CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Presently, the basic form of currency is paper notes, coins or plastic cards (i.e. credit or debit cards). Even though this difference between money and currency is significant in some extent, for the purpose of this study, the terms ‘money’ and ‘currency’ are used interchangeably. Money permits people to transact goods and services indirectly. It assists to communicate the price of goods, and it shows people 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, does not always have value. Else, its total universal value relies on it as a means of exchange which people place on it.
All around the globe, there are over 180 currencies in the world circulating in 197 (Eurochange, 2022). There is the United States Dollar (USD), European Euro (EUR), Japanese Yen JPY, British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD), South Africa Rand (ZAR), Ghanaian Cedis, Nigerian Naira, to mention but a few. In total, there are 162 official currencies around the globe of these 162, hence, 47 currencies are bent to another with a fixed exchange rate. This implies that, for instance, the Danish Krone is a currency in its own, but is tied to EUR with a constant rate. Other countries like Bahamian dollar even correspond to the USD directly in 1:1 rate. The oldest currency is still in use is the British Pound sterling. It spread over Great Britain and its various colonies like Nigeria, Ghana and others, for more than 1,200 years. Some of the world currencies are reserved currencies. A reserved currency is a currency that is also used to a restricted extent as a means of payment beyond its country of origin, like the US Dollar, the pound sterling and Euro are seen as the most reserved or anchored currencies in the world. These foreign currencies are held in important quantities by central banks or other monetary authorities as part of their exchange reserves. The reserved currencies can be used in International transactions, investments and all facets of world economy. They are sometimes address to as hard currencies or safe haven currencies. The become dominant of the reserved currencies is the US Dollar. Evidently, monetary policy is accepted and approved by the Central Bank of Nigeria (CBN) in other to excite combined demand through flexible changes in money supply and interest rate. It also plays an important role in the redesign of the currency. The purpose of the currency redesign is to soak up the enormous amount of cash that is outside the banking system, which presently estimated at 2.73 trillion or about 85% of the total cash in circulation. Economic factors driving the redesign of the Naira include lowering inflation, thwarting counterfeiting, reducing insecurity, and increasing the amount of money in circulation, as it is believed that 85% of all the country's cash is hidden away in houses outside of the banking system. Amassoma, Keji and Emma-Ebere (2018), explained that monetary policy is a vital tool which could be used to achieve currency management, price stability, and strengthen the growth of investment. Studies show that currency redesign is a good approach to manage the money in circulation (International Monetary Fund, 2022; Whelan, 2010; Kregel, 2010). It is hoped to minimize the influence of money on the country’s electoral process thereby discouraging vote-buying and inducement of electoral officers. Nonetheless, many experts have disagreed that the timing of this exercise in Nigeria is always wrong, and as such, this study cannot agree less. Literatures at disposal disclosed that the CBN always intents to carry out the naira redesign to successively take care of the flow of the currencies (CBN, 2015). And the short period notice was to discipline and frustrate those stockpiling or laundering the Nigerian currency. Monetary policy is therefore passed and approved by a central bank in other to give strength to a level economy and reduce unemployment in the country, shield the value of the currency, and safeguard economic growth in consequence the redesign of the naira. Researches have proven that the immedient need to redesign and take charge of currency in circulation in a country is to address the problem of putting aside and stockpiling of banknotes outside the banking system, the scarcity of clean and fit banknotes in circulation, the increase in faking and counterfeiting of high denomination banknotes, interest rates and inflation, trade, embezzlement, fraud, market expectations and a host of others may have lead in the redesign of the naira note. On this note, the study is set out to evaluate naira redesign and effectiveness of monetary policy in Nigeria. This study is divided into five sections: chapter one, chapter two, chapter three, chapter four and chapter five.
1.2 Problem of the study
It is believed that 80% of naira is concealed away in houses outside of the banking system. Amassoma, Keji and Emma-Ebere (2018), explained that monetary policy is a vital tool which could be used to attain currency management, price steadiness, and intensify the advancement of investment. researches have shown that naira redesign is a good advancement to manage the money in circulation (International Monetary Fund, 2022; Whelan, 2010; Kregel, 2010). It is hoped to minimize the influence of money on the country’s electoral process hence disheartening vote-buying and encouragement of electoral officers. Nonetheless, a lot of professionals in the field have disagreed that the timing of this exercise in Nigeria is always wrong, and this paper cannot agree less. Studies present disclosed that the CBN always make arrangement to effect the naira redesign to successively manage the flow of naira (CBN, 2015). And the short period notice is put in place to punish and frustrate those keeping aside and stockpiling or laundering the Nigerian currency. Monetary policy is passed by a central bank to retain a level economy and reduce unemployment, protect the value of the currency, and maintain economic growth in consequence the redesign of the naira. Studies have revealed that the immediate need to redesign and take charge of currency in circulation in a country is to address the issue of hoarding of banknotes outside the banking system, the shortage 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 may have resulted in the redesign of the naira note. Hence, the study will evaluate naira redesign and effectiveness of monetary policy in Nigeria.
1.3 Objectives of the study
The purpose of this research paper is to examine Naira redesign and effectiveness of monetary policy in Nigeria.
Specifically, the paper aims to analyze the impact of the redesign of Nigerian currency on monetary policy, and national identity. To analyze the policy implications of currency redesign in Nigeria. The paper will also evaluate the effectiveness of the policies and regulations governing currency redesign in Nigeria and provide recommendations for policymakers and stakeholders in the financial sector.
1.4 Research Questions
What are the impacts of the redesign of Nigerian currency on monetary policy, and national identity?
What are the policy implications of currency redesign in Nigeria?
How effective are the policies and regulations governing currency redesign in Nigeria?
1.5 Research Hypothesis
H01: the policies and regulations governing currency redesign has a significant effect on Nigerian.
H02: the redesign of Nigerian currency has a significant impact on monetary policy, and national identity.
1.6 Significance of the study
The paper will be of immerse help to policymakers and stakeholders in the financial sector. The study will make recommendations on the effectiveness of the policies and regulations governing currency redesign in Nigeria.
Ultimately, this research paper will contribute to the existing body of knowledge on currency redesign and provide more insights into the implications of currency redesign for other developing economies facing similar challenges.
This study will look intensively on naira redesign and effectiveness of monetary policy in Nigeria. It will be beneficial to stakeholders in the educational sector such as teachers, parents, students, school management, and ministries of education, educational researchers, and the society at large.
This study is essential for several reasons: It contributes to an understanding of the current state of the new notes naira in the country, providing insights into the naira redesign, and if the monetary policy has been effective, if the redesign has helped and to what extent. The study sheds light on the specific impacts of naira redesign and monetary policy. The study can serve as a valuable resource for students, scholars seeking to research more on the topic, electoral candidates, and policymakers seeking to make informed decisions regarding the topic in question.
Educational researchers will see it as an addition to the literature on Naira redesign and effectiveness of monetary policy in Nigeria; giving them a concise and significant outlook of the topic. The recommendations is hoped to enhance the Nigeria economy.
1.7 Scope of the Study
The scope of the study is limited to Naira redesign and effectiveness of monetary policy in Nigeria only. The study was carried out in Ondo state, Nigeria. The study was also limited to activities of Naira redesign and monetary policy in Nigeria. The study made use of both primary and secondary data. Questionnaires will be distributed and used for data collection from respondents.
