The Nigerian central bank’s surprise decision to redesign the nation’s banknotes sparked a currency mess this week, igniting a rush to dump the naira, reports Bloomberg.
The plan to replace 200, 500 and 1,000 naira notes took most people unawares, even Finance Minister Zainab Ahmed.
The six-week window to change the money, starting on Dec. 15, also comes at a difficult time for most households in Africa’s biggest economy.
The festive Christmas season is when many people travel to their family villages — far from the bank branches clustered in major cities.
That’s raised concern of even longer lines as the end-of-January deadline that will make the cash worthless approaches.
Currency traders say the scurry for dollars since the announcement has been unprecedented, forcing many to pool resources to meet the increased demand.
The naira hit record lows in the parallel market where it’s freely traded and where most Nigerians get their US currency.
Read also: CBN’s currency controversial redesign political, has no economic basis – Obaseki
Even the tightly controlled official rate, used mainly by the government for budgeting and public-sector transactions slumped to new levels. The gap between the two is now the widest ever.
While the International Monetary Fund urged caution, saying the short period to change notes could “create huge operational pressure on banks,” policymakers and President Muhammadu Buhari defended the move.
The central bank insisted it’s in the best interest of the country and will stop hoarding of cash outside the financial system. Buhari says the plan will help curb inflation that hit a 17-year high in September.
Yet Nigeria would do well to heed the experience of India in 2016 — its hastily arranged redesign bought in a frantic scramble for cash and slowed economic growth. With oil output plunging, another hit on the economy is something the West African nation can ill afford.
