- Customers, CBN blame banks
Dirty naira notes flood Nigerian markets – Irked by the increasing amount of dirty, mutilated naira notes in circulation, the banking public in Lagos and its environs are blaming commercial banks and calling on the Central Bank of Nigeria (CBN) to control the situation.
This they said, have been causing a lot of arguments, embarrassment, and loss of sales for commercial transport drivers, petty traders, and their customers among others.
But in a swift reaction, the CBN, through the Acting Director of Corporate Communications, Mr. Isaac Okoroafor said commercial banks are responsible for this because they deliberately flood the system with such notes.
A bank customer and lawyer who preferred anonymity is seriously worried that the alarming quantity of dirty/mutilated currency notes in circulation had become a national embarrassment.
He added that banks were issuing torn, mutilated and unhygienic currency notes through Automated Teller Machines (ATM), and across the counter.
Specifically, he said, “I observe that in spite of arrest and subsequent prosecution of the culprits, there is still a cartel in CBN and commercial banks, which make brisk business recycling old naira notes meant for destruction.
They enrich their bank accounts according to him, acquiring properties through these illegal proceeds by converting the equivalent of the mutilated notes into their accounts and selling printed mint, meant for customers, to touts and hawkers.
“Section 21(4) of the CBN Act of 2007 makes it a punishable offense for any person to hawk, sell or trade in naira notes, coins or any other issued by the apex bank,” he said.
The legal practitioner stressed that most of the mutilated currency notes in circulation harbored pathogenic microorganisms hazardous to human health. He said that the mutilated notes also harbored infectious diseases such as diarrhea, food poisoning and respiratory problems which could be spread through the notes
Another customer with one of the new generation banks, Mr. Jude Okon told Nigerian Tribune that the bulk of naira notes in circulation look so bad. According to him, it is, even so, worse than “when they are given to you as balance (change), you prefer to reject them because spending such notes is a herculean task.”
Okon said most of the bad notes are already turn into unrecognizable pieces and the amount CBN charges commercial banks is too small to warrant such national embarrassment. His words: “Some of them can compare to papers fit for dustbin or pit toilets. The fact that they are still been exchanged as legal tender, marvels not a few Nigerians. In fact, they look to me as a ready source of transmitting diseases.”
While calling on the central bank to find ways of taking them off circulation, Okon said the shocking thing he discovered is that commercial bank’s tellers are using “cello tape” to fix some of the bad naira notes.
“Do you know what? I apply cello tape every now and then and just last Sunday, I still did it on a naira note that was so bad. CBN should simply do something about the problem; it is simply making a bad statement about us as a country,” he lamented.
Responding to the above, Okoroafor said, all over the world, it is the duty of commercial banks to sort dirty and mutilated notes and return them to the central bank.
In the same way, “as a good bank customer, when you want to deposit money in the bank, you sort the good ones out and the ones that are bad. That is what the banks are expected to do when they have unfit notes that should be brought to CBN but they fail to do it.
According to Okoroafor, the banks are supposed to employ people to do the sorting, the same way CBN has employed people to do it. Instead, they expect the CBN to do the sorting because they are avoiding the cost.
“So, instead of bringing them to us sorted, the banks bring them unsorted. Then we started charging them N12, 000 per box. A box of N1000 notes contains N10million worth. So, a box of N500 notes is N5 million in that order. So, in a bid to avoid cost, they preferred to re-circulate old and mutilated notes.”
Okoroafor had earlier given other reasons why there are so many mutilated Naira notes in circulation.
According to him, people handle these notes so badly and so within a short while they don’t get to their lifespan anymore and for the lower denomination notes, they have a higher velocity of circulation.
“What that means is that you use it more often and as you use it in exchange, it gets worn out and gets torn more frequently. So, that also creates another problem.
However, based on the above explanation, the House of Representatives had earlier this year, directed the Central Bank of Nigeria to stop imposing charges on commercial banks before receiving mutilated and dirty notes from them.
The House noted in Abuja that the surcharge was one of the major reasons why the banks were reluctant to withdraw such notes from circulation or accept them from customers.
He promised that the CBN apart from monitoring and sanctioning those caught, violating extant rules is working with appropriate authorities to arrest the ugly situation.
An accountant with one of the print media organizations complained that some banks are rejecting the mutilated notes even when the numbers and every other information on the naira notes are still visible.
According to her, “each time I take money to the bank, they will collect the good notes and reject the sorted, mutilated ones. They will tell me that I should take it to First Bank where it will be accepted. I have experienced this with a particular branch of United Bank for Africa and Wema Bank.”
An analyst, Kirk Leigh regretted that when old worn-out notes are being surreptitiously channelled back into the system, there are no records of the ‘transactions’ and the immediate implication is that the Central Bank has an inaccurate, amount of currency in circulation and therefore has no control of aspects of monetary policy couched on fractional banking and interest rates.
“It makes nonsense of the money multiplier and the Monetary Policy Rate (MPR), instruments for managing money in circulation, volume of credit and inflation. This could mean that the quarterly meeting of the Monetary Policy Committee (MPC) of the Central Bank is a mere hang out of peers, a charade with little or no impact on the economy,” he said in an article on Thursday.