira and ₦500 Introduced as the highest

4, Kobo denomination of the time.
2001

October 12, Naira and ₦1000 Introduced and remain the highest
2005 Kobo domination to date.

February Naira and Redesigning of ₦50, ₦20, ₦10 and

28, 2007 Kobo ₦5 (in polymer notes). Withdrew

20
 1/2 k and 25k from circulation.

September Naira and Launched a new design of ₦50

29, 2010 Kobo commemorative note and non-
circulating coin as part of activities
to celebrate
Nigeria’s Independence
Anniversary.

November Naira and Launched a new design of ₦100

12, 2014 Kobo commemorative note to celebrate
one hundred years of Nigeria’s
existence as a nation, from 1914 to
2014.
Source: This is a modified version of the table in P. Nwaoba (2010).

2.1.2 Cashless Policy and the e-Naira

From 2014, Nigerian currency did not witness any change until 2021 when
the e-Naira was introduced. The e-Naira is a Central Bank Digital Currency
(CBDC), which is the digital equivalent of the cash Naira. Just like the physical
cash, the e-Naira is an official legal tender of Nigeria and is part of the currency in
circulation. But unlike the physical cash whose transactions could be carried out
through bank accounts and e-banking systems that are direct liabilities of financial
institutions, the e-Naira transactions are done through the e-Naira Wallets, which
are direct liability of the CBN (CBN, 2021 a: 1-3). The major reasons behind the
introduction of the virtual currency, likened to crypto-currencies, include the need
to improve availability and usability of the Nigerian currency, support a resilient
21
payment ecosystem, encourage financial inclusion, reduce the cost of cash
production, enable direct welfare disbursement to citizens, increase revenue and
tax collection, facilitate Diaspora remittances, and reduce the cost and improve the
efficiency of cross-border payments (CBN, 2021).

The launching of the e-Naira was part of Nigeria’s drive towards creating a
digital and cashless economy. This drive, which aims towards reducing the amount
of physical cash in circulation and encouraging more digital and electronic-based
transactions, was ignited with the official take-off of the cashless policy of the
CBN on April 1st, 2012. The basic objectives of this policy was to, among other
things, reduce the cost of banking services, checkmate the high level of corruption
in the country and improve the effectiveness of monetary policy in managing
inflation and driving economic growth. At its take-off, Lagos was chosen as the
testing ground for the policy. The policy was, however, expanded to cover the
Federal Capital Territory (FCT) Abuja and the five states of Kano, Rivers, Abia,
Ogun and Anambra before it finally extended to other states of the federation
(Ovat, 2012).

Over the years, the policy has continued to evolve with the incorporation of
various means of online transactions into the banking system and the introduction
of policies and programmes directed towards reducing cash transactions. Some of
these include the introduction and use of Automated Teller Machines (ATMs), the
Point of Sale (POS) terminals, alerts system, adjustment to 10 digits uniform
account numbers, mobile money payment system and prohibition of encashment of
third party cheque beyond ₦150,000 (Ovat, 2012). With these policies and
programmes, restrictions and limits were placed on customers of commercial banks
on depositing and withdrawing cash beyond certain amounts. Customers could,
22
nonetheless, carry out transactions beyond the pegged limits but must pay a certain
amount of money for such transactions. The essence was to shift the economy of
the country from its century-long history of cash transactions to digital and
cashless ones (Ovat, 2012). It was at the height of this drive that the e-Naira was
introduced in 2021. It was equally in further pursuance of this policy, alongside
other factors, that the 2022 Naira redesign programme was launched.

2.1.3 The 2022 Naira Redesign Programme and the Local Economy

The Naira redesign programme of 2022 was not planned and implemented
out of the whims of the Management of the CBN or even the Presidency. It was
rather premised on the Apex Bank’s understanding of the local situations and
global best practices necessitating currency redesign. The five most basic end goals
of the Naira redesign programme were to enhance the management of Nigerian
currency; promote the drive towards a digital and cashless economy; reduce
incidences of terrorism and kidnapping; fulfill the global best-practices of
redesigning national currencies in every five to eight years; and quite subtly,
sanitise the 2023 general elections. The major impediments to these end-goals are
excessive cash-hoarding and the prevalence of Naira counterfeiting in the country,
which the CBN announced as the main factors that behind the programme. The
question, however, remains: after the elapsing of the three months (October 26,
2022 – February 10, 2023) within which the programme was designed to be
implemented, did it achieve its end-goals?

