The World Bank has warned the newly redesigned N,1000, N500 and N200 naira notes would have negative effect on economic activity especially on poor Nigerians, small and medium businesses.
The Washington-based bank, in a new report titled, “Nigeria Development Update” said the negatives effect is due to its timing and short transition period.
WITHIN NIGERIA recalls that the Central Bank of Nigeria had last month unveiled new N,1000, N500 and N200 notes as part of measures to mop up excess cash in circulation, ransom payment for kidnapping, terrorism financing, counterfeiting, among others.
The World Bank, however, in its report said the new policy would negatively affect small businesses especially those who 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 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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