GTI ResearchGTI Research
    What's Hot

    Nigeria Air to fly soon — FG

    February 9, 2023

    IMF recommends more fiscal, monetary tightening as farmers decry 50% crash in food prices

    February 9, 2023

    LCFE Presents Eko Gold Coin to Finance Minister

    February 9, 2023

    Join our 100k+ subscribers receiving New Stocks to buy every week.

      Facebook Twitter Instagram
      Trending
      • Nigeria Air to fly soon — FG
      • IMF recommends more fiscal, monetary tightening as farmers decry 50% crash in food prices
      • LCFE Presents Eko Gold Coin to Finance Minister
      • Oil prices steady amid China demand revival, high U.S. inventories
      • Dollar stuck as traders assess Fed outlook before CPI; Aussie jumps
      • The Best Stocks to Buy in the Nigeria Stock Exchange Today
      • NASD Price List for Wednesday, 8th February 2023
      • Bull Return As NGX-ASI Increased By +0.23%
      GTI ResearchGTI Research
      savings
      • Market News

        Nigeria Air to fly soon — FG

        February 9, 2023

        IMF recommends more fiscal, monetary tightening as farmers decry 50% crash in food prices

        February 9, 2023

        LCFE Presents Eko Gold Coin to Finance Minister

        February 9, 2023

        Oil prices steady amid China demand revival, high U.S. inventories

        February 9, 2023

        Dollar stuck as traders assess Fed outlook before CPI; Aussie jumps

        February 9, 2023
      • Market Summary

        Bull Return As NGX-ASI Increased By +0.23%

        February 8, 2023

        Bulls Dominance Ends As NGX-ASI Dipped By -0.13%

        February 7, 2023

        NGX Started The Week Bullish As ASI Pegged At 0.29%

        February 6, 2023

        NGX Ended The Week Positive As Gain Pegs Index at 0.40%

        February 3, 2023

        Market Continues To Gain As ASI Increase By 0.93%

        February 2, 2023
      • Sector Report

        Agriculture Sector Report for August 2022

        August 20, 2022
      • Economic Report

        NAIRA REDESIGN AND ITS IMPLICATIONS

        November 1, 2022

        September Inflation Rises to 20.77% – The Highest since September 2005

        October 17, 2022

        Federal Government of Nigeria Savings Bond

        October 4, 2022

        MPC raises Benchmark Interest Rate from 14 percent to 15.50 percent; and Cash Reserve Ratio to 32.5 percent.

        September 27, 2022

        Nigeria GDP Q2 2022 Report

        August 30, 2022
      • Corporate Action

        List of Dividend Declared So Far in Nigeria

        December 22, 2022

        Seplat Petroleum Development Company 9M’2022

        November 8, 2022

        Okomu Oil Palm Company Plc Q3’2022

        November 8, 2022

        CONOIL PLC 9M’ 2022

        November 8, 2022

        Livestock Feeds Plc Q3’2022

        November 8, 2022
      • Banking

        20 Common Budgeting Problems and Solutions

        February 7, 2023

        How to Report Fraud to Your Bank

        January 21, 2023

        Quick IPPIS Loan for Federal Workers in Nigeria

        January 11, 2023

        How Many Commercial Banks in Nigeria?

        January 2, 2023

        Functions of Commercial Banks in Nigeria

        December 29, 2022
      GTI ResearchGTI Research
      Home»Economic Report»NAIRA REDESIGN AND ITS IMPLICATIONS

      NAIRA REDESIGN AND ITS IMPLICATIONS

      November 1, 20224 Mins Read
      Facebook WhatsApp Email
      Share
      Facebook Email WhatsApp
      • CBN Governor Emiefele announced that new designs of high-value currency will begin circulation in December.
      • The aim is to rein in unbanked cash (+85%) and improve the effectiveness of monetary tools on inflation and the naira
      • Demonetization will not tackle real issues on FX. Also not a game-changer for banks, but multiples are currently cheap.

      It is worth noting that the real problem is not the proportion of the unbanked currency in circulation (as it has not significantly deteriorated from previous levels – see chart above), but rather that the money supply has increased significantly since the CBN’s unorthodox practice of ‘ways and means’ lending under Buhari’s administration, which simply put, involves printing new monies and lending to the federal government.

      Recently, the government has securitized these loans, but we don’t think it will mark an end to the “ways and means” advances. While redesigning the currency notes may not automatically grant potency to the CBN’s monetary tools, reining in unbanked cash could help measures like the Cash Reserve Ratio (CRR) become more effective in curbing money supply (the CBN last increased the CRR by 500bps to 32.5% in September). It will also help against money laundering and malpractices, as corruption and criminal activities typically thrive in cash-based systems. This becomes more pertinent as Nigeria’s general elections draw closer.

      Will the new notes help curb inflation and salvage the naira?
      Nigeria’s inflation spiked to 20.8% in September (its highest level since 2005) with increased prices typically driven by cost-push factors, rather than money supply. A direct impact of the increased money in circulation is the depreciation of the naira (especially in the parallel market), which has led to a rise in imported inflation. By having more banked cash, the CBN can control FX activities, especially with the bank’s tight capital control measures.

