TheCentral Bank of Nigeria (CBN) has imposed hefty fines totaling N1.35billion on nine Deposit Money Banks for failing to ensure cash availability via their Automated Teller Machines (ATMs) during the Christmas season. Although the fine is a little belated, it is still a step in the right direction. Each of the defaulting banks was fined N150 million in what the regulatory authority said was the outcome of spot checks which revealed non-compliance with the regulatory cash distribution guidelines.
A statement issued by CBN’s acting Director of Corporate Communication, Mrs. Hakama Sidi Ali, said the fines would be debited from the affected banks’ accounts with the apex bank. While assuring the regulatory authority’s commitment to ensuring seamless cash availability, the CBN’s spokesperson also explained that the fines should serve as a clear warning of its zero tolerance for cash flow disruption. Prior to the sanction, CBN had warned commercial banks to strictly comply with cash distribution policies. In September, 2024, the CBN announced plans to penalise banks that failed to dispense cash via ATMs as part of efforts to ensure adequate cash circulation.
At the heat of the cash crisis last month, CBN had urged bank customers to report to it, violations of the guidelines through specified emails. This followed reported cases of long queues in banks across the country for cash withdrawals. Many banks could only dispense between N5,000 and N20,000 cash limits to each customer, daily, a situation that worsened the economic hardship during the Yuletide. This was in spite of repeated warnings by the apex bank that it would not hesitate to impose hefty fines on any of the banks violating its cash circulation guidelines. According to CBN guidelines, daily withdrawal limit for Point of Sale (PoS) operators is N1.2 million.
Despite the fact that currency circulation reached a record high of N4.5trillion in October, 2024, a 4.7 per cent increase from that of September, 2024, it is unfortunate that millions of Nigerians are still experiencing acute cash crunch at the banks and ATMs. The paradox reflects a deeper dysfunction in Nigeria’s financial system. The cash scarcity also exposes systemic failures in currency management, as well as trust deficit in digital payment system and the ineffective enforcement of monetary policies of the CBN.
While the sanction might have served as a deterrent, it remains more reactive than proactive. It only addressed the symptoms instead of the structural and fundamental issues that often lead to cash shortages across the banking system. The same situation happened a few months to the 2023 general elections. Going forward, the CBN should embrace a multifaceted approach that should include the implementation of a robust monitoring mechanism to track the flow of currency and prevent hoarding and diversion of cash.
As the regulator of the banking industry, the CBN should not lose sight of its primary duty, which is to ensure the stability and liquidity of the financial system. The frequent cash scarcity, especially during the festive season, suggests either an unwillingness or inability on the part of the CBN to decisively rein in defaulting banks until the crisis worsens. Undoubtedly, this is partly as a result of poor monetary policy, weak oversight and even strained interbank liquidity. The present management of the CBN should do more than it has already done in its reforms, some of which have not addressed the basic monetary issues that hamper economic activities. Sometimes, the CBN’s failure to strictly enforce its mandate erodes public confidence in the banking system. Trust, no doubt, is the cutting edge in the financial services sector. Liquidity crisis, which has persisted for months now, has had its toll on businesses and the economy in general and undermined financial inclusion, making it harder for businesses to thrive. Government’s huge deficits and soaring inflation have increased the propensity for people to hold more cash than before.
The CBN should henceforth to ensure that banks have adequate cash supply. And where there is shortage, banks should offer prompt explanation. The CBN should consider increasing money supply and negotiating new payment system. Nigerians should also reduce non-essential spending. In addition, CBN’s oversight function needs to be enhanced and strictly enforced. In the same vein, its public communication must be more proactive in rebuilding trust and confidence in the banking system.