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The Proposed Naira Redesign, the Ensuing Cash Crunch, and Their Implications on the Nigerian Economy – Evidence from Q1 2023

Author

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  • Oyadeyi, Olajide

Abstract

Many articles had been published online regarding the proposed naira redesign and its possible consequences on the Nigerian economy ex-ante. This article however focuses on the naira redesign and its implications on the Nigerian economy ex-post, particularly in Q1 2023, when the policy took effect. To achieve this, the article highlights some facts about Nigeria’s economy, as well as the implications of the policy on economic activities, using trend analysis on a host of economic variables, with reference to the real GDP, PMI, and inflation. The trend analysis results showed that indeed, the cash-crunch policy affected economic growth and productive activities as real GDP and the PMI shrank. On the other hand, the article dismisses the notion that the inability to account for the high currency outside banks to currency in circulation ratio was the main cause of rising consumer inflation in Nigeria. Rather, the article revealed that the growth in money supply was induced by quasi-money activities which may have led to the rise in consumer prices.

Suggested Citation

  • Oyadeyi, Olajide, 2023. "The Proposed Naira Redesign, the Ensuing Cash Crunch, and Their Implications on the Nigerian Economy – Evidence from Q1 2023," MPRA Paper 117550, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117550
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    File URL: https://mpra.ub.uni-muenchen.de/117550/1/The%20Proposed%20Naira%20Redesign%2C%20the%20Ensuing%20Cash%20Crunch%2C%20and%20Their%20Implications%20on%20the%20Nigerian%20Economy%20%E2%80%93%20Evidence%20from%20Q1%202023.pdf
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    More about this item

    Keywords

    Cash Crunch; Naira Redesign; Demand for Money; Nigeria; Q1 2023; Currency in Circulation; Currency Outside Banks; Velocity of Money;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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