The naira (sign: ₦; code: NGN) is the currency of Nigeria. The Central Bank of Nigeria (CBN) is the sole issuer of legal tender money throughout the Federal Republic of Nigeria and controls the volume of money supplied in the economy in order to ensure monetary and price stability.
The naira was introduced on 1 January 1973, replacing the Nigerian pound at a rate of £1 = ₦2. This also made Nigeria the last country in the world to abandon the £sd currency system in favour of a decimal currency system. The coins of the new currency were the first coins issued by an independent Nigeria, as all circulating coins of the Nigerian pound were all struck by the colonial government of the Federation of Nigeria in 1959, with the name of Queen Elizabeth II on the obverse.
Queen Elizabeth II on Nigerian currency
Early Coinage and Banknotes
In 1973, coins were introduced in denominations of 1⁄2, 1, 5, 10 and 25 kobo, with the 1⁄2 and 1 kobo in bronze and the higher denominations in cupro-nickel. The 1⁄2 kobo coins were minted only that year. In 1991, smaller 1, 10 and 25 kobo coins were issued in copper-plated-steel, along with nickel-plated-steel 50 kobo and ₦1. On 28 February 2007, new coins were issued in denominations of 50 kobo, ₦1 and ₦2, with the ₦1 and ₦2 bimetallic.
On 1 January 1973, the Central Bank of Nigeria introduced notes for 50 kobo, ₦1, ₦5, ₦10 and ₦20: in April 1984, the colors of all naira banknotes were changed in an attempt to control money laundering. In 1991, ₦50 notes were issued, while the 50 kobo and ₦1 notes were replaced by coins in 1991. On 28 February 2007, new versions of the ₦5 to ₦50 banknotes were introduced.
Read also: Current USD/NGN Value
Naira banknotes
Currency Redesign and Policy Changes
In 2022, a policy was implemented by the Central Bank of Nigeria (CBN) to redesign and replace the highest denomination banknotes: the ₦200, ₦500, and ₦1,000 notes. The Central Bank of Nigeria cited several reasons for the currency redesign and the associated demonetization policy, noting that, by global best practice, currency should be redesigned every 5 to 8 years, and the Naira was long overdue. The redesign primarily focused on changing the colour palette and enhancing the security features of the affected denominations.
A major cash crunch occurred in February 2023 when the Nigerian government used a currency note changeover-delivering too few of the new notes into circulation-to attempt to force citizens to use a newly created government-sponsored central bank digital currency. The 2023 Nigerian currency crisis was precipitated in January 2023 by a shortage of naira cash amid an attempt by the Nigerian government to force citizens to use newly-designed notes, which the government said would help stem the tide of vote-buying in the lead-up to the 2023 general elections.
The scarcity of both old and new notes led to a prolonged cash crunch across Nigeria, severely impacting the economy. Businesses, particularly those in the informal sector which relies heavily on cash, suffered significant losses. The policy was highly controversial, with critics arguing the timing (just before the 2023 general elections) and implementation were flawed.
Exchange Rate Dynamics
The Nigerian Central Bank stated that it would make the naira fully convertible against foreign currencies by 2009. Currently, the amount of foreign currency is regulated through weekly auctions, while the Central Bank sets the exchange rate. The naira appreciated against the dollar through 2007 due to high oil revenues. However, the exchange rate has seen significant fluctuations.
Read also: Exchange Rate Analysis
In 2011, the CBN increased key interest rate six times, rising from 6.25% to 12%. There was a government plan to redenominate the naira at 100:1 in 2008, but the plan was suspended.
The naira was scheduled for redenomination in August 2008, although this was cancelled by then-President Umaru Musa Yar'Adua, with 100 old naira to become 1 new naira.
Naira Exchange Rates Over Time
Here's a simplified table illustrating the Naira's exchange rate with the US Dollar at different points in time:
| Year | Exchange Rate (NGN/USD) | Notes |
|---|---|---|
| 1973 | ₦2 = £1 (Initial Rate) | Replaced Nigerian Pound |
| 2007 | Appreciated | Due to high oil revenues |
| 2024 | ~₦1483 | Black market rate |
When Will Naira's Fluctuation End?
Currently, the dollar is around ₦1483 per 1 USD, significantly higher than the official Central Bank of Nigeria rate.
Read also: Exchange Rate: 300 USD to NGN
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