Naira Redesign and Cashless Policy: the Nigerian Experience

Abstract

The Nigerian economy has witnessed significant transformations in recent years, including a redesign of its currency, the Naira, and the implementation of a cashless policy. This article delves into the Nigerian experience of Naira redesign and the adoption of a cashless policy, exploring their implications on the economy. Through an extensive literature review, detailed methodology, and analysis of results, the study discovered that the currency redesign policy in Nigeria has had a profound impact on the nation's economy, yielding a range of advantages and challenges. This abstract provides a concise overview of the implications of the policy.The advantages of the currency redesign include enhanced economic security through a significant reduction in counterfeit currency circulation, increased foreign investor confidence, and a reduction in the informal economy. Additionally, the policy has improved transparency, fostered economic stability, supported anti-corruption efforts, bolstered Nigeria's international reputation, and promoted greater confidence in the banking system.However, challenges exist, including initial implementation costs, potential confusion during the transition, logistical hurdles, resistance to change, and the risk of incomplete transition. The study employed secondary time series data which was quarterly in nature and spanned from 1992 to 2021. The methodologies adopted in the study are the unit root (stationarity) test for the validation of the data, the Johansen co-integration test for the level of relationship among the variables and to validate the result error correction model, and the Granger causality test. Findings reveal that point-of-sales transactions and Unstructured Supplementary Service Data Transactions contributed to Nigeria's economic growth in a positive and significant way while Website/internet transactions and Mobile payments negatively contributed to economic performance in Nigeria. As such, we conclude that the negative contribution of Mobile payment and Website/internet transactions to economic improvement may be linked to the high volume of fraudulent activities associated with this version of E-banking and excessive charges on such transactions. The study recommends that efforts should be directed toward enhancing digital infrastructure, promoting regulatory frameworks that support innovation and consumer protection, and fostering technological advancements to maximize the potential of these payment methods.