The Central Bank of Nigeria (CBN) has penalized negligent Deposit Money Banks (DMBs) N150 million per branch in an effort to curb the illicit flow of newly printed naira notes to currency hawkers and other dishonest agents.
The CBN claims that the commercialization of Naira notes compromises the effective distribution of cash to Nigerians, which is why this is part of the measures to stop it.
In a December 13, 2024, circular signed by Mohammed J. Olayemi, Acting Director of the Currency Operations Department, the apex bank voiced its displeasure with the growing number of mint Naira notes being offered for sale in cash hawking locations throughout the nation.
Citing a previous instruction dated November 13, 2024, the circular reaffirmed the CBN’s resolve to combat this illegal behavior.
Any bank branch found guilty of assisting, helping, or abetting the flow of mint notes to hawkers will be subject to the fine at the first instance of a violation, according to the CBN.
The Banks and Other Financial Institutions Act (BOFIA) 2020 specifies that subsequent infractions will result in more harsher penalties.
Increased enforcement and surveillance
With an emphasis on examining cash disbursement procedures, the CBN announced intentions to increase recurring spot checks in banking rooms and ATMs in order to guarantee compliance.
In order to identify hotspots for cash-hawking and identify banks involved in the illicit trade, the apex bank also plans to launch surprise shopping operations.
The CBN has also imposed penalties and urged banks to strengthen internal controls, procedures, and processes related to cash management, especially at Cash Management Centers, branches, and teller operations.
According to the circular, “The CBN has expressed dismay at the widespread illegal flow of mint banknotes to currency hawkers and other dishonest businesspeople who commodify Naira banknotes, thereby hindering the efficient and effective distribution of cash to banks’ clients and the public at large.”
“CBN will keep stepping up its routine spot checks at banking halls and ATMs to examine cash payouts to bank customers. We’ll also continue to conduct mystery shopping at all of the locations where cash is smuggled throughout the nation.”
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“In this regard, any deposit money banks or financial institutions that, through direct actions or inactions, facilitate, aid, or abetting the illicit flow of mint banknotes to currency hawkers and unscrupulous economic agents that commodify Naira banknotes shall be penalized at first instance N150,000,000.00 (one hundred and fifty million Naira) only, per erring branch, and the full weight of relevant provisions of BOFIA 2020 at later instances.”
Financial institutions were encouraged by the apex bank to take aggressive measures to prevent the use of cash distribution mechanisms for illegal purposes.
What you ought to be aware of
Since it leads to inefficiencies in the currency distribution system and calls into doubt the integrity of banking operations, the CBN has long been concerned about the illegal flow of mint Naira notes to hawkers. The most recent circular highlights the apex bank’s resolve to bring the country’s currency back into order.
Nairametrics previously reported that as part of its continuous efforts to guarantee appropriate currency distribution, the CBN issued severe fines for Deposit Money Banks (DMBs) discovered to be diverting cash to hawkers.
A 10% fee on the entire amount of the withdrawn monies would be imposed on any bank connected to cash taken from hawkers, the central bank said in a circular dated November 13, 2024.
Any further infractions will result in a 5% penalty.
The circular emphasized that these actions are intended to prevent the misuse of naira notes and to support an effective cash distribution system. It was signed by Muhammad J. Olayemi, Acting Director, Currency Operations Department.
The CBN’s Clean Note Policy, which aims to preserve the value of the naira by guaranteeing appropriate handling and circulation of banknotes, was reaffirmed.
Additionally, the CBN cautioned DMBs against cash hoarding and diversion, emphasising that these actions impede cash availability, especially during times of high demand, such as the Yuletide season.
Banks that participate in these practices will be subject to penalties, and the CBN will cooperate closely with law enforcement to step up mystery shopping and spot checks.