When the programme was launched in October 2022, the hoarding of

banknotes, especially among the country’s elite corps, was at its peak. A data
released by the CBN indicates that at the time when the programme was launched,

23
over 85 per cent of the money in circulation was outside the vaults of commercial
banks and supposedly held by the public. In the words of the

CBN Governors, “at the end of September 2022, available data at the CBN
indicates that ₦2.73 trillion out of the ₦3.23 trillion naira currency in circulation
was outside the vaults of commercial banks across the country” (CBN, 2022). Only
₦500 billion was within the banking system. This challenge, coupled with the
rapid increase in the amount of currency in circulation—which morphed up from
₦1.46 trillion in December 2015 to ₦3.23 trillion as at September 2022—
mandated the management of the apex bank to embark on currency redesign as a
means of ensuring effective currency management. From the beginning of the
programme in October 2022 to 29th January, 2023 (eleven days to the February
10th deadline, set for the demonitisation of the old notes) the CBN had recollected
75 percent (₦1.9 trillion) of the ₦2.73 trillion of the old notes that were outside the
banking system when the programme was launched (CBN, 2023).

In pursuance of the cashless policy, the Apex Bank released only ₦400
million of the new notes to replace the ₦1.9 trillion of the old notes it recollected.
It also pegged weekly limits on the amount of new notes that could be withdrawn
by individuals and organisations (CBN, 2022). Initially, the CBN directed that
over-the-counter cash withdrawals by individuals and organisations be limited to
₦100,000 and ₦500,000 respectively. On the directives of the National Assembly,
however, the limit was reviewed upward to ₦500,000 for individuals and ₦5
million for organisations (Adegboyega, 2022). This attempt by the CBN to force
the Nigeria’s jump into a cashless economy threw the country into an
unprecedented cash crunch, which exposed the weaknesses of Nigeria’s e-banking
channels: commercial banks had limited cash to dispense through ATMs and
24
mobile banking applications became impotent due to high traffic of electronic
transactions necessitated by the cash crunch. At the height of the cash crunch,
which spanned throughout February and March 2023, one author described the
critical situation created by the scarcity of cash in an article titled “Nigeria’s
Season of Cash Scarcity”. He wrote:

Digital payments run by banks are often unreliable, leaving businesses

struggling as growing numbers of customers have been unable to find cash to pay
for goods and services. The situation has created a parallel market for people to
illegally sell the new banknotes. The cash supply crisis has disrupted businesses
across the country, forcing a good number of businesses to shutdown. The two
critical sectors of the economy – trade and commerce as well as agriculture – have
been very badly affected because their transactions are mainly in cash, especially in
rural areas. This policy has brought rural economic activities into a halt (Morphy,
2023).

The adverse effects of the cash scarcity on local populations propelled the
governments of Kaduna, Kogi and Zamfara States to initiate a suit before the
Supreme Court challenging the haphazard implementation of the programme. On
March 3, the Court ruled that the old notes be brought back into circulation; and
that they remain legal tender up till December 31st 2023 (Olabimtan, 2023). On the
whole, nonetheless, the programme has inadvertently promoted cash-hoarding:
whereas the elites have deployed all means at their disposal to secure and hoard the
new notes from the commercial banks, rural dwellers no longer trust banks and are
unlikely to deposit their money in banks because of perceived difficulty of
accessing banked funds during times of need. The programme was also not able to
tame bribing and vote buying during the 2023 general elections. During the
25
presidential and National Assembly elections, held on February 25th, as well as the
gubernatorial and state assemblies elections, held on March 18th, the cash crunch
constrained, among other things, the smooth conveyance of electoral officers and
election materials to voting units. Amid the cash crunch also, politicians used
wrappers, food items, bank transfers and hard currencies such as CFA Franc and
the US Dollar to buy votes and bribe election officials (Ndujihe, 2023).

By October 2022 when the programme took-off, Naira counterfeiting was on

the rise. According to the CBN Governor, Godwin Emefile, “recent developments
in photographic technology and advancement in printing devices have made
counterfeiting relatively easier. In recent years, the CBN has recorded a
significantly higher rate of counterfeiting especially at the higher denominations of
₦500 and ₦1000” (CBN, 2022). This claim by the CBN Governor was confirmed
by the level at which currency counterfeiting was being practised in Nigeria.
According to media reports, for instance, about ₦64.7 million of counterfeit
currency was confiscated by the CBN in 2019 alone. This was followed in 2020 by
the CBN’s confiscation of a total of 67,265 pieces of counterfeit banknotes with a
nominal value of ₦56.8 million. According to the 2020 annual report of the apex
bank, ₦1000 and ₦500 formed the better part of the confiscated counterfeit
currency of the year 2020, accounting for 69.06 per cent and 30.79 per cent
respectively (CBN, 2020). The trends in 2019 and 2020, for example, are sharply
in contrast with what was obtainable in 2016, when according to a press release
signed by the Acting Director of Corporate Communications of the CBN, Isaac
Okorafor, the “prevalence of counterfeit notes in Nigeria from January to
December 2016 was less than one per cent, precisely 0.0014% (CBN, 2016: 1).
Although fake new notes were spotted in circulation a few weeks after the new

26
notes began circulating (Nweze, 2022), the chances for counterfeiting is
significantly reduced by the pursuit of cashless transactions. This would even be
more effective when a significant number of Nigerians begin to use the eNaira,
which is extremely difficult, if not impossible to counterfeit.

