CBN, Banks And Dirty Naira Notes

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A seriously battered N100 note. Source: BBC.com

Nigerians and other residents of Africa’s most populous country are already up to their neck in attempting to tackle the challenges that come with the use of mostly torn, patched and terribly dirty currency notes.
This probably explains why the House of Representatives recently asked the Central Bank of Nigeria (CBN) to commence immediate withdrawal from circulation of all mutilated and dirty naira notes, particularly the N100 denomination. The National Assembly’s green chamber also charged its Committee on Banking and Currency to investigate the activities of street traders of the nation’s mint currency bills.
According to reports, the lawmakers’ directives followed a motion by Hon. Adekoya Abdel-Majid who described the N100 bill as being ‘‘badly torn, terribly squeezed, soiled, cello-taped, dirty and mutilated. Considering that bacteria naturally breed and live in dirty environments and objects, dirty naira notes could pose serious health risks as they have been found to contain pathogenic parasites and bacteria.’’
The Ogun State representative added that apart from the N1000 and N500 notes, new issues of the other denominations were rarely paid at the counters to bank customers, whereas such notes are always available in the black market.
Besides the risk associated with keeping such contaminated bank notes in one’s pocket, wallet or brassier (as was once popular among women), bank tellers were also said to have complained that these dirty currency notes are usually fragile, sticky and difficult to count using the cash registers, leading to multiple recounts that often end in an eventual resort to manual confirmation. Imagine how frustrating and time consuming!
Rejection of deformed naira notes as means of payment for goods and services has often resulted to quarrels and outright brawls, especially between traders, taxi drivers, commercial motorcyclists, bus conductors and their various customers.
Chibuzor Ndribe is a Port Harcourt-based banker. According to him, ‘‘mishandling of the naira has reached an epidemic level; it is now very common to see even educated Nigerians mishandling naira notes; it is also common to see market traders writing on naira notes or squeezing wads of currency notes into their pockets and bags, thereby abusing such notes.’’
Another banker who preferred to remain anonymous said that the culture of spraying money at parties and other public functions should be blamed. According to him, a situation where different denominations of the local and, sometimes, foreign currency notes are showered on celebrants at birthday, marriage and naming ceremonies with dancers trampling on the bank notes is most appalling. “What becomes of such currencies if the occasion was held in an open space before or during a drizzly weather?” He queried.
In her contribution, Mrs. Sonia Manafa said that the “naira is a major instrument of national sovereignty and carries with it Nigeria’s identity. Mishandling the naira note is unacceptable. Poor handling of naira notes increases the cost of printing new ones while its scarcity impedes effective business transaction.”
Mrs. Aseleme Abdulkareem, a petty trader, regretted that the scarcity of lower denomination naira notes, especially the N5, N10, N20 and N50 polymer notes is seriously affecting her business. She narrated her daily ordeal in the hands of student customers who always deferred payment for items purchased from her because she was unable to split the N200, N500 and N1000 bills they tendered. Others simply dropped the purchases and moved on to the next shop.
Also bemoaning the dire situation is a commercial tricycle operator in Port Harcourt, Mr. Ikechukwu James, who complained that “the N100 note is very scarce to the extent that we wait for passengers to board an onward vehicle before obtaining change from their new driver in order to complete most transactions.” He blamed the CBN for failure to print more currency notes. Re-echoing this, another transporter on Aba Road in Port Harcourt, Mr. Aniefiok Udeme, said he was tired of always spending from his meager profit to purchase wads of N50 polymer notes from roadside currency hawkers. He wished for an end to the prevailing ugly situation.
But in an apparent reply to Ikechukwu and others who are wont to accuse the apex bank of delinquency, its Corporate Communications Director, Mr. Isaac Okoroafor, was quoted to have countered thus: “It is not true. We have been printing lower denominations of naira notes. A combination of currency abuse and the fact that N100 notes have high velocity of circulation all contribute to the fast wear and tear of lower naira notes.”
The CBN may choose to put up whatever defences it pleases, but there are analysts who think that the banking regulator has been unsuccessful in its public campaign against abuse of the naira at social gatherings; not even after so much media promotion of this campaign some years ago. What’s more, this school of thought also believes that the recent policy of delivering fresh paper money to market traders for direct exchange with bad notes does not appear to be making the desired difference. Such laudable ideas had always enjoyed implementation not before their promoters’ agents had been adequately tutored on how best to circumvent the process.
Again, who would have bothered about the prevalence of deformed naira notes if the CBN had perfected the cashless policy it initiated in 2012 or, better still, if it had succeeded in re-introducing the use of coins into the nation’s economy as was last attempted in 2007?
According to Ndribe, almost all denominations of the naira currently in circulation have a huge percentage of torn or unfit elements. When a customer approaches a deposit money bank (DMB) for exchange of bad naira notes with clean ones, such request is usually turned down on the excuse that the new notes are not available. But the truth is that the CBN deducts a five per cent charge from the DMBs on the total value of bad notes returned for exchange. This charge, when added to the cost of employing staff for currency-sorting duties, makes most of the commercial banks to be uninterested. The banker’s bank is, therefore, forced to undertake the sorting job by itself and subsequently surcharge the defaulting banks. Even petrol filling stations which once served as veritable vents for spending any terribly deformed naira note have now become increasingly circumspect, having experienced the banks’ reluctance to accept such bills.
Some stakeholders have also blamed the CBN for being unnecessarily too lenient with its staff entrusted with the destruction of certified bad currency notes sorted out of the banking system but who were found to have colluded with observer security agents to compromise the process. They argue that this is mainly responsible for the persistent recirculation of such dirty notes and is capable of causing inflation as the bulk (if not all) of the condemned notes already replaced with mint currency still find their way back into the nation’s financial system.
Selling crispy naira notes to street hawkers contravenes Section 21 (4) of the CBN Act of 2007; but there are indications that syndicates exist within and across banks who profit immensely from the recirculation of notes earmarked for destruction and those who trade in new notes through their black market proxies.
In fact, now that the present House of Representatives is sure to be reconstituted after the 2019 general elections, not a few Nigerians would be wondering how soon to expect results from its latest charge to the CBN.

 

Ibelema Jumbo & Favour Ekeke