The World Bank has cautioned that the newly redesigned naira notes may have a negative impact on economic activity in the country, especially on poor Nigerians and small-scale businesses.
The global bank disclosed this in a new report titled, “Nigeria Development Update.”
It followed the mixed emotions that have heralded the newly redesigned notes which went into circulation last week.
The Washington-based bank warned that the timing and short transition period for the new notes may not help Nigeria achieve the desired result.
Recall that the Central Bank of Nigeria, CBN, last month unveiled new M200, N500, and N1000 notes as part of a policy to mop up excess cash in circulation, ransom payment for kidnapping, terrorism financing, and counterfeiting, among others. The apex bank said that the bulk of money in circulation in the country was outside the banking vault.
However, the World Bank in its report said that the new policy would not bear positive results for small businesses especially those that depend on day-to-day cash transactions.
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The report partly read, “While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have been redesigned for two decades, the timing of and short transition period for this demonetization may have negative impacts on economic activity, in particular for the poorest households.
“International experience suggests that rapid demonetizations can generate significant short-term costs, with small-scale businesses, and poor and vulnerable households, potentially being particularly affected due to being liquidity-constrained and heavily reliant on day-to-day cash transactions.
“At present, households and firms already face elevated financial pressures from prolonged, high inflation, recently compounded by external food and fuel price shocks, and the severe floods, and phasing out existing naira notes over a short time period may add to their challenges.”
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