Quite ambitiously, the Naira redesign programme was meant to accelerate

the drive towards reducing incidences of kidnapping and terrorism: the target was
to reduce notes in circulation as a means of minimising chances of ransom
payments (CBN, 2022). Of course, this aim of the programme has suffered some
blows because terrorists have variously resorted to collecting ransom in other
currencies such as the CFA Franc. In fact, in January 2023, a viral video showed
some terrorists in the forest flaunting the new banknotes. Its partial success could,
however, be seen in a widely reported incident where members of the notorious
Islamic State West Africa Province (ISWAP) blocked a highway in Borno and
distributed ₦100,000 of the old notes to each passenger, probably out of the fear
that the old notes could expire in their own custody (Okoye, 2023).

2.1.4 Naira Redesign and Cashless Policy in Nigeria

Currency redesign is an activity of a sovereign nation to either change or
modify the existing currency in a country. This can be done for several reasons
like; improving the security features of the new currency, reducing the money
supply, reducing inflation, investigating incomes from nefarious sources and many
other economic indicators that affect the financial status of a nation.

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

27
bank aims to control the money supply, and inflation, as well as, curb counterfeit
currency.

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

Historically, the re-design of the Naira started in the last 30 years. In 1973,
the naira was changed from metric to decimal which precipitated the change from
pounds to naira and kobo. In 1977, the highest denomination at the time, the 20
naira note was introduced. In 1979 , the government minted the N1, N5, and N10
notes.

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

Despite the various monetary policy measures and reasons for the re-design
of the naira by the CBN, there were both positive and negative effects of the re-
design. From a 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 payments may be aborted.

28
 In my opinion, the cost of 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.

From the monetary policy perspective, global best practice demands that
countries restructure their currencies every five to eight years. Thus, the re-design
of the Naira by the apex bank is justifiable; it’s a crucial step towards ameliorating
the large volumes of money in circulation outside the banking system, but the
problem is more than just the redesign of the low confidence levels of Nigerians in
the Naira.

Furthermore, on November 23, 2022, President Muhammadu Buhari

unveiled the new naira note redesign for N200, N500, and N1000. On the
unveiling, the currency has a resemblance to the previous currency, the only
difference is the colour change, and the expectation of the redesign is not appealing
to the public. Due to these similarities in colours can cause a loss of funds during
financial transactions in low power supply areas. More so, counterfeits will be
highly circulated in the economy because the redesigned naira can be massively
duplicated in colour, which makes it hard to easily detect counterfeits, and one of
the ways for curb this counterfeits is for CBN to add more security features to the
redesigned naira.
The new naira notes redesign has the same colour as N20, N50 and N10 notes.
Voices against the redesign have been raised in fact that the public is dissatisfied
with the new redesign in terms of macroeconomic uncertainties.

However, on December 6, 2022, the Banking Supervision Department of

CBN brought out a new policy that will work in line with the new naira redesign
29
and cashless policy that will be taking effect from January 9, 2023, with the
following details:

1. Maximum cash withdrawal by individuals and organizations shall be between

N100,000 to N200,000 per week.

2. A customer can only withdraw a maximum of N20,000 from Automated Teller

Machine (ATM) daily and N100,000 weekly.

3. Maximum cash withdrawal from POS will be N20,000 per day.

Three vital things to note from this CBN policies are:

1. Retrieve all idle currency from the economy by currency redesign.

2. Promote cashlessness, traceability and accountability by setting cash

withdrawal limits and charges. The idea is to keep the currency within the
banking system as possible.
3. Reduce recurring expenditure of printing naira. CBN spend about N58 billion to

print approximately N2.5 billion worth of currency.

This policy has both positive and negative implications for the economy of
Nigeria. On the positive angle, this policy aims at promoting a cashless policy,
improving the electronic use of the payment, curtailing vote buying in the
forthcoming 2023 election and also curtailing inflation.

On the negative angle, it has humongous consequences, because it will make a lot
of people hoard cash at home, affect businesses and industry in Nigeria and it has a
high chance of declining Nigeria's Foreign Direct Investment (FDI). In addition,
many industries and businesses are likely to experience slow growth that will
likely lead to a decline in Nigeria's real GDP and other macroeconomic
uncertainties
30
2.1.5Brief History of Global Currency

