Nigeria’s Currency – How It Developed

Ashay Mervyn is the Head of Emerging Markets for JNF Capital, and specialises in investment in Sub-Saharan Africa, Middle East and China and Latin America. He is particularly interested in Nigerian currency trades and investments. Ashay has successfully built up the business from inception to its current position of investing around $200 million a year. He uses his Pinterest page to share his thoughts on investment in the Middle East and North Africa (MENA) regions, which are likely to fascinate anyone who also shares an interest in this area. Ashay is also interested in how Nigeria’s currency has developed over the years, and explains more about its history.

Nigeria’s History

Nigeria is a country with a long and colourful history, with its first inhabitants thought to have settled there as long ago as 11,000 BC, after which many different tribes made it their home. It is still viewed as a multinational state as its population spans over 500 different ethnic groups, with a corresponding number of different languages. The region became part of the British Empire in 1901, and achieved independence again in 1960. In 2006, Nigeria became the first African country to pay off its debt in full, clearing an amount of around $30 billion, which it owed to The Paris Club.

In 2015, Nigeria was the world’s 20th largest economy, with a GDP of over $500 billion, having also overtaken South Africa to become Africa’s largest economy.

Ashay Mervyn

Who Is In Charge Of Nigerian Currency?

The Central Bank of Nigeria (CBN) is the sole body responsible for issuing the currency in the federation of Nigeria. It controls monetary and price stability by manipulating the amount of money in the economy. A subdivision of the CBN, the Currency & Branch Operations Department manages the currency on a day to day basis by supplying and distributing the money, and either reissuing bank notes or disposing of them if they are no longer of an acceptable quality.

Nigeria Joins the Decimal Era

Up until the end of December 1972, Nigeria was still using its imperial currency of pounds, shillings and pence. On 1 January 1973, it became the last country to make the transition to a decimal currency. The new currency was called the naira, and the replacement rate was two naira to one pound.

New Nigerian Coinage

When the transition to the decimal currency was first made, new coins were issued in various different denominations, starting at ½ and 1 kobo, which were minted in bronze, and 5, 10 and 25 kobo, which were minted in cupro-nickel.

Over 30 years later, in February 2007, the decision was made to release new coins in denominations of 50 kobo, 1 and 2 naira. The naira coins were made of an alloy of two different metals and some Nigerians wondered how practical the 2 naira coin was. The old coinage was withdrawn and the deadline for exchanging old currency for new was the end of May 2007, and the CBN also made the decision to withdraw the ½ to 25 kobo coins altogether.

New Nigerian Bank Notes

When the transition to the decimal currency was first made, bank notes were issued in denominations of 50 kobo, as well a 1, 5, 10 and 20 naira. No new 50 kobo notes were released after 1989, and between 1991 and 2005, notes were issued in increasing values from 50 naira all the way to 1,000 naira. Always keen to innovate and move with the times, the CBN wanted to reissue some of the bank notes as polymer versions, which would be more durable. They planned to do this in 2007, but eventually the first note to be issued in this format was the 20 naira note, and this was released just before the end of 2009. Since then, other bank notes have been issued in polymer format, but the CBN has recently announced that no further polymer versions of bank notes will be issued as this medium is more expensive as well as not being environmentally friendly.

Future Prospects For Nigeria

This region has enjoyed year on year growth of about 7% for the last ten years; however, it needs to have plans in place to ensure its exchange rate remains stable, and also to manage falling revenues from oil, which is having an effect on public sector spending. It also needs to manage insurgency from the north east, as this has a destabilising effect on investment as well as hampering efforts to eliminate poverty.

At the moment, 57% of the economy’s growth is due to the non-oil sector, with manufacturing and agriculture between them accounting for another 30%. The country’s economy is diversifying, becoming more oriented towards services such retail and wholesale trade, real estate, information and communication. If it can control its macro-economic challenges, the region has the potential to sustain its growth rate.