IMPACT OF NAIRA REDESIGN ON ECONOMIC GROWTH IN NIGERIA.

ABSTRACT This study evaluates the impact of the Naira redesign on Nigeria's economic growth. The research focuses on key economic variables such as Gross Domestic Product (GDP), Inflation (INFL), Exchange Rate (EXCH), Interest Rate (INTR), and Money Supply (M2) to determine the impact of redesigning of naira on macroeconomic stability. With currency redesigns serving as a strategic tool for managing inflation, reducing counterfeiting, and improving financial stability, the Central Bank of Nigeria's policy sought to address these issues while supporting a transition toward a more cashless economy. The study uses time series data spanning only on years when currency was designed and redesigned since recession till date (1958, 1959, 1962, 1973, 1977, 1979, 1984, 1991, 1999, 2000, 2001, 2005, 2007, 2010, 2014, 2022) and employs unit root tests, regression analysis, co-integration analysis, covariance analysis, correlation analysis and the Vector Error Correction Model (VECM) to analyze both short-term and long-term relationships among the variables. The findings reveal that the Naira redesign initially led to inflationary pressures and liquidity constraints, as currency scarcity disrupted economic activities. However, over time, the policy facilitated improved monetary control and reduced counterfeit currency in circulation, contributing positively to Nigeria’s financial stability. Co-integration results suggest a long-term equilibrium relationship between GDP, inflation, and money supply, implying that the redesign's positive effects on economic growth may strengthen as the banking system stabilizes. Additionally, Granger causality tests highlight the role of money supply and interest rates in influencing inflation, affirming the necessity for well-coordinated monetary policies. The study concludes by recommending enhanced digital payment infrastructure, increased public awareness on the benefits of financial reforms, and efficient implementation of monetary policies to maximize the redesign’s benefits. These policy actions can help Nigeria leverage the advantages of currency redesign for sustained economic growth while mitigating transitional challenges such as inflation spikes and currency hoarding.