Because cash accounts for over 70 per cent of trading transactions in Nigeria, the naira redesign policy may result in the country’s Gross Domestic Product (GDP) losing $18 million every month, the Chief Executive Officer of the Financial Derivatives Company, Bismarck Rewane, has said.
Rewane, during a presentation at the Lagos Business School, that, “the loss is due to cash accounting for 70 per cent of trading transactions.”
The economist explained that the GDP would bear the brunt of a decline in cash circulation within the trading sector.
Rewane’s statement was on the back of the trade disruption caused by the scarcity of Naira notes, which has seen many Nigerians depend on Point of Sale (PoS) operators to withdraw, as banks run out of cash.
Speaking on the impact of the situation, Rewane said, “Total man-hours loss in a month will be 120 hours and total GDP loss in a month will be $18 million.”
He added “Trade is settled mainly in cash and POS, although 70 percent of trading transactions are settled by cash.
“Therefore, velocity of circulation in the trading sector (16 times) is approximately four times more than the formal sector.
“A decline in the velocity of circulation could reduce output in the trading sector. Hence its contribution to GDP will fall.”