Naira Crashes to N800/$ a week after CBN announced the change to new Naira notes

By: Damian Okonkwo

The Nigerian naira has lost so much value against the US dollar in October 2022 and is now set to end the month with the lowest exchange rate so far against the US dollar with Naira crashing to N800/$ at the black on Friday 28th October 2022, roughly one week after the CBN governor Godwin Emefiele announced that the Central Bank will proceed to change the Naira notes including N200, N500, and N1000 to new notes.

The CBN governor revealed on Wednesday 26th October that the Central Bank had obtained the go-ahead order from the president to redesign, reproduce and print a new version of the Nigerian currency notes such as the N200, N500, and N1000 notes.

Speaking on the decision to redesign the denominated Naira notes, the CBN governor stated that it was necessary to curb the excess currency in circulation and thereby reduce the rising inflations. Here following the data released by the apex Bank on the amount of the old Naira notes printed so far, it was found that over N2.73 trillion notes of Naira out of the N3.23 trillion Naira notes in circulation are outside the reach of the commercial banks within the country. This suggests that individuals and secret agents appear to be hoarding the Naira thereby creating artificial scarcity for the currency despite the large amount which is meant to be in circulation.

Notwithstanding, the news of this recent development mounted so much pressure on the Nigeria Naira last week. Many investors not sure of the impact this new policy could have on the Naira rushed to convert their Naira notes into dollar to avoid risking greater inflations. This effect of this has been so negative for the Naira leading to a great loss of value at the black market last Friday.

However, with regards to this recent decision by the CBN, the International Monetary Fund (IMF) representative in Nigeria Mr. Ari Aisen has called on the apex bank to be very cautious while carrying on with this decision and avoid steps that could undermine investors' confidence in the economy.

Above all odds, the decision to redesign the Naira notes appears to be a laudable decision that will help retrieve the hoarded Naira notes by unscrupulous citizens who have increased the scarcity of the Naira despite having a large amount of it in circulation. This will help to restore a greater quantity of circulating Naira to the safe hands of commercial banks and prevent artificial inflations.