In a circular issued on November 13, 2024, the CBN stated that any financial institution associated with cash confiscated from hawkers will incur a 10% penalty on the total withdrawn amount.
Further violations will result in an additional 5% penalty.
The circular, signed by Muhammad J. Olayemi, Acting Director of the Currency Operations Department, highlighted that these actions are intended to prevent the misuse of naira notes and to foster an effective cash distribution framework.
It reaffirmed the CBN’s dedication to upholding its Clean Note Policy, which aims to preserve the naira's integrity through appropriate handling and circulation of banknotes.
Additionally, the CBN cautioned DMBs against the practices of cash hoarding and diversion, emphasizing that such actions hinder access to cash, especially during peak demand periods like the holiday season.
Banks involved in these practices will face repercussions, with the CBN collaborating with law enforcement to enhance spot inspections and undercover operations.
The circular stated: “For the avoidance of doubt, it should be noted that:
“a) DMBs, to whom cash seized from “hawkers” of cash is traced, will be penalized 10 per cent of the total value of cash withdrawn on the day the seized cash was withdrawn from the Central Bank of Nigeria. Every subsequent offense will incur an incremental penalty of 5 per cent.
“b) DMBs found engaging in cash hoarding, diversion, or any actions that hinder efficient cash distribution, including violations of the Clean Note Policy, will incur appropriate sanctions.”
The circular emphasized the importance of banks prioritizing cash distribution through Automated Teller Machines (ATMs) to improve public access and reduce dependence on unauthorized channels.
This directive from the central bank comes in response to growing concerns regarding the distribution of new naira notes in informal markets, often linked to hawkers who sell cash at inflated prices. By imposing penalties on banks that engage in such activities, the Central Bank of Nigeria (CBN) aims to prevent the misuse of the nation’s currency and ensure that cash is available to legitimate users.
The implementation of these penalties is part of the CBN’s comprehensive strategy to uphold public trust in the financial system. The Clean Note Policy plays a crucial role in this initiative, aiming to decrease the circulation of damaged and unfit banknotes while discouraging unethical behavior within the banking industry.
As the festive season approaches, an increase in cash demand is anticipated, prompting the CBN to reinforce its regulatory measures. The circular urged banks to enhance their internal procedures and adhere strictly to the cash disbursement guidelines.
To ensure accountability, the CBN will ramp up its monitoring efforts, collaborating with law enforcement agencies to identify and penalize violators. These initiatives, the central bank highlighted, are vital for addressing systemic inefficiencies and ensuring the efficient distribution of cash throughout the country.
The circular noted: “As we approach the yuletide season, with an anticipated increase in cash demand, DMBs are advised to implement internal controls for responsible disbursement and accountability in respect of mint banknotes payouts at their outlets. To enhance public access to cash, we encourage banks to prioritize cash distribution through ATMs.
“During this season, the Bank, in collaboration with relevant law enforcement agencies, will intensify spot checks and mystery shopping activities to monitor and enforce responsible cash distribution and prevent Naira abuse.”
The recently issued directive underscores the Central Bank of Nigeria's unwavering commitment to addressing the persistent challenges in cash management, particularly with regard to the improper handling of naira notes.
For financial institutions, strict adherence to these guidelines will not only mitigate the risk of incurring penalties but also elevate their standing as responsible entities within the financial sector.
As the holiday season draws near, the effectiveness of the CBN's initiatives will hinge on the banks' diligent compliance with the directives and the central bank's robust enforcement mechanisms.