Nigeria’s Money Swap Saga

In 2016, India embarked on an exercise to flush out black money and tax evasion by removing its two highest denominations, representing 86% of all banknotes in circulation, overnight.

The resulting chaos included an immediate drop in GDP, economic hardship, civil unrest and legal challenges that went right the way up to the Supreme Court. And it didn’t even achieve its objectives, as nearly all of the demonetised banknotes were returned to the central bank, showing that the initial assumption that 30% of the notes were in the hands of criminals was vastly over-stated.

It should have served as a warning to other countries but Nigeria has embarked on its own demonetisation – albeit not nearly so dramatic, but with similar outcomes nevertheless.