Reserve currencies have come and gone with the evolution of the world
geopolitical order. International currencies in the past have (excluding those
discussed below) included the Greek drocfima, coin in the fifth century BC. The
Roman denarii, the Byzantine solidus and Arab dinar of the middle ages and the
French Franc. The Vientiane ducat and the Florentine Florin became the gold-
based currency of choice between Europe and Arab world from the 13th to 16th
centuries, since gold was easier than silver to mint in standard sizes and transport
over long distances. It was the Spanish silver dollar, however, which created the
first true global reserve currency recognized in Europe, Asia and America from the
16th to 19th centuries due to abundant silver supplies from Spanish America
(Gary, 1996). While the Dutch guilder was a reserve currency of somewhat lesser
scope used between Europe and the territories of Dutch colonial Empire from 17th
to 18th centuries, it was also a silver standard currency fed with the output of
Spanish American monies flowing through the Spanish Netherlands. The Dutch,
through the Amsterdam Wissel bank (the Bank of Amsterdam, were also the first
to establish a reserve currency whose monetary unit was stabilized) through
American monies output and Spanish fiat which can be considered as a precursor
to modern day monetary policy (Coyle, Kim & O'Brien, 2021).
It was therefore the Dutch which served as the model for bank money and
reserve currencies stabilized by central banks, with the establishment of Bank of
England in 1694 and Bank of France in the 19th century.
The British Pounds Sterling, in particular was poised to dislodge the Spanish
dollars hegemony as the rest of the world transitioned to the standard gold in the
last quarter of the 19th century. At that point, the UK was the primary exporter of

31
manufactured goods and services and over 60% of the world trade was invoiced in
Pounds Sterling. British Banks were also expanding overseas; London was the
world center for insurance and commodity markets and British capital was the
leading source of foreign investment around the worlds; sterling soon became the
standard currency used for International commercial transactions (Gary, 1996).
Attempts were made in Inter war period to restore the gold standard. The
British gold standard Act reintroduced the gold bullion standard Act 1925. (10)
followed by many other countries. This led to relative stability followed by
deflation, but because the onset of the Great depression and other factors; global
trade greatly declined and the gold standard fell. Speculative attacks on the Pound
forced Britain entirely off the golden standard in 1931.
After the World War II, the International Financial system was governed by
a formal agreement, the Bretton woods system under this system, the USD was
placed deliberately as an anchor of the system, with the US government
guarantying other central banks that they could sell their dollar reserves at a fixed
rate for gold. In the late 1960s and early 1970s the system suffered setbacks
ostensibly due to problems pointed out by Triffin dilemma – the conflict of
economic interest that arises between short-term domestic objectives and long-term
International objectives when a national currency also serves as a world reserve
currency.
Additionally, in 1971, President Richard Nixon suspended the convertibility
of the USD to gold, thus creating fiat global reserve currency system. However,
gold has persisted as a significant reserve asset since the collapse of the classical
gold standard (14). Following the 2020 economic recession, the IMF opined about
the emergency of “a new Bretton woods moment” which could imply the need for
a new global reserve currency system. John Maynard Keynes proposed the bancor,
32
a super national currency to be used as a unit of account in International trade, as a
reserve currency under the Bretton woods conference of 1945. The bancor was
rejected in favour of US Dollar.
A report was released by the United Nations Conference on Trade and
Development in 2010, which called for the abandoning of the US Dollar as a single
major reserve currency. The report states that the new reserve system should not be
based on a single currency or even multiple currencies but instead permit the
permission of international liquidity to create a more stable global financial
system. Countries such as Russia, China Central banks, and economic analysts and
groups such as the Gulf cooperation council have expressed a desire to see an
Independent new currency replace the dollar as a reserve currency
2.1.6 History of Nigerian Currency
During the pre-colonial era, different cultures used a variety of items as
mean of exchange. These included cowries, manilas, beads, bottles, and salts
among others.

The first major currency issue in Nigeria was undertaken sequel to the
colonial ordinance of 1880 which introduced the Shillings and Pence as a legal
tender currency in British West Africa. The units of coins managed by the bank of
England were one Shilling per Pence, ½ Penny and 1/10 Penny were distributed by
a private bank, the Bank of British West Africa till 1912.

From 1912 – 1959, the West African Currency Board (WACB) issued the first
set of banknotes and coins in Nigeria, Ghana, Siera-Leon and the Gambia. The
highest banknote, while the WACB issued banknotes, coins were withdrawn. It
was not until 1st July, 1962 that the currency was changed to reflect the country
republican status. The banknotes which bore the inscription ‘Federation of Nigeria’

33
and now had ‘Federal Republic of Nigeria’ inscribed at the top. The notes were
changed again following the misuse of the currency banknotes during the circular.

Sequel to the decision of the FG to change from metric to decimal, the name of
the Nigerian currency was changed in January, 1973. The major unit of currency
which used to be one Pound (1 Pound) ceased to exist and the one naira which was
equivalent to ten Shillings became the major unit, while the minor unit was called
the Kobo, hundreds of which made one naira.

