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Currencies |
| NIGERIAN NAIRA |
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| Introduction
| Overview | Structure
| History | Factors
affecting change in exchange rates | Daily
trend of Nigerian naira | Weekly
trend of Nigerian naira |
| Introduction |
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Naira is a currency unit that is used by Nigeria as its official
currency since 1973. "Kobo" subdivides the currency unit
into 100 equal parts. Naira is depicted with the symbol "₦"
but due to lack of accessibility of the symbol in most of the
fonts, it is often denoted by a simple "N" instead.
According to the ISO 4217 regulation, Nigerian naira is entitled
with NGN as the currency code and 566 as the numeric code. Even in
plural terms, the currency is known "naira" only.
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Overview
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Nigeria is a country characterized by rich oil reserves and other
minerals on one hand and on the other hand it encounters
challenges on the political, infrastructure and managerial front.
Nigeria is the 12th largest producer of oil in the world and among
the major exporters of oil, it stands 8th place. The economy is
highly dependent on its oil sector that contributes 40% of the GDP
and as high as 95% of the foreign exchange revenues. The political
instability and corruption keep even its oil sector from
performing 100% and result in a portion of its natural resources
unused. To worsen the situation, Nigeria is supposed to be the
most populated country in Africa and it is said that one in four
Africans is Nigerian. Also, mismanagement on the macroeconomic
front along with all the other leaves the economy struggling and
poor. Nigeria is counted among the countries of the "Third
World".
When the Nigerian naira was launched, it was
pegged to a basket of currencies having currencies of its seven
trading countries including US dollar, British pound, German mark,
French franc, Japanese yen, Dutch guilder and Swiss franc. But
from 1986, the currency removed the peg and was freely floated in
the market and it still follows the flexible exchange rate regime.
In context of import and export restrictions of currency in
Nigeria, any foreign currency can be imported in the country
without any limitations with a declaration needed on amounts
equivalent or in excess of US$5000. Import and export of local
currency is permitted only till 5000 naira.
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Structure
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Nigeria adopted a decimalized official currency
in the form of naira in 1973, 12 years after the
country gained independence. The subunit of the
naira has been served by "kobo". The
Central Bank of Nigeria that was established in
1959 and issued the national currency prior to
naira, got the responsibility and authority to
issue the new currency as well. The paper
currency form dominates the Nigerian currency
system as the banknotes are issued in 8
denominations as compared to the coinage that is
issued just with 3 face values. When the
Nigerian currency was launched in 1973, currency
coins were minted in 8 denominations and
currently it has reduced to denominations namely
50 kobo, 1 naira and 2 naira, other coins being
withdrawn in 2007. The backside of all the coins
have embossed image of the coat of arms of the
Nigeria surrounded by the words "FEDERAL
REPUBLIC OF NIGERIA" and year of minting at
the bottom. The obverse side of the coins
possesses symbolic images with their respective
face values. The 50 kobo coin shows a symbol of
maize, 1 naira coin depicts a portrait image of
Sir Herbert Macaulay and the 2 naira coin has
the embossed picture of National Assembly
building in the capital city, Abuja. The naira
coins are circular in shape whereas the 50 kobo
coin is 12-sided polygon.
The naira banknotes are
printed 8 denominations that are 5, 10, 20, 50,
100, 200, 500 and 1000 naira. Redesigned notes
for face values ranging from 5 to 50 naira were
issued recently in February 2007 as a part of
economic reforms. Also, attempts to issue
polymer notes have been started, the 20 naira
being already issued in polymer. The obverse
side of all the notes show portrait of images of
people that are important in context of the
history and culture of Nigeria except for the 50
naira note that shows picture of 4 common
Nigerian people, 3 men and 1 woman. The backside
of the currency notes possesses pictures that
relate and depict the culture of Nigeria. The
details about the images on the country’s
currency notes are mentioned below
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| History |
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The early history of western Africa suggests that the
area now known as Nigeria was divided into three
states namely Yoruba kingdom, Igbo kingdom and Edo
kingdom ruled over by ethnic groups. During that time,
barter system prevailed as a medium of exchange. With
time, ring shaped Okpoho manilla, usually made from
bronze or copper, came into existence and started to
be used as barter coinage. Manilla coins got popular
and its use spread all over western African region.
Along with manilas, cowrie shells were also exchanged
as medium of exchange. When the new world was found,
Portuguese started the slave trade in which they
shipped slaves from central and western Africa to the
new world. These coins also played an important part
in the Atlantic slave trade as these coins were used
to acquire and exchange slaves and that is why,
manilla coins came to be known as "slave trade
money".
In the late 1800s, a British
mercantile company, Royal Niger Company, was chartered
for revival of Nigerian government, as a result of
expansion of trade between Britain and Nigeria. The
official currency of Britain that was British pound
sterling started to be used in Nigeria along with
Spanish dollars and French francs with an exchange
rate of 1 British pound = 4 Spanish dollars. In 1900s,
the territory under the company’s reign was taken
over by the British government and thus, Nigeria
became a British colony. Attempts of monetary reforms
proved fruitful when in 1907, the country minted its
own coins for the first time in its history
denominated in West African pound. In 1913, West
African Currency Board was established to issue the
coins for the country and in 1915; it was also
permitted to issue pound notes at par with British
pound sterling. All this time, manilla coins were in
circulation and were withdrawn and exchanged with
notes and coins in 1948.
The Nigerian central bank was
established in 1959 and at the same time West African
pound was replaced by the Nigerian pound. Nigeria
gained independence in the year 1960 but was
recognized as republic in 1963. The new and
decimalized currency naira was announced in 1971 but
it didn’t come in circulation before 1973. The state
of biafra was not a part of Nigeria then and issued
its own currency until it was merged into Nigeria in
1970.
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| Factors
affecting the exchange rates between two countries
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The volatility in the foreign exchange rates
depends upon a numerous macro economic factors that
have different degrees of importance to different
economies of the world. Some special and exceptional
factors affecting the rates may also exist in the case
of different countries. Following are shown the common
factors on which the foreign exchange rate depends
- Flow of imports and exports between the
countries
- Flow of capital between the countries
- Relative
inflation rates
- Fluctuation limits on exchange rate
imposed by the governments of the countries
- Merchandise trade balance
- Rate of inflation in the country
- Flow of
funds between the countries for the payment of
stock and bond purchases
- Relative growth
- Short term
and long term interest rate differentials
- Cost of borrowings
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