CBN to the Rescue

Sarah Alade, acting CBN governor

Central Bank of Nigeria directs its branches nationwide to supply lower naira denomination banknotes to deposit money banks to address the complaints of their scarcity by the informal sector

By Anayo Ezugwu  |  Apr. 28, 2014 @ 01:00 GMT

THE Central Bank of Nigeria, CBN, has stepped in to address the complaints by many Nigerians, mostly those in the informal sector over the scarcity of lower naira denomination across the country.  The CBN on Sunday, April 13, said it had ordered its branches in the country to increase the supply of the banknotes to Deposit Money Banks, DMBs.

The apex bank explained that presently, there was sufficient supply of lower denomination notes, adding that it had directed all its branches to interface directly with members of the public, including shop owners to enhance easy circulation of the currency. The CBN also expressed concern over the unwholesome act of hawking the naira, dispensing it in parties and squeezing it.

Throwing more light on the circulation of unfit currencies in the country, the central bank said the failure of some banks to make the needed investments in currency sorting was responsible for the dirty naira notes in circulation. “The bank, in collaboration with law enforcement agencies, has taken steps to curb these acts. The CBN is also investigating to determine if any of its staff is involved in this criminal act and is prepared to take appropriate action against such staff. Any staff caught in this nefarious act will be punished,” it said.

According to the CBN, there had been misrepresentations and speculations regarding its role and mandate in the issuance and management of the national legal tender currency, the naira.
It stated that the CBN Act 2007 empowers the CBN to, among other mandates, issue legal tender currency in Nigeria and to promote a sound financial system in Nigeria.
“The CBN does not impose any charge on DMBs for currency sorting services for the purpose of pecuniary benefits. Instead, it is the responsibility of each bank, as is the practice world over, to sort its own currency notes appropriately into “fit” and “unfit” categories before lodging them with the CBN.”

It, however, pointed out that in a situation where any bank fails to perform this responsibility; it plays the role on behalf of affected banks by sorting the banknotes, separating the fit notes from the unfit notes. This service, according to the statement, attracts a legitimate charge of N12,000 per box on the bank that fails to sort its currency. Thereafter, the fit notes are put back into circulation while the unfit notes are destroyed and new notes are reissued to replace them.
“What is happening is that banks have failed to make the needed investments in currency sorting and therefore resorting to re-circulating unfit notes. I can assure you that in due course, something will be done to check this. It is pertinent to note that the CBN issues only clean and fit notes to the banks and can only replace unfit notes brought to it by the banks. Suffice to state that the CBN can only replace unfit notes that are brought to it by the banks which are the proper and natural interface with the general public,” it stated.

Realnews story on the scarcity of lower denomination of naira published in its March 14, 2014, issue, revealed that the shortage of lower naira denominations in circulation was   very noticeable among retailers, bus conductors and petty traders in the last one year. For this reason, many traders and commuters had been forced to abandon their balances after purchase or exchange of services when the sellers or bus conductors could not raise the necessary balance to complete the transaction.

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