EFFECTS OF CBN'S NEW MONEY POLICY ON NIGERIAN ECONOMY by ABIOLA JOY (LEGBETI)

     

Firstly, people have been talking about the fact that the new currency is just a filter effect, Lol! The beauty of a note does not increase the value of the currency. Compared to the current notes in circulation, this one used less materials, hence is less cheaper to produce. Although, this is based on speculation. However, looking at the colour choice: Red, green and blue, and the overlay of colours, you can deduce that this one is relatively cheaper to produce. The cost of printing notes before were far too expensive, and sometimes were even more than the value of the notes themselves. If the new notes are cheaper to produce, and it is just economically sensible. What's the point of having a beautiful note, which is so expensive to make, yet it holds no value? 

Maybe this was one of the reasons why they stopped the production of coins. Now Kobo exists only in the digital space. Nonetheless, coins have not ceased to be legal tenders. I can say that was a good initiative from the Central Government. We should appreciate them instead of criticizing anything and everything they do. No be fine money go give us food chop.

With the announcement of a new design, money laundering activities fell significantly, a lot of looted funds were returned to circulation, naira was able to gain traction against the dollar in the international market, and the central bank was able to reduce cash transactions drastically. 

     Money derives its value from the law, and not its beauty.

The CBN has been looking for ways to digitize the economy. You can see what they did with the e-Naira. It was a really massive project.

As we learnt, this is one of the CBN's way of controlling the flow of money. They are not just trying to reduce the amount of money in circulation, they are also trying to curb financial crimes, and strengthen the digital economy. With new currency notes, we can expect the inflation rate to fall. 

And on how this will strengthen the value of naira ...

Apart from that, there's a limit to the amount that you can deposit at a time. Although there was a revised policy to this effect that allowed for unlimited deposits.

  Inflation is not just an internal affair, but also external. When there's so much money in circulation, it means so many factors don shook hand. When we overcharge ourselves for goods and services, the tap of money will not just flow, but rush

Where is this money coming from?

   One of the ways is when people render services to foreign clients or sell to foreign clients. 'Factor income from abroad'; We import wealth into the country, and there's more money to spend here. If something is N50, and you're charged N100 for it, because you have so much money, you will pay for it. Then, the flow begins, you've inflated the circulatory system of money, so there's more to go round. At the end of the day, money begins to lose value to the average Nigerian.

Imagine, N5 and N10 have become so useless. 

Things that were so affordable have now become so expensive. N1000 that could feed a family of five some years ago, is no longer enough to satisfy a man.

   As you can see, you're losing trust in naira. People are encouraging you to earn in dollars, because naira is losing value… Kidnapper's money, politicians money, money that's waiting to be cleaned, counterfeit money, and even blood money. All of them have contributed to our high inflation rate. Imagine, over 20%. This shows you that a lot of money has been moving around, some came in as a result of foreign transactions too. 

   Make so much in dollars, and spend it here in Nigeria. Freelancers can relate.

For those asking if this will have any effect on the value of naira - it will, but indirectly.

  Actually the inflation thing works in a cycle. Companies borrow at high interest rate in naira and then import goods at a high exchange rate, that will definitely lead to cost pull inflation too. And Bank plays a major role in the falling values of Naira, Imagine a common citizen can't even transact at an official rate anymore, they prefer selling to those in the black market as it gives them more profit

   I want to talk on the perspective of mint, every denomination should be available in bank, but people sell currency these days and go away with it. 

The ATM dispensing as low as 200 will kill the sales of money, lower denominations would no longer be hoarded but free for individuals

And limiting the amount of withdrawal will also help ensure that demand is more than supply, and that will help suppress the rate of inflation and injection into the economy.

There was a revised withdrawal policy that further limited the amount of withdrawal. 

 Prior to the announcement of a redesign, there was limit to the amount that people could deposit, however, we saw that they revised that too to make sure people brought in money that was hidden into the light. This withdrawal policy backs up the revised deposit policy by ensuring that the money that is deposited remains in the bank.This ploy clearly explains that the policy is the reduce the amount of money in circulation, thereby reducing inflation rate, and by extension, the strength of the naira as compared to foreign currency.

The sale of currency is one of the things that weakens the naira compared to foreign currency, and where the government through the central bank makes most denominations available, people will trust the naira more and spend it more.

 Imagine, the scarcity of ₦5 has made most items that could have cost that same amount to be shifted up to ₦10. Instead of hoarding currency, let's have it readily available and for every transactions that we need them for.

    I can remember the confidence OAU students had in the ₦200 note when Union bank at Morèmi hostel was dispensing it. Everyone found it interesting, hence the policies are good ones and should be supported at all cost.