Laws, rules, regulations are made to be obeyed. Laws are obeyed for different reasons: Out of respect and for fear of consequences. In one of my episodes in this column, I had highlighted how MDBs wound the economy by serially violating established financial regulations and how during the immediate past administration, the soul of the Central Bank was hijacked by the MDB’s. During the period the Bankers Forum became too powerful and the Central Bank rendered powerless to perform its regulatory functions. DMBs could commit murder in the daylight on Broad Street and walk free. I had ended the episode by urging the apex bank to bark and bite at the banks if it must reclaim its position as the apex bank.
Given recent development, it would appear that the Central Bank is paying attention to good counsel. CBN’s recent decision to sanction some Deposit Money Banks (DMBs) for failing to dispense cash via ATMs during the Yuletide season is a bold step towards ensuring seamless cash flow in the economy. This move sends a clear message to financial institutions on CBN’s zero tolerance for cash flow disruptions. Each of the affected banks was fined ₦150 million for non-compliance with the CBN’s cash distribution guidelines. According to the CBN, the fine will be deducted directly from the banks deposit with the apex bank. This amount may be small and a slap on the wrist to these banks given the lucrativeness of their dirty deals, but at best, it signals a new dawn where CBN is willing to bite and not just bark at the banks.
As I write this episode, President Trump has been sworn-in as the 47th President of the United States of America. No one is left in doubt that his policies may negatively impact on developing economies. Nigeria has joined the BRICS club as a partner, a move which President Trump views as hostile. Given the volatility of our economy, I would have advised that we tread with caution and weigh our options to determine if we can withstand an unfavourable US economic hostility against the BRICS which seeks to undermine the US dollar dominance. Is the price to pay worth it, when we are not even considered a full member? I felt bad reading of Nigeria relying on South Africa and Ethiopia to be admitted into the BRICS club as a mere partner despite our GDP and strategic position in Africa. This BRICS adventure is a decision that will pose more challenge to Nigeria and may further destabilise our highly volatile economy.
As we navigate the complexities of this new challenge, it is essential to recognise the critical role that seamless cash flow plays in maintaining public trust and economic stability. The CBN’s commitment to ensuring that cash is available to meet the needs of Nigerians is a testament to its dedication to fostering economic growth and development, and the banks are critical to achieving this objective.
The importance of seamless cash flow in these trying times need not be overemphasized. Seamless cash flow is the lifeblood of any economy. It enables individuals and businesses to conduct transactions efficiently, promotes economic activity, and maintain public confidence in the financial system. When cash flow is disrupted, the consequences can be far-reaching, leading to reduced economic activity, increased transaction costs, and decreased public confidence. The DMBs, when they ply their trade of economic sabotage, must put the country at heart for we cannot afford to collapse this country to satisfy a greedy few.
In Nigeria, where a significant proportion of the population relies on cash transactions, ensuring seamless cash flow is critical. The CBN’s efforts to maintain cash circulation are, therefore, a vital component of our economic stability. DMBs remain a critical partner to achieve CBNs monetary policy objective. In a release circulated to the media, the CBN has reiterated its commitment to maintaining a robust cash buffer to meet Nigerians’ needs. The CBN Governor, Olayemi Cardoso emphasised that the CBN’s focus remains on fostering trust, ensuring stability, and guaranteeing seamless cash circulation across the financial system.
This commitment is reflected in the CBN’s guidelines for cash distribution, which require banks to ensure that ATMs are stocked with cash at all times, particularly during periods of high demand. The CBN’s sanctions on DMBs for failing to comply with these guidelines serve as a reminder of the importance of respecting regulations.
Disregard for established rules must meet with severe consequence. The CBN’s sanctions on DMBs for failing to dispense cash via ATMs during the Yuletide season are a clear indication of its commitment to enforcing regulatory guidelines. The regulator is working with security agencies to crack down on illegal cash sales and operational violations, including enforcing POS operators’ daily cumulative withdrawal limit of N1.2 million.
Banks that fail to comply with the CBN’s guidelines risk facing more severe penalties, including fines and reputational damage. This can have far-reaching consequences for their business, including loss of customer trust and revenue. So, it is time for banks to sit up.
The CBN’s Director of Communication emphasized that banks play a critical role in maintaining cash circulation in the economy. They are expected to ensure that ATMs are stocked with cash at all times. This requires effective cash management strategies, including forecasting cash demand, managing cash inventory, and ensuring that ATMs are functioning properly.
Banks must also ensure that they comply with the CBN’s guidelines for cash distribution, including maintaining a robust cash buffer to meet the needs of their customers. By doing so, banks can help maintain seamless cash flow, promote economic activity, and maintain public confidence in the financial system. When banks for whatever reasons disrupt seamless disruption of cash they rightly or wrongly
– Reduce economic activity: Cash flow disruptions can lead to reduced economic activity, as individuals and businesses may be unable to access cash to conduct transactions.
– Increased transaction costs: Cash flow disruptions can lead to increased transaction costs, as individuals and businesses may be forced to use alternative payment methods, such as mobile payments or online banking.
– Decreased public confidence: When customers deposit their money in the banks, they do so in the trust that their demand will be honoured on demand. Cash flow disruptions can lead to decreased public confidence in the financial system, which can have far-reaching consequences for the economy. I am confident that if we fix the banks and we would have fixed the economy
In conclusion, the CBN’s decision to sanction DMBs for failing to dispense cash via ATMs is a welcome development-a bold step towards ensuring seamless cash flow in the economy. Banks must ensure that they comply with regulatory guidelines to avoid sanctions and maintain public trust. This move also will need to extend to other infractions by banks. With the right political will, I trust that if we fix the banks and the financial system, we would have fixed the economy.
As we move forward, it is essential that we recognize the critical role that seamless cash flow plays in maintaining public trust and economic stability. By working together, we can promote economic growth and development, maintain public confidence in the financial system, and ensure that our economy remains stable and prosperous.