All cash is money but not all money is cash!!!

• In 6 weeks, you will have new Naira notes - uh oh – why now??
• In 10 weeks, you will need to be counted in a new census - ah!!
• In 12 weeks, you will be voting for a new president - hmm!

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.

One commodity that is in abundant supply in Nigeria is the political promises of candidates including how the sky can be turned from blue to black.  Ozzie once said, “money talks and BS walks”.  So what we do know is that the next election is showing signs of a battle between those funded by oil bunkering warlords on the one hand and the others funded by financial terrorists who are extorting money from economic bottlenecks in the name of levies, taxes, fines and regulations.

But no matter what happens, the Nigeria economy will be opened up to more competition and reform by whoever is the next president.

In this month’s edition of the LBS Breakfast Session, Bismarck Rewane and the FDC Think Tank try to unpack these new guidelines and its effect on the Naira, Inflation and your airline ticket in December this year.

Kindly Download - The LBS Executive Breakfast Session – November 2022