Impact of naira redesign and monetary policy on Nigeria economy

Abstract

Naira redesign is typically carried out to prevent naira counterfeiting and control the amount of money in circulation lowering inflation and is also a good monetary policy. The sole aim of this study is to examine the effects of monetary policy and the redesign of the Naira on the Nigerian economy. The secondary data used was taken from World Bank publications published between 1970 and 2021. While accounting for inflation, the regression model demonstrates a significant relationship between GDP and monetary policy. The model also demonstrates that the exchange rate and interest rate coefficients have a positive and significant impact on Nigeria's GDP, whereas the inflation rate coefficient has a negative and significant impact. The unit root test was also used, and the results demonstrate that all of the variables are ordered-one integrated. According to the Johansen cointegration analysis, the GDP, exchange rate, interest rate, and inflation have a long-term relationship. This demonstrates unequivocally that monetary policy, when properly applied by the federal government via the central bank of Nigeria, has a positive significant impact on the Nigerian economy. To prevent Naira notes counterfeiting, remove about 80% of Naira currency outside of commercial banks, and also to mitigate the inflation rate that has essentially driven Nigeria into recession, the government should strictly implement the Naira redesign decision from time to time through the Nigeria apex bank. This will positively affect the Nigerian economy.