The Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane has projected that Nigeria would suffer a total GDP loss of $18 million and total man hour loss of 120 hours (five days) per month due to the disruption in economic activities that is triggered by the implementation of the Central Bank of Nigeria’s currency swap of old currency notes of N1,000, N500 and N200 for newly printed Naira notes.
Rewane, during his presentation on February 9 at the Lagos Business School, attributed the decline in GDP growth to reduction in velocity of money circulation and total man-hours loss in the economy.
He projected that the “total man hour loss in a month will be 120 hours and ttal GDP loss in a month will be $18 million.
“Trade is settled mainly in cash and POS (though) 70 per cent 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,” he said.
According to him, trade contributed 16 per cent of the formal GDP and employed 17 per cent of the total labour force in Nigeria.
His projection was distilled from the following facts: that total money supply in the economy is N52 trillion while the total cash in circulation is N3.01trillion. In addition, three of the eight denominations is N2.71trillion.
However, he estimated that the “total new naira notes printed is N400 billion, which left a Naira cash shortfall of N2.31trillion, which is about 77 per cent of total cash in circulation that has lead “to near paralysis of commercial activities.”