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Monetary Assignment

The Naira redesign policy implemented by the Buhari administration aimed to combat corruption and promote a cashless economy but resulted in significant economic disruptions and public unrest. The policy's shortcomings, such as inadequate infrastructure and poor coordination, led to unintended consequences that reflect the Cobra Effect, where the solution exacerbated the original problem. Ultimately, the policy serves as a cautionary example of the need for careful planning and assessment in public policy implementation.

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3 views4 pages

Monetary Assignment

The Naira redesign policy implemented by the Buhari administration aimed to combat corruption and promote a cashless economy but resulted in significant economic disruptions and public unrest. The policy's shortcomings, such as inadequate infrastructure and poor coordination, led to unintended consequences that reflect the Cobra Effect, where the solution exacerbated the original problem. Ultimately, the policy serves as a cautionary example of the need for careful planning and assessment in public policy implementation.

Uploaded by

virtue.patrick
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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NAME: PATRICK VIRTUE EBUBECHI

MATRIC NO: AUL/ECO/22/004

COURSE TITLE: MONETARY ECONOMICS

LECTURER: DR. MATTHEW .A

ASSIGNMENT

DISCUSS THE NAIRA REDESIGN POLICY OF BUHARI ADMINSTATION: DOES THIS POLICY REFLECT
THE COBRA EFFECT HYPOTHESIS IN THE CAUSE OF POLICY IMPLEMATION.

ANSWER

Introduction

In late 2022, the Buhari administration, through the Central Bank of Nigeria (CBN), announced a
policy to redesign the ₦200, ₦500, and ₦1000 naira notes. The move was part of a broader
strategy to combat corruption, control inflation, reduce the volume of money outside the
banking system, and promote a cashless economy. However, the implementation of this policy
generated widespread public outcry, economic disruptions, and legal challenges — leading to
questions about its effectiveness and unintended consequences. This paper discusses the naira
redesign policy and evaluates whether it reflects the Cobra Effect hypothesis in the course of its
implementation.

Overview of the Naira Redesign Policy

The Central Bank of Nigeria stated several objectives behind the currency redesign, including:

 Reducing the volume of cash outside the banking system.


 Curbing currency counterfeiting and ransom payments to kidnappers.

 Promoting digital payments and a cashless economy.

 Enhancing the effectiveness of monetary policy.

While the policy was theoretically sound in its objectives, its rollout was characterized by
significant flaws:

 A short timeframe for phasing out old notes.

 Inadequate printing and distribution of new notes.

 Limited preparedness of financial infrastructure, especially in rural areas.

 Poor coordination between the CBN, commercial banks, and the general public.

Impact of the Policy

The practical consequences of the policy were far-reaching and largely negative:

 Cash scarcity disrupted economic activities, particularly in the informal sector.

 Small businesses and daily wage earners suffered losses and reduced income.

 Widespread public protests and unrest emerged in several parts of the country.

 Citizens spent hours in queues at banks and ATMs.

 The Supreme Court had to intervene to extend the use of old notes due to public
hardship.

Instead of curbing corruption, many reports suggested that politically connected individuals still
had access to new notes, while the masses bore the brunt of the scarcity.

Understanding the Cobra Effect

The Cobra Effect is a term used in policy analysis to describe a situation where an attempted
solution to a problem actually worsens the problem due to unforeseen or poorly managed
consequences. The term originates from British colonial India, where a bounty on cobras led
people to breed them for reward. When the bounty was removed, breeders released the
snakes, worsening the problem.

This concept highlights the dangers of poorly designed incentive structures or ill-considered
policies.

Does the Naira Redesign Reflect the Cobra Effect?

Yes, the Naira redesign policy does reflect the Cobra Effect in several ways:
Policy Objective Intended Effect Actual Outcome (Cobra Effect)

Reduce corruption and Force hidden cash into Elites found alternative channels; the poor
money hoarding the banking system suffered most from cash scarcity

Promote cashless Increase use of digital Digital systems were overwhelmed;


economy payments frequent failures and transaction delays

Short-term hardship increased; informal


Control inflation Reduce excess liquidity
economy disrupted

Reduce crime and Make ransom payments No measurable decline in crime; social
kidnapping harder unrest actually increased

Conclusion

The Naira redesign policy of the Buhari administration serves as a cautionary tale in public
policy. While the objectives may have been laudable, the poor planning, lack of infrastructure,
and weak stakeholder engagement resulted in serious unintended consequences. These
unintended outcomes, which in many cases aggravated existing issues, reflect the Cobra Effect
hypothesis. It underscores the need for careful policy design, realistic timelines, and thorough
impact assessment before implementing major economic reforms.

REFRENCES

[1] Idike, Adeline, and Okechukwu Innocent Eme. “Role of the Youths in Nation Building.”
Journal of Policy and Development Studies 9, no. 5 (2015): 50–71.
https://doi.org/10.12816/0018243.

[2] Central Bank of Nigeria | FREQUENTLY ASKED QUESTIONS AND ANSWERS ON NAIRA
REDESIGN . Accessed July 1, 2023. https://www.cbn.gov.ng/Out/2022/CCD/Naira_Redesign.pdf.

[3] “Protests in Oyo, Delta, Edo over Naira Scarcity, Bank Atms Destroyed.” Channels Television .
Accessed July 1, 2023.
https://www.google.com/amp/s/www.channelstv.com/2023/02/15/protests-in-oyo-delta-edo-
over-naira-scarcity-bank-atms-destroyed/amp/.

[4] “University of Ibadan .” NHEF(The Nigeria Higher Education Foundation) . Accessed July 1,
2023. https://www.thenhef.org/partner-universities/university-of-ibadan/#:~:text=Founded
%20in%201948%2C%20University%20of,alumni%20in%20160%20countries%20worldwide.
[5] Pillah , Tyodzer; Patrick. “Currency Redesign and Monetary Policy of Nigeria: An Evaluation.”
International Journal of Public Administration and Management Research (IJPAMR 8, no. 4
(2023): 46–53. – https://sdbindex.com/Sourceid/00000429, google scholar, etc.

[6] Pillah , Tyodzer; Patrick. “Currency Redesign and Monetary Policy of Nigeria: An Evaluation.”

[7] Olujobi, Oluwatosin. “Macroeconomic Implications of the New Currency Refurbishment and
Capital Formation in Nigeria.” Munich Personal RePEc Archive, December 12, 2022.
https://mpra.ub.uni-muenchen.de/115634/.

[8] Central Bank of Nigeria | Home. Accessed July 1, 2023.


https://www.cbn.gov.ng/Out/2022/CCD/ReNairaRedesignPolicyRevisedWithdrawal.pdf.

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