Conventional macroeconomics has brought about the congregation of knowledge in a single source of truth, and from here did the divergence into societies and nations begin.
To say that postulations and principles of economics should be taken bare-faced and applied to solve problems in their minimalist sense without a recourse to the unique journey, local atmosphere, and the availability of enabling systems and tools is surely an invitation to massive failure of both policies, programmes, and the push back on societal goals of growth and development.
When economies grapple with a condescending inflationary pressure markedly attributable to signs and causes like a diminished value of currency and sharp rise in prices and staples, an antidote called a contractionary monetary policy is advanced. To ensure a coordinated and impactful response to this challenge, the central bank of that economy will have in its arsenal a couple of tools.
At a minimum, irrespective of the response that is made by the regulatory institution (the Central Bank) including an Open Market Operation (OMO), an increase in bank and reserve rate, the goal is to mop up the volume of money in circulation to reverse the phenomenon of ‘lots of money chasing few goods’.
Globally, nations are increasingly being faced by an existential threat of hunger, unaffordable, unsafe, and low-quality foods with millions of people across continents now exposed to greater levels of food shortages, malnutrition, deteriorating health conditions and death.
Buoyed by three major factors – an adverse climate change effect which has exacerbated global warming, posing a threat to the ecosystem, – the survival of plants and animals, Russia’s invasion of Ukraine bringing on its wake a rising cost of foods and sharp rise in inflationary pressures and finally an energy crisis precipitating a value of currency erosion.
In Nigeria, the National Bureau of Statistics (NBS) in September announced that The National Bureau of Statistics (NBS) announced on Thursday that the inflation rate jumped to 20.52 percent in August. This was the highest in 11 months.
As any would imagine, a response from the monetary authorities was imminent and so it came.
The Central Bank of Nigeria (CBN) yesterday announced that the President Muhammadu Buhari has approved the redesign, production, and re-issuance of the local currency (N200, N500 and N1000 notes) with the new notes to begin circulation by December 15th, 2022.
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Not a few murmurings, and bickering have emanated from public and economic Analysts and the greater public since this news hit the airwaves.
While we go through our unique challenges, let us not fail to postulate solutions that address them and while the undertone to major economic policies are not unconnected with political consideration, it behooves for the sake of the greater good of the society.
The trend tells the story better.
According to information published on the CBN website, “on February 28th, 2007, as part of the economic reforms, N50, N20, N10 and N5 banknotes and N1 and 50K coins, were reissued in new designs. A general election was thereafter held on the 21st of April 2017. In 2015, just before another general election, the N100 note was redesigned and re-issued to the public. This year, there is a new re-issuance with activities preceding the 2023 General Elections beginning.
The questions remain – are policies made to cushion political effects or to address economic challenges. Again, with socio-political and economic themes very much interconnected the answers are far-fetched.
The CBN has attributed the new release to the rate of currency hoarding and its quest to nip kidnappings in the bud. These reasons are non-economic classified, and it can be argued that in fact they do not directly address the current challenges that the Nigerian economy faces.
As we approach the 2023 General elections, in the months to come, we look forward to seeing the gains and impact of the recent redesign of the currency being made positively on the economy.
Where this doesn’t happen, we can be right to say that this exercise comes with its sinister motives and runs afoul of the goals of contractionary monetary policy with more money to be spend on the various design, production, distribution of new currency thereby introducing more volume of money in circulation and in fact with a risk to further worsen the inflationary pressure on the Nigerian Naira.
Imouokhome, an economist, writes from Lagos