On 11th February, 1977, a new banknote with the value of twenty naira note (N
20) was issued. It was the highest denomination introduced at the time as a result
of the growth of the economy, the preference for cash transactions and the need for
convenience. The Bank note was the first in Nigeria to bear the portrait of a
prominent citizen, the late Head of State, General Ramat Murtala Mohamed (1938-
1976) who was the torch bearer of Nigeria’s revolution in July, 1975. The note was
issued on the first anniversary of his assassination as a fitting tribute to an
illustrious son of Nigeria. He declared as a National Hero on 1st October, 1978.

The name “naira” was coined from the word Nigeria by Chief Obafemi
Awolowo, First Premier of Western Nigeria who later became federal
commissioner of finance. Till Dec. 1972, the official currency of Nigeria was
Pound because Nigeria was the British colonial administration so, when the first
naira was introduced, it replaced Nigeria Pound at a rate of 2 naira to 1 Pound. It
made Nigeria, the last former colony to abandon the Pound currency system in
favour of the decimal currency system.

The Central Bank of Nigeria (CBN) is the apex monetary authority of Nigeria
located in Abuja, Nigeria, Africa, and was founded in 1958. The CBN issues legal

34
tender currency in Nigeria; maintain external reserves to safe guard the
international value of legal tender currency; promote a sound financial system in
Nigeria; and acts as the banker of last resort, and provide economic and financial
advice to the federal government of Nigeria (FGN).

2.1.7 Currency Re-design and Monetary Policy in Nigeria

Currency permits private and public-sector agents of different countries to
interact in international economic and financial activity by using it as a means of
payment, a unit of account or a store of value.
Over the years, the objectives of monetary policy have remained the
attainment of internal and external balance of payments. However, emphasis on
techniques/instruments to achieve those objectives have changed over the years.
There have been two major phases in the pursuit of monetary policy, namely,
before and after 1986. The first phase placed emphasis on direct monetary controls,
while the second relies on market mechanisms. In 2021, monetary policy focused
on easing the impact of shocks on the Nigerian economy which emanated from the
various developments in the global and domestic economies (CBN, 2021). This
prompted the widespread agreement in Nigeria that the financial crisis was both
triggered and propagated by failures within the financial system. More open,
however, remains the debate on its underlying causes.
In April 1984, the colours of all the banknotes in circulation in Nigeria were
changed with the exception of the 50 Kobo banknote to arrest the currency
trafficking prevalent at the time. In 1991, the 50K and 1 were both coined.
On 1st July, 1959 the Central Bank of Nigeria (CBN) issued Nigerian currency
banknotes, while the WACB-issued banknotes and coins were withdrawn. It was
not until 1st July, 1962 that the currency was changed to reflect the country’s

35
republican status. The banknotes which bore the inscription, ‘FEDERATION OF
NIGERIA’, now had, ‘FEDERAL REPUBLIC OF NIGERIA’, inscribed at the top.
The notes were again changed in 1968 following the misuse of the currency
banknotes during the civil war.
Sequel to the decision by the government to change from the metric to
decimal, the name of the Nigerian currency was changed in January, 1973. The
major unit of currency which used to be £1 ceased to exist and the one naira which
was equivalent to ten shillings became the major unit, while the minor unit was
called the kobo; hundred of which made one naira. On 11th February 1977, a new
banknote with the value of twenty naira (20) was issued. It was the highest
denomination introduced at the time as a result of the growth of the economy; the
preference for cash transactions and the need for convenience.
The banknote was the first in Nigeria to bear the portrait of a prominent
Nigerian citizen, the late Head of State, General Murtala Ramat Muhammed
(1938-1976) who was the torch bearer of the Nigerian Revolution in July, 1975.
The note was issued on the 1st anniversary of his assassination as a fitting tribute
to a most illustrious son of Nigeria. He was declared a national hero on 1st October
1978 (CBN, 2015).
On 2nd July, 1979, new currency banknotes of three denominations, namely
1, 5 and 10 were introduced. These notes were of the same size i.e. 151 X 78 mm
as the 20 note issued on 11th February, 1977. In order to facilitate identification,
distinctive colours were used for the various denominations. The notes bore the
portraits of three eminent Nigerians, who were declared national heroes on 1st
October, 1978. The engravings at the back of the notes reflected various cultural
aspects of the country (The Guardian, 2022).

