Scorecard is out: CBN’s naira redesign weakened Nigerian economy

The Central Bank of Nigeria-induced naira crunch between January and March weighed down on the economy leading to a decline in growth, the National Bureau of Statistics said Wednesday.

The statistics agency said Nigeria’s gross domestic product, which measures economic growth, grew at 2.31% in the first quarter compared with 3.11% a year ago.

The non-oil economy increased 2.77% compared with 4.4% in the prior three months. The oil sector contracted 4.21% even as production increased to 1.51 million barrels per day from 1.49 million barrels a day a year earlier.

“The reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter,” it said.

– Naira redesign

The central bank introduced a debilitating naira redesign policy in October 2022 but its implementation between January and March caused massive disruption in the economy as the country held general elections. The bank claimed it aimed to curb inflation, counterfeiting and insecurity but government data showed prices surged instead.

The CBN mopped cash out of the economy leaving citizens stranded for weeks as they struggled to feed and pay for basic needs. A promise to replace old notes failed as commercial banks said they were not supplied with new bills.

Despite causing widespread suffering, the policy remained even after the elections in February and March. It was only reversed after the organized labour, Nigeria Labour Congress, threatened strike following a Supreme Court order for the extension of the redesign deadline from Feb. 10 to December.

– Slow growth

In its report, the NBS said economic growth in the first three months of the year declined from 3.52% recorded in the fourth quarter of 2022.

The Services sector contributed the most to the total economy with 57.29%, growing at 4.35%. The agriculture sector was the worst hit as it shrank 0.90%, lower than the growth of 3.16% recorded in the first quarter of 2022. The industry sector also performed poorly.

Analysts had expected a slow growth but not as bad as reported. The CBN projected 2.64% growth while economists surveyed by Bloomberg predicted an average growth of 2.85%.