      However, the short time frame for the implementation of the new notes (old notes expire on 31 January 2023) poses some risks to the naira in the short term, as hoarders of old notes will scramble to secure FX holdings. To mitigate this, Nigeria’s anti-corruption commission (the Economic and Financial Crimes Commission or EFCC) has said that it will clamp down on speculative activities on the naira and Bureaux de Change (BDC) operators that facilitate this outside of the stipulated guidelines. This will also be crucial, especially going into the pre-election season as spending and campaigning have been rumoured to drive up US$ demand, as politicians look to the parallel market to fill their coffers before they take to the campaign trail.Since the announcement, N/$ has depreciated to a new low of N775, compared to N755 on Tuesday in the parallel market. We reiterate our view that the fundamental challenges with the naira will remain, as dollar supply remains low due to the decline in oil revenues and lack of foreign portfolio investors’ funds, while FX demand continues to rise.

      Scope for more bank deposits, but not a game-changer
      As of March 2022, Nigerian banks’ total deposits stood at N31tn from N17tn in October 2019, after the bifurcation of the open market operation (OMO) and treasury bills market (when domestic, non-bank investors were excluded from trading OMO bills) led to a spike in system liquidity and unattractive investments yields.

      The CBN’s demonetization plans to increase “banked cash” will be positive for banks, but it is unlikely to be a game-changer considering the total currencies outside banks (N3tn) makes up only 10% of total deposits. And it is unlikely that all of the currency in circulation is brought in.That said, Nigeria’s banking stocks are trading cheap, as the price-to-book multiples in GTCO (0.6x), ZENITHBA (0.5x), UBA (0.3x) and STANBIC (1.1x) are trading at a discount to their 5-yr averages of 1.5x, 0.8x, 0.5x, and 1.6x, respectively

      Related Posts

      September Inflation Rises to 20.77% – The Highest since September 2005

      October 17, 2022

      Federal Government of Nigeria Savings Bond

      October 4, 2022

      MPC raises Benchmark Interest Rate from 14 percent to 15.50 percent; and Cash Reserve Ratio to 32.5 percent.

      September 27, 2022

      Nigeria GDP Q2 2022 Report

      August 30, 2022

      Join our 100k+ Subscribers receiving New Stocks to buy Every Week.

        Recent Posts
        • Nigeria Air to fly soon — FG
        • IMF recommends more fiscal, monetary tightening as farmers decry 50% crash in food prices
        • LCFE Presents Eko Gold Coin to Finance Minister
        • Oil prices steady amid China demand revival, high U.S. inventories
        • Dollar stuck as traders assess Fed outlook before CPI; Aussie jumps
        Don't Miss

        Nigeria Air to fly soon — FG

        Market News February 9, 20233 Mins Read

        The Federal Government said yesterday that Nigeria Air will soon start flying, having got the…

        IMF recommends more fiscal, monetary tightening as farmers decry 50% crash in food prices

        February 9, 2023

        LCFE Presents Eko Gold Coin to Finance Minister

        February 9, 2023

        Oil prices steady amid China demand revival, high U.S. inventories

        February 9, 2023
        Stay In Touch
        • Facebook
        • Twitter
        • Instagram
        • LinkedIn
        • YouTube
        Our Picks

        Nigeria Air to fly soon — FG

        February 9, 2023

        IMF recommends more fiscal, monetary tightening as farmers decry 50% crash in food prices

        February 9, 2023

        LCFE Presents Eko Gold Coin to Finance Minister

        February 9, 2023

        Oil prices steady amid China demand revival, high U.S. inventories

        February 9, 2023

        Join our 100k+ Subscribers receiving New Stocks to buy every week.

          About Us
          About Us

          Your source for market research, news and reports.

          Email Us: research@gti.com.ng
          Contact: +234 (1) 2772481, +234 (1) 2772484

          Facebook Twitter Instagram LinkedIn
          Our Picks

          Quick IPPIS Loan for Federal Workers in Nigeria

          January 11, 2023

          List of Dividend Declared So Far in Nigeria

          December 22, 2022

          NGX Price List for Friday, 30th December 2022

          December 30, 2022
          Recent
          • Nigeria Air to fly soon — FG
          • IMF recommends more fiscal, monetary tightening as farmers decry 50% crash in food prices
          • LCFE Presents Eko Gold Coin to Finance Minister
          • Oil prices steady amid China demand revival, high U.S. inventories
          • Dollar stuck as traders assess Fed outlook before CPI; Aussie jumps
          • The Best Stocks to Buy in the Nigeria Stock Exchange Today
          © 2023 GTI Group.
          • Academy
          • Asset
          • Capital
          • Microfinance
          • Security
          • Trading
          • SAHA
          • TNFF

          Type above and press Enter to search. Press Esc to cancel.