36
 In April 1984, the colours of all the banknotes in circulation were changed
with the exception of the 50 Kobo banknote to arrest the currency trafficking
prevalent at the time. In 1991, the 50K and 1 were both coined. In response to the
expansion in economic activities and to facilitate an efficient payments system, the
100, 200, 500 and 1000 banknotes were introduced in December 1999, November
2000, April 2001 and October 2005 respectively (CBN, 2015).
On 28th February, 2007, as part of the economic reforms, 20 was issued for
the first time in polymer substrate, while the 50, 10 and 5 banknotes; as well as 1
and 50K coins were reissued in new designs, and the 2 coin was introduced. On
30th September, 2009 the redesigned 50, 10 and 5 banknotes were converted to
polymer substrate following the successful performance of the 20 (polymer)
banknotes. Thus, all lower denomination banknotes were now printed in the
polymer substrate.
Finally, the CBN, as part of its contribution towards the celebration of the
nation’s 50th anniversary of Nigeria’s Independence and 100 years of its existence
as a nation, issued the 50 Commemorative polymer banknote on 29th September,
2010; and the N100 Commemorative banknote on 19th December, 2014
respectively.
The Central Bank of Nigeria Governor, Godwin Emiefiele observed that over three
trillion-naira notes are supposedly in circulation but merely a trillion have been
accounted for by the banks. So, the presumption is that the remaining unaccounted
couple of trillions are stockpiled somewhere.
In line with the provisions of section 2(b), section 18(a) and section 19(a) and (b)
of the 1999 Nigerian constitution, the management of the CBN has sought and
obtained approval of President of the Nigeria, President MohammaduBuhari
(PMB) to redesign, produce, release and circulate new series of bank notes of
37
N200, N500 and N1000 at all levels”. He added that, “in line with the approval,
they have finalised arrangements for the new currency to begin circulation on
December 15, 2022 after been launched by PMB. The new and existing currencies
shall remain legal tender and circulate together until January 31, 2023 when the
existing currencies shall cease to be legal tender (Tribune, 2022).
Apart from the politicians who stockpiled the bigger nominations, the
redesigning of N200, N500, and N1000 will help to address some of Nigeria’s
security threats especially laundering, kidnapping and terrorism. According to
sources, the purpose of the policy is to mop up the huge amount of cash that is
outside of the banking system, currently estimated to be 2.73 trillion or about 85%
of the total cash in circulation. This move therefore rids the economy of a lot of
‘black money’, and will help to improve the health of the system, strengthen
security and enable regulators to monitor the flow of funds in the country (CBN,
2022).
Additionally, the monetary policy and currency design will help deepen
financial inclusion by getting most people into the banking system. These sources
believe this is a sine qua non to improving credit in the system and expanding
productive activities, as well as usher in an improved cashless policy, and tighten
the money supply which may combat inflation. While this may not be apparent to
many Nigerians, only 4 out of the 54 African countries print their currencies in
their countries, and Nigeria is one. Hence, a majority of African countries print
their currencies abroad and import them the way we import other goods
(Vanguard, 2022).
Acknowledging that international best practice requires central banks and
national authorities to issue new or redesigned currency notes every 5 to 8 years,
the President of Nigeria noted that it is now almost 20 years since the last major
38
redesign of the country’s local currency was done. This implies that the Naira is
long overdue to wear a new look (Premium Times, 2022). This implies that a cycle
of banknote redesign is generally aimed at achieving specific objectives, including
but not limited to: improving security of banknotes, mitigating counterfeiting,
preserving the collective national heritage, controlling currency in circulation, and
reducing the overall cost of currency management.
2.1.8 The impact of currency redesign on Nigeria Economics development.
Redesigning the naira is also a good monetary policy, which is proxied by
the interest rate and the exchange rate, to prevent naira counterfeiting and control
the amount of currency in circulation to reduce inflation.
The currency redesign assists a country in the fight against corruption as
such exercise would rein in the higher denomination used for corruption, and
hence, the movement of such funds from the banking system could be tracked
easily. Again, the CBN has explained why it decided to redesign some naira notes.
It acknowledges that the decision was taken because of the huge volume of
counterfeit notes in circulation, money laundering and hiding of the naira notes
amongst others.
The redesigning of the Naira is for economic reasons which is not limited to
reducing inflation, combating counterfeiting, checking financial insecurity and
reducing the money in circulation. It’s reviewed, that the redesigning of the Naira
is for economic reasons which is not limited to reducing inflation, combating
counterfeiting, checking financial insecurity and reducing the money in circulation.
Other research argued that the policy rids the economy of a lot of ‘black money’,
thereby helping it improve the health of the monetary system which enables the
regulators to monitor the flow of funds in the country.

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 In addition, studies contributed that currency redesign can minimize the
influence of money on the country’s electoral process by discouraging vote-buying
and inducing of electoral officers.
Prospects
The CBN can limit cash flow to all Banks, by providing leadership and
ensuring that the Naira is not commandeered in bullion vans for the prosecution of
Elections vis-a-vis the Bimodal Voter Accreditation System (BVAS) at every
polling booths monitored by INEC. Also, printing more currency notes will only
reduce the inherent value of the currency in direct proportion to the number of
additional currency notes printed. This implies that the value of currency notes
increases only when the 'wealth' of the country increases. This wealth is typically
measured in GDP, GNP etc. The more wealth a country creates and accumulates,
the more valuable its currency notes become. Merely printing more currency notes
will not make a country wealthy.
In spite of the perceived benefits of the 2022 Naira redesign programme by
the CBN, the programme has had devastating effects on Nigerians, especially rural
dwellers and small and medium scale business owners, who found it very difficult
to make transactions amid the cash crunch. The cash crunch was itself furthered by
hierarchies of corrupt practices that became hopelessly entangled with the
implementation of the programme: the new notes were mostly packed and given to
a few privileged Nigerians at the expense of others.
The lapses of the country’s e-banking infrastructure also became apparent in
the absence of sufficient cash circulation. All these are pointers, not only to the
faultiness of the hazy implementation of the Naira redesign programme, but also to
the need for renewed efforts in combating corruption in the Nigerian banking

