CBN Moves To Reclaim Integrity Of Naira Notes

For decades, Central Bank of Nigeria (CBN) had relied on moral suasion through mostly media and public enlightenment campaigns to dissuade Nigerians from continuing abuse of currency notes. Despite this, the legal tender remained much abused at street parties where people spray and dance on it, meat sellers rubbing it in blood stained hands, traders cutting its edges to allegedly preventing evil spirit from stealing it from safekeeping and other such unwholesome acts.

Consequently, a large percentage of currency notes in circulation have become dirty, mutilated, and unfit for ATMs and over-the-counter payments despite the huge amount spent by the apex bank to constantly print new currencies. Increasing amount of dirty and mutilated currency notes in circulation has elicited widespread criticism from private citizens and commercial enterprises.

Mutilated banknote refers to a poor quality banknote that requires a special examination to determine its value. The note could be partially or permanently damaged by fire, water, dye, insects, rodents or destroyed by natural disasters. An unfit banknote refers to a genuine banknote that is no longer fit for circulation in accordance with the quality standard set by the CBN.

In recent years, the bank has made efforts to devolve retail currency management function of the CBN to the private sector while concentrating on the wholesale function.

After years of these unsuccessful campaigns however, the apex bank has announced a Clean Note Policy aimed at finally putting to an end, a regime of dirty and mutilated currency in circulation and giving needed dignity to the legal tender. Section 18 of the CBN Act 2007 imposes an obligation on the Bank to maintain the quality of banknotes issued. The Clean Note Policy entails a quality banknotes and withdrawal of unfit/soiled banknotes to guarantee public confidence and usage of the Naira banknotes as a medium of exchange.

Both the CBN and deposit money banks (DMBs) have previously blamed each other for availability of large proportion of mutilated and dirty currencies in circulation. CBN has blamed DMBs for deliberately mixing unfit and new notes available in circulation, and re-circulating dirty/unfit currencies instead of sorting out the bad ones and returning them to CBN because in their bid to avoid paying for the prescribed fees for the service.

According to a statement from the apex bank, “the intention of the Bank is to ensure that unfit, dirty, mutilated and counterfeit banknotes are not in circulation in Nigeria. This is in pursuant to Section 18,20 & 21 of the CBN Act 2007, which prohibits the counterfeiting, sale and abuse of the Naira.

“The Bank cannot achieve these objectives without the collaboration of deposit money banks, merchant banks, microfinance banks, government agencies, Cash-in- Transit (CIT), cash processing companies (CPCs), market associations, merchants/retailers, chambers of commerce and industry, security agencies, currency management equipment manufacturers, bank customers and the general public.

“The Bank has developed a mechanism to ensure full compliance with the documents by stakeholders. Compliant channels such as phone and emails would be provided to enable the general public provide information on infractions of the two documents.”

A circular issued by the CBN noted that the initiative was in a bid to enhance the availability of clean notes and effect expeditious withdrawal of dirty notes from circulation. It said Deposit Money Banks and Cash Processing Companies making deposits at the CBN should classify their cash deposits into fit and unfit notes.

According to a circular issued as a result of the introduction of the Clean Note Policy and Banknote Fitness and Guidelines, the policy is intended to be used by the public and major cash handlers such as DMBs, Microfinance Banks, third party service providers and others.

It clarifies that a banknote would be considered unfit for recirculation if it was badly soiled or if there was a general distribution/localisation of dirt. Other features that could make a note be classified as unfit were if the note presented a limp/rag appearance due to excessive folding that resulted in the breakdown of the texture and structure of the note or if the note had added image or lettering marked on it or if a hole that was more than 10 mm had.

The circular read in part, “Other features that classify notes as unfit are torn parts of the banknote that are re-joined with adhesive tape in a manner that tries to preserve as nearly as possible the original design and size of the note; reduction in the original size of the note through wear and tear or fire, rodents and chemicals; perforation of the notes; and loss of more than half of the original size of the banknote.

