By FDC Limited.
New Naira notes will neither reduce inflation, nor make the currency stronger.
Our 2 cents on the currency redesign process!
All cash is money but not all money is cash!!!
In 6 weeks you will have new Naira notes.
In 10 weeks you will need to be counted in a new census.
In 12 weeks you will be voting for a new president.
But right now you are facing a dollar crunch, buying a bag of rice for N51k and you cannot fly to Dubai on Emirates.
You are probably asking what is the next surprise
As if Nigerians had not had enough economic jolts, they were further startled by the proposed guidelines for redesigning the Naira. There will be new N200, N500 & N1000 notes from December 15 this year.
Most Nigerians who are already embattled are asking one question “what will these new notes do to soothe our frayed nerves??
The answer is that the new notes will do nothing to address the burning issues but will only increase the level of uncertainty in an economy which is slowly facing a crisis of confidence.
The notion that hoarding of currency notes outside the banking system is the primary cause of inflation is absolutely wrong.
This is because cash and currency in circulation (N3.2trn) constitutes less than 7% of the money supply (N48trn) e.g. the N5,000 you have in your wallet is less than 10% of the balance on your bank account.
Whilst M2 average growth rate in the last 5 years has been 12.5%, the increase in cash has been minuscule compared to money supply growth.
The new notes will not reduce inflation nor will they make the Naira stronger in the forex market. It is already trading at N875/$. In supermarkets and department stores, there is already a sign of shortage of some goods, this is happening 6 weeks to Christmas day.
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