The World Bank has cautioned that the newly redesigned naira, which entered circulation last week, may have a detrimental impact on economic activity, particularly for impoverished Nigerians, due to the timing and short transition time.
The Washington-based bank revealed this in a new report titled, “Nigeria Development Update.”
This came amid the mixed reactions that had trailed the newly redesigned notes.
The Central Bank of Nigeria issued new N1000, N500, and N200 notes last month as part of efforts to reduce excess currency in circulation, ransom payments for abduction, terrorism financing, and counterfeiting, among other things.
The World Bank, in its analysis, however, warned that the new regulation would significantly affect small firms especially those with day-to-day cash transactions.
The report read in part, “While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have not 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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