The Introduction of Higher Banknotes and the Price Level in Nigeria: An Empirical Investigation

  •  Ngozi E. Egbuna    
  •  Nonso Obikili    


The planned restructuring of the Nigerian currency to include a N5, 000 note has generated a lot of controversy. Much of the furor is centered around the supposed inflationary effects of introducing higher denomination notes, which provides the motivation for this paper. Using five different measures of inflation, from 1973 to 2011, we examine the effects of the introduction of new notes since the launch of the Naira in 1973. Our empirical results show that none of the currency restructuring episodes has had any effect on inflation. There, however, seems to be a short-lived positive effect on food inflation every time a new note is introduced. We attribute this not to the introduction of the note itself but to the change in inflation expectations following the introduction. However, the change in inflation expectations more than completely dissipates by the second month after which there is no subsequent effect.

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