The World Bank has issued a warning regarding the detrimental impact the redesign of the Naira will have on Nigeria’s economic activity.
The international financial organization warned that the timing and short transition period of the Naira redesign could have a negative impact on small and medium-sized businesses and the impoverished in Nigeria.
This was disclosed by the Washington-based bank in a recent study titled “Nigeria Development Update.”
In an effort to reduce counterfeiting, abduction ransom payments, terrorism financing, and surplus cash in circulation, the Central Bank of Nigeria redesigned the old currency – N, 1000, N500, and N200 notes last month.
However, the report partly reads; “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.”