How Naira redesign, cash scarcity crippled Nigerian economy –UN

*The World Bank, in a Trade and Development Report Update, says the recent shortage of cash in Nigeria, occasioned by the CBN’s redesign cum replacement of N1000, N500 and N200 notes ‘hobbled the economy, especially the informal sector’ of the West African country’s economy

Gbenga Kayode | ConsumerConnect

Against the backdrop of the Central Bank of Nigeria’s Naira redesign project and attendant cash crunch in the country’s economy in the first quarter of 2023, the United Nations (UN) says the development at the time affected the country’s economy.

The inter-governmental organisation said the development, which lasted for months mostly affected the informal sector.

The global lender in its recent report, stated the cash scarcity, which lasted for months mostly affected the informal sector of the economy.

The Bank reported: “In Nigeria, a shortage of cash, triggered by the replacement of the highest denominations of the country’s currency, hobbled the economy, especially the informal sector,”

The report titled, “Trade and Development Report Update; Global Trends and Prospects (April 2023)” also stated: “Meanwhile, the continuing decline of oil production, accompanied by large-scale oil theft, poses a main threat to strained finances in Africa’s most populous nation.”

The transnational lender also projected an expansion of the African continent’s economy by 2.5 percent which is a drop from last year.

The report further explained: “Like in other developing regions, weaker external demand and tighter financial conditions have made growth prospects gloomier for the region.

“In the case of commodity exporters, the fading of the initial effects of the 2022 price boom will add to the equation.”

The World Bank said: “Rising global interest rates have triggered significant capital outflows and have further constrained fiscal space, at a time when public finances were already severely affected by costly subsidy schemes aiming at contending the adverse effects of high food and energy prices.

“Under these circumstances, the risk of stagflation is a key concern for many African economies.

“In approximately half of the countries, inflation remained double digits in early 2023.”

It as well noted: “In many instances, these recent inflation spikes relate to the continuing depreciation of several African currencies in early 2023 – often following a loss in 2022 of 10–30 per cent of their value vis-à-vis the Dollar.

“Public debt, in many cases standing at levels not seen since the early 2000s, is another worry across the continent.”

According to the report, out of the 38 African countries that are part of the Debt Sustainability Framework (DSF) of the IMF and World Bank, 8 entities are already ‘in debt distress’, while “13 are considered ‘at high risk’ of distress.”