“Unfit banknotes shall not be re-circulated by DMBs and CPCs. However, a penal charge of N12,000 per box, or any amount determined by the management of the CBN shall apply for the deposit of unsorted banknotes. In addition, penalties as may be determined by the CBN, shall apply for the re-circulation of unfit banknotes.”

At the launch of the Clean Note Policy and Banknote Fitness Guidelines in Lagos recently, CBN’s Director of Banking & Payments Mr. Dipo Fatokun said the banknote is a reflection of a functional central bank.

Highlights of Clean Note Policy

  1. Clean and good quality notes in circulation Banks to ensure notes in circulation are clean and of good quality. Banks to classify notes into a fit and unfit category and return unfit ones to the CBN. Unfit banknotes shall not be re-circulated.

CBN to monitor compliance on a regular basis.

  1. ATMs to dispense and accept fits notes only CBN to ensure that ATMs deployed by banks and other service providers are configured to dispense and accept only genuine banknotes in all denominations. The ATMs shall dispense notes that have been duly checked for authenticity and fitness according to the Bank’s standard. Contravention to attract sanctions
  2. A campaign against abuse of Naira notes

Mutilation through writing/graffiti, mutilation, stapling, tearing or making a hole of any kind, spraying, soiling or matching the naira note will attract N50,000 fine or six months’ imprisonment or both under the CBN Act for naira abuse.

4 Fit banknotes

A banknote that is suitable for continued circulation and is sufficiently clean to allow its authenticity and value to be readily ascertained.

Unfit banknote

A banknote that is unsuitable for further circulation because of its physical condition, which may be soiled, dirty, limp, worn out, defaced or has a hole that is larger than 10 mm. Unfit notes should be returned to DMBs or a branch of the CBN anywhere in Nigeria for exchange.

  1. CBN to ensure adequacy and availability of fit banknotes in the right denominational mix to meet public demand and maintain confidence in the national currency.
  2. CBN seeks approved processing infrastructure by deposit money banks and other approved channels.
  3. Policy to remain open for future amendments in tandem with emerging currency management issues.

To ensure that the banknotes in circulation are clean and of good quality, DMBs will be required to ensure that they process their banknotes using registered processing companies, other approved processing infrastructure and channels, classify them into fit and unfit. Any counterfeit notes discovered are to be returned to CBN. Only the banknotes which have been authenticated, that is to say, verified for counterfeit and free from unfit notes according to CBN standard, will be issued over the counter by banks or through their cash dispensing machines.

Section 2 of the CBN Act, 2007 vests the issuance of legal tender currency on the Central Bank of Nigeria (CBN). The task entails design (including security features), production, and distribution of newly printed notes and fit notes as well as replacement of unfit banknotes which are destroyed or older series withdrawn from circulation. The bank also has responsibility to preserve the integrity of the naira and thereby sustain public confidence in the legal tender currency. To attain these objectives, the quality of the naira banknotes in circulation must be maintained in good condition to ensure that they could be processed by approved processing systems and freely accepted by the general public for payment and settlement of transactions.

Customers responsibility

To make the new policy effective and realise its objectives, CBN has given the responsibility to Nigerians and bank customers to report erring banks to its officials for appropriate sanctions. Director of Currency Operations department Ms Priscilla Eleje said the copies of the guidelines will be made available to aid bank customers to know when any lender is not complying and needs to be sanctioned. The regulator will regularly carry out spot checks on bank branches, based on complaints from customers, which will serve as guide on where to go. “Complaints from customers on any bank not accepting dirty notes will serve as a trigger for the CBN to know where to go and penalty for defaulting banks,” Eleje said.

The director noted that there should also be a banner in every banking hall for customers to understand the Note Policy and Banknote Fitness Guidelines and their rights as stipulated in it,” she said, noting that that the CBN is planning mobile courts to try currency counterfeiters to serve as a deterrent to others. The bank will also continue to sensitise the public on the basic security features of the notes, the dangers of sale of the naira, and proper handling habits of the banknotes by the public.