Last updated on March 28th, 2024 at 12:16 pm
What Is An Obsolete Currency?
When a currency is no longer in use and can not, therefore, be used as a means of exchange by the country of origin, it is called obsolete currency.
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In the 1990s, my grandma showed us some currencies that were of significant value during her youthful days. She kept it for historical purposes.
Such leftover banknotes and coins can be found in the homes of elderly persons not just in Nigeria, but around the world and are called obsolete currency
Most often, holders of such outdated currencies like to reminisce how valuable they were, and how many goods they bought with them.
Causes of Obsolete Currency
Many reasons or factors could make a currency outdated: inflation and the release of a new mint are some of the most common reasons.
Impact Of Inflation
Between 1999 to 2007, new currencies were released. Old ones were faced out of circulation.
The government also released some banknotes like NGN1 and added NGN2 in coins. They were in circulation for a certain period.
Unfortunately, Nigeria’s high inflation made the coins die a natural death because there are no products NGN1 or NGN2 could buy any longer.
Not just that, NGN5 which is the lowest acceptable banknote is also facing the same problem as NGN1. Hardly can you find good NGN5 in Nigeria.
What this means is that the lowest-value currency decreases in actual value to a point that they have no value in the face of economic problems. The monetary policy of a country could also spark inflation which will affect the value of a currency.
Nigeria isn’t the only country that has issues with inflation. South Africa had a similar issue in the past where some coins were faced out because they had no value again.
Inflation and devaluation can relegate a currency to its lowest value and make it worthless in the market
Introduction Of New Prints
NGN20 in Nigeria is one of the banknotes that have undergone several prints, modifications and new designs.
Whenever the new notes are minted, the old design becomes outdated and is withdrawn from circulation by the Central Bank of Nigeria (CBN).
For instance, 20 naira notes were first Withdrawn in 1984 when new designs were released. In February 2005, the same thing happened. This isn’t peculiar to Nigeria. It happens around the world including in the United States.
In the U.S., high denominations like $5,000, and $100,000 were discontinued. Some of them were recalled in 1969. Today, it’s hard to find $100,000 denomination in the hands of individuals, it is used for internal government transactions.
The fact that a currency is outdated or discontinued doesn’t stop individuals from holding them.
Anyone who wants to keep obsolete coins or banknotes has the right to do so, but may no longer be able to spend them in some jurisdictions when the ultimatum given by the apex bank elapses.
Change In Political Structure
South Africa changed its currency after the end of the horrible days of the Apartheid regime. Nigeria changed its currency after British colonial rule ended. This is similar to several countries around the world.
So, change in political structure which mostly triggers new economic and monetary policies can make currency to be old and replaced by new ones.
Poor Handling
In a country where there is poor handling or poor maintenance culture of currencies, such legal tender could become disused.
For instance, no one is going to accept the 20naira note below because it has been defaced and it’s going to be obsolete over time.
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- By everyevery.ng
