In its official website, the core mandate of the Central Bank of Nigeria (CBN) is derived from the 1958 Act of Parliament, as amended in 1991, 1993, 1997, 1998, 1999 and 2007. The CBN Act of 2007 of the Federal Republic of Nigeria charges the bank with the overall control and administration of the monetary and financial sector policies of the Federal Government.
The objectives of the CBN, as listed in its websites, are as follows: ensure monetary and price stability; issue legal tender currency in Nigeria; maintain external reserves to safeguard the international value of the legal tender currency; promote a sound financial system in Nigeria; and act as banker and provide economic and financial advice to the Federal Government.
Over time, hoarding and eventual hawking of the Naira notes has become a regular practice. It is not uncommon to go to the bank to withdraw money and be turned back, whereas the black market and POS operators are brimming with cash. How come black market operators store cash whereas there is no cash in the banks for legitimate customers? This is a legitimate concern and people need answers. In a country where most people depend on cash for their daily transaction, the scarcity of naira notes can be frustrating as it adds to economic hardship.
While digital economy is encouraged, we must acknowledge the fact that not every Nigerian has access to electronic money transfer and as such the culture of having cash at hand cannot be totally eliminated. The rural farmers and the illiterate grandmother in the village need cash at hand and their needs have to be catered for as well as millions of others that are vulnerable. The CBN is mandated to ensure the availability of legal tender notes to those that deserve it.
It is in the light of the above that the new CBN policy to checkmate the activities of banks that are hoarding the currency and trading them to partygoers, POS operators and politicians is a welcome development.
To curb the nuisance created by those that hoard the Naira, the Central Bank of Nigeria (CBN) recently announced tough penalties for banks found to be involved in the illegal distribution of Naira notes to currency hawkers. In a bid to curb the growing practice of Naira abuse, the CBN has introduced new measures to hold banks accountable for the improper handling of mint banknotes. Recall that the Central Bank of Nigeria and the EFCC have successfully prosecuted some celebrity individuals for abuse of the Naira.
As Nigeria approaches the Yuletide season, the Central Bank of Nigeria (CBN) has reaffirmed its commitment to combating currency hawking and ensuring responsible cash disbursement. The CBN’s mystery shopping exercise and spot checks on Deposit Money Banks (DMBs) aim to prevent mint banknotes from falling into the wrong hands, thereby safeguarding the integrity of the Naira.
Currency hawking, the illicit sale of mint banknotes, undermines Nigeria’s economy, fuels inflation, and disparages the Naira’s value. This nefarious activity thrives on the exploitation of vulnerable citizens, who are forced to purchase essential goods and services at exorbitant prices. The consequences of inaction are dire: a weakened economy, reduced consumer purchasing power, and a loss of faith in the financial system.
To combat currency hawking, the CBN has introduced stringent proactive measures, which if followed through, will help in restoring back faith in the naira. Some of the CBN’s measures include:
Mystery Shopping Exercise: That is un-announced inspections of DMBs to monitor cash disbursement practices: Spot Checks: Regular audits to detect and prevent cash hoarding and diversion: Penalties: DMBs found complicit in currency hawking will face penalties of 10 per cent of withdrawn cash, with incremental 5 per cent penalties for repeat offences; collaboration with Law Enforcement: Joint efforts to monitor and enforce responsible cash distribution.
There are school of thoughts that believe that the biggest sabotage of the CBNs policies are the commercial banks. This notion has been expressed in many quarters and it is depressing because the banks ought to be the major partners of CBN. DMBs are critical stakeholders in the fight against currency hawking. To support the CBN’s initiatives, banks must implement internal controls; establish robust internal controls to prevent cash hoarding and diversions; prioritize ATM distribution; ensure ATMs are well-stocked and functioning efficiently; enhance public access by providing convenient, secure, and accessible cash distribution channels.
Moving forward, the new CBN measure requires citizens’ support to succeed. All stakeholders must collaborate. Citizens should be able to see something and say something. They should report suspicious activities and support banks in their quest for responsible disbursement.
Law Enforcement agencies like the police and EFCC should intensify efforts to apprehend and prosecute currency hawkers. DMBs should strictly adhere to CBN guidelines and prioritize customer convenience.
Many a time rules are not complied with due to lack of fear of consequences for Non-Compliance. It is left for the CBN to either bark without biting or to bark and bite. I believe the apex bank must be able to bark and bite where and when necessary.
DMBs found non-compliant should be made to face severe penalties capable of damaging their reputation and risking their licence. The CBN should not hesitate to revoke the licences of erring DMBs.
While it is good to punish offenders, it will not be out of place to reward banks that are compliant. The Central Bank may have a system where banks that are compliant receive certificate of compliant or an award, which will earn them some privilege and priority in accessing cash from CBN. Such gestures have the potential of increasing customer trust: Demonstrating commitment to responsible cash disbursement. Compliance will have reduced risk and minimize exposure to penalties and reputational damage. DMB’s compliance will improve efficiency and assist CBN in streamlining cash distribution processes.
As Nigeria navigates the Yuletide season, l urge Nigerians to join forces with the CBN to safeguard the Naira. The CBN’s proactive measures, coupled with stakeholder collaboration, will prevent currency hawking and ensure a stable economic future. Together, we can protect Nigeria’s economy and maintain the integrity of the financial system.
It is my opinion that CBN can make further measures that will strengthen the fight against currency hawking by establishing a National Cash Management Policy: operationalizing a standardised cash distribution practice across Nigeria. Enhanced public awareness and education of citizens on the risks and consequences of currency hawking need not be overemphasised, Finally, there is need to strengthen the law enforcement agencies by providing adequate resources to them to combat and diligently prosecute currency hawkers.
The Naira is our pride. By working together, we can create a secure, efficient and responsible cash distribution system, ultimately protecting the Naira and Nigeria’s economic well-being