40
sector; and the need to upgrade the country’s e-banking channels and other
infrastructures necessary for the smooth running of a cashless economy.
Finally, the programme and its attendant drive towards a cashless economy
should be understood for what they are: policies that are ultimately premised on the
efforts of the world largest economies to further incorporate the country’s economy
into the global economy as a means of facilitating the exploitation of Nigeria’s
economy through global imperial economic institutions such as the International
Monetary Fund (IMF) and World Bank
2.2 Theoretical Framework
According to the Keynesian theory, the Naira redesign, which is a
component of sound monetary policy, makes a substantial contribution to the GDP
and the country's exchange rate, both of which lead to economic growth. This
expression is shown by the following straightforward equation:

Y = NairaR + EXR (1)

Where Y represents the total output (GDP), while the monetary policy indices are
naira redesign (NairaR) and exchange rate (EXCH).

Nevertheless, apart from the gross domestic product (GDP) and exchange
rate, the inflation rate is another critical macroeconomic variable. The survival of
the Nigerian economy is solely dependent on the macroeconomic instruments and
monetary policy regulation from time to time which is also proxied by interest rate
(INTR) apart from the exchange rate (Alasha, 2020). In light of this, we can
deduce the second equation with inclusion of the above variables as:

Y = F (INT, EXCH, INF) (2)

Where Y = Gross Domestic Product (GDP)

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INTR = Interest Rate

EXCH = Exchange Rate

INF = Inflation Rate.

2.3 Application of the theory to the work
Currency redesign is an activity of a sovereign nation to either change or
modify the existing currency in a country. This can be done for several reasons
like; improving the security features of the new currency, reducing the money
supply, reducing inflation, investigating incomes from nefarious sources and many
other economic indicators that affect the financial status of a nation.
2.3 Empirical Framework

Alisha (2020) used the exchange rate, interest rate, inflation rate, and trade
balance as variables and data from the Central Bank of Nigeria statistical bulletin
and publications from the National Bureau of Statistics to examine the relationship
between exchange rate fluctuations and their effects on the growth of the Nigerian
economy. Several methods, including the Augmented Dickey-Fuller test,
Cointegration, and Granger Causality test, were used to analyze the data in
addition to the typical least-squares approach (OLS) and the traditional least-
regression model. According to the findings, exchange rates and inflation rates are
detrimental to GDP while interest rates are beneficial.
Adeniran, Yusuf, and Adeyemi (2014) used secondary data from the Central
Bank of Nigeria Statistical Bulletin along with correlation and regression analysis
of the ordinary least square (OLS). They looked at how changes in exchange rates
affected Nigeria's economic growth between 1986 and 2013. Their findings
confirmed earlier research suggesting that developing countries should generally
prefer flexible exchange rate regimes, showing that exchange rates have a positive
42
but not very significant impact on economic growth. Furthermore, their study
found that while interest rates and inflation generally harm economic growth, they
don't do so particularly. The exchange rate significantly affects the determination
of both short- and long-term macroeconomic growth and development goals,
according to economic literature (Ehikioya 2019; Alagidede and Ibrahim 2017).
Recent studies looked at the relationship between the exchange rate and
economic growth (Morina et al. 2020; Ioan et al. 2020). Morina et al. (2020), who
studied the effects of real exchange rate instability, concluded that growth requires
little exchange rate volatility. Trade openness and fixed capital formation were also
supported by the study, which used the fixed effect model of analysis, as additional
factors that support longterm economic growth in the Central and Eastern
European nations.
According to Balcilar et al. (2019), who focused on these two countries,
South Africa was found to have stickier prices than Nigeria in the study that
examined how the volatility of currency rates affected inflation in both countries.
Munthali et al. (2010) acknowledged that real effective exchange rate shocks
hurt Malawi's GDP and discovered a weak but statistically significant correlation
between these variables. A real exchange rate depreciation for the country may
lead to inflation, but it may also tend to encourage exports and, as a result, improve
economic performance, according to Mahoney and hypothesis. They made this
claim in a study on how currency rate fluctuations affect inflation and how those
changes then affect Zimbabwe's economic expansion. The relationship between the
country's exchange rate devaluation and GDP is not discussed in this argument.
After examining the connection between GDP, exchange rate pass-through, and
copper prices in Zambia, Roger et al. (2019) concluded that a drop in inflation was
a reliable indicator of exchange rate volatility. According to the analysis above,
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different people have different viewpoints on the links between exchange rate
volatility, inflation, interest rates, and economic growth. However, the vast
majority of investigations supported a negative correlation between inflation and
GDP or between exchange rate volatility and economic growth. Therefore, the
primary objective of this study is to evaluate the impact on the Nigerian economy
of the redesign of the Naira and monetary policy.
2.4 Gap in Literature
The basic form of money is numbers; currently the basic form of currency is
paper notes, coins or plastic cards (i.e. credit or debit cards). Though this
distinction between money and currency is important in some context, for the
purpose of this study, the terms ‘money’ and ‘currency’ are used interchangeably
(Gary, 1996). Money allows people to trade goods and services indirectly. It helps
communicate the price of goods, and it provides individuals with a way to store
their wealth. Money, whether it’s represented by a seashell, a metal coin, a piece of
paper, or a string of code, or electronically mined by computer, doesn’t always
have value. Rather, its total global value depends on it as a medium of exchange
which people place on it.

CHAPTER THREE

METHODOLOGY
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3.1 Research Design

Ojo (2009) defines research design as the strategy that guides the
investigation throughout the process of research. It refers to the programme that
guides the research in the process of collecting, analyzing and interpreting data and
observation. It is a logical and model of proof by which the researcher draws
inferences regarding relationships among variables under investigation. For this
study the researcher used survey method.

Cambell (2015) defined research design as a framework or plan for a study

that is used in collecting and analyzing a set of data. The design of this study
adopted is survey method of data collection which involves administration of
questionnaires.
In preparing this research, the researcher made use of tables, simple’s
percentage as the basic instrument of data analysis. Thus, the researcher used
descriptive research method.
3.2 Area of the Study
The area of the study is the geographical area where the study is undertaken
Ojo (2009). Since Nigeria is too big to cover the research study is undertaken in
Lokoja Local Government Area of Kogi State.
3.3 Population of the Study

Ojo (2009) defined population as the collection of individual items whether

people or object that has to be observed in a given problem or situation. According
to the 2006 population census, Lokoja local government area of Kogi State has a
total population of one hundred and ninety six thousand, six hundred and forty
three (196,643).

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3.4 Sample size and Sampling Technique

Sample size involves the process of selecting reasonable number of trends,

events, subjects or number taken from the population as a representation of the
universe or the entire population. Respondents were randomly selected from
selected from staff of local government in Kogi State. At the end of the exercise,
two hundred and fifty (250) were selected.

A simple random sampling technique was adopted for this study, giving
each member of the population opportunity of being selected as member of the
sample size.

3.5 Instrument for Data Collection

The two main method of data collection are the primary and secondary data
sources.

i. Primary Method: This is a means of obtaining data from the horses

mouth.

Toluhi (2013) refers to primary data or source “as a systematic collection of

information directly from respondents for the purpose of understanding
some aspects of the population of interest”. Primary data can be obtained via
questionnaires, interview and observation. For the purpose of this study
questionnaire was used.

For the purpose of this research work the researcher make use of
questionnaire as an instrument for containing some questions and /or statements
from which the respondents picks or determine the answers to the questions or
alternatives presented to him.

46
 Secondary data source: Data that is not personally obtained from the field by
the researcher, but is obtained via other sources is called secondary data.

According to Ogwonu and Anugwom (2006) point out clearly that

secondary data is “information or material that is already in existence or amassed
by some other people for different purposes and which a researcher finds useful to
the study he is carrying out.

3.6 Validity of Instrument

Validity is determined by the degree of provision of correct response from

sample objects by the relevant research design or research instruments.
The structure and language of the study were in line of the correction, the
instrument was structured in such a way as to minimize the effect of errors like
inconsistency and ambiguity.
3.7 Reliability of Instrument
Reliability is defined as the ability of a particular measuring instrument to
use similar result when applied to the same situation at different times.
The reliability of the research is also said to have been proven if the
researcher pre-tests the questionnaire. In this work, research questionnaire was sent
to the supervisor to check the reliability before the final work is ready to be sent to
the respondents. The reason for the pre-test is to check whether the information is
appropriate for the research or not. In order to make the research instrument more
reliable the empirical study is combined with theoretical study. The researcher
found the research instrument to be reliable because the results found were as
expected and more than 50 percent of the employees of the state responded to the
survey, then the research is said to be reliable

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3.8 Method of Data Analysis

According to Osuala (1991), analysis is the ordering and breaking down of

data into constituent parts. It consists of the statistical calculation performed with
the new data to provide answers to the question initiating the research and it also
involves writing in a descriptive form in order to communicate or make across the
required information which provides answers to the questions initiating the
research.

In view of the above, data collected for this research was presented in
tabular form and analysis carried out using simple percentages.

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