Waiting for Banks’ Compliance with CBN Directives on New Naira Notes

Finance

The Central Bank of Nigeria insists that old naira notes will cease to be legal tenders in the next 15 days, whereas many of the banks’ ATMs are still dispensing old notes. Nigerians are therefore counting on the apex bank to remove all the obstacles put in place by the banks against the realisation of its naira redesign policy without delay, reports Festus Akanbi

Although the Central Bank of Nigeria (CBN) has insisted there is no going back on the expiration of old naira notes on January 31, financial market watchers said a combination of poor logistics which manifested in poor circulation of the new currency notes by banks, and sabotage by some bank staff is threatening the Naira redesign policy.

This is because, with two weeks to go, many banks are still dispensing the old notes through their Automated Teller Machines (ATMs), making it a waste of time for anyone to take his/her old naira notes to the bank.

Last year, the apex bank announced plans to redesign N1,000, N500 and N200 notes with January 31, 2023, as the  date the old notes would cease to be legal tender.

Amidst the growing complaints over the scarcity of new notes in banks, THISDAY conducted a random survey in banks in Lagos last week and confirmed that with barely two weeks to the expiration of the CBN’s deadline, many Nigerians may still have loads of old naira notes as they are still being disbursed by banks ATM.

In Ikoyi, Lagos State, for example, compliance by banks varied. In some banks, along Awolowo road, old naira notes were still disbursed at the weekend while many others were able to give out new notes to customers. It was the same story at the Ojodu, Berger, Ijanikin, Ojuelegba and Egbeda areas of Lagos where most of the banks continued to roll out a combination of old and new naira notes.

THISDAY noticed protests by some bank customers who lamented their ordeal in their bid to change their old notes to new ones. They complained that having complied with the CBN’s directives and returned their old naira notes, they expected the banks to load their ATMs with new notes. They lamented that up till the weekend, all they were receiving were old notes.

“If the CBN cannot enforce compliance, then we hold them accountable. Why would people who deposit old notes now be paid in the same old notes through ATMs?” an angry customer queried.

Allegations

Another customer alleged that bank staff are determined to frustrate the efforts of the CBN by selling the new notes to syndicates that sell the naira at social events.

“Did we factor in the fraud of banks selling new banknotes to Owanbe Party Sprayers Cash Vendors Association? After selling illegally to these vendors and POS operators, they end up loading ATMs with old notes and talking rubbish about non-availability. Not only this, they also reserve new notes for political patrons for vote buying and other enterprises.”

Insisting that trading blames  over the scarcity of new notes will not stop until the apex bank uses force on the banks, he said: “Just let CBN unleash a consequential inspection team on them and watch new notes flood the economy by force.”

Available Options

As protests over the scarcity of the new banknotes persist, some Nigerians believe the only way out is for the apex bank to extend its deadline in the interest of the nation’s economy.  Many argued that going by the current situation in the banks, it is very unlikely that the new notes will circulate adequately at the expiration of the deadline.

Following the concerns raised by the bank customers, the Senate had asked the apex bank to move the deadline to the end of June, citing the hardship the hasty enforcement would have on Nigerians. While the CBN said the currency redesign is aimed at checking counterfeiting, reducing the volume of money outside the banking system earlier estimated at N2.7 trillion, among others, some have suggested that the programme seeks to mop up black money and checkmate politicians ahead of the February and March general election.

Former Director General of the Lagos Chamber of Commerce and Industry (LCCI) and private sector advocate, Dr. Muda Yusuf, argued that there “is no logic behind CBN’s stampede”. He warned that millions of poor Nigerians in rural areas could lose their money or pay a high premium to have their old banknotes exchanged for the new legal tenders if the straightjacket implementation goes on. 

“The CBN keeps assuring us that it would meet all the demands. Even though some of us disagreed with the whole idea, since we are in the process, we have requested that it should give Nigerians more time. That would make sense, and I do not see anything it would lose if it postpones the timeline by two or three months,” the economist told THISDAY yesterday.

On the slow switchover of ATMs, an official of one of the banks hinted that banks are wary of configuring the machines, as they are not sure of sustainable supply. The source said the trickling supply has prevented banks from complying with the CBN directive.

CBN Threatens to Wield Big Sticks

And in confirmation of the non-compliance with its directives, the CBN had recently warned that banks that failed to comply with its directive to dispense the newly redesigned N200, N500, and N1,000 notes through their ATMs would face penalties.

The CBN Director of the Currency Operations Department, Ahmed Umar, issued the warning in Abuja last week during a training session for state directors of the National Orientation Agency (NOA).

Umar explained that the CBN directive was issued to enforce the January 31 deadline for the withdrawal of old naira notes in circulation.

The apex bank had ordered the banks to suspend dispensing the new currency notes over the counter and to only make them available via ATMs.

Umar said: “We want to use this training session to pass a message that CBN has enough currency notes for the general public.

“We, CBN management, have mandated banks to stop putting old notes in their ATMs. They should only put the new notes.

“And there is a serialisation of the policy that they can put either N500, N1,000 or N200 notes, whichever denomination they have or combination of any of those notes, they should just put new notes in their machines.”

He said: “We are going to monitor to ensure that the banks comply and if they don’t, we have a penalty for non-compliance.”

The CBN director further noted that in many countries across the world, it takes a few years to change a currency, adding that, “in our case what we had was over 20 years of having the same design of the note.

“Over that period, what it did to us was to create an avenue for some people to master the act of counterfeiting the note.

“In our case, what we have is a minimum of 17 years or more for us to redesign our currency.

“If you notice the N1,000 note that was introduced in 2005, it took 17 years for us to redesign it; N500 and N200 notes were also redesigned after 21 years and 22 years, respectively.

“So, if currency notes stay too long in the system, there is a tendency for people to make a lot of efforts to produce the same notes. So, that is why there is a need to change our notes regularly,” he added.

Umar further pointed out that the N500 and N1,000  notes constituted 99 per cent of the currency notes being targeted by counterfeiters.

He said: “It is simple logic; the effort you put to counterfeit N1,000 is the same effort you put to counterfeit N5.

“So, why will they waste their energy doing small notes; they always target the higher note, particularly N1,000, because of the values attached to it,” he explained.

On October 26, 2022, the CBN Governor, Godwin Emefiele, disclosed the bank’s resolve to redesign, produce, and circulate new series of the N200, N500, and N1,000 denominations.

Emefiele had said the move would help to manage the money supply, and tackle currency counterfeiting, and terrorism among others.

He explained that while the circulation of the new banknotes would commence on December 15, 2022, the new and existing currencies shall remain legal tender and circulate together until January 31, 2023, when the existing currencies shall cease to be legal tender.

Emefiele had insisted that the January 31 deadline remained sacrosanct, adding that the 100 days provided for people to deposit existing banknotes in commercial banks was adequate.

Whatever measures that the CBN put in place this week will show which way to go. It is time to deal with currency traffickers and sabotage in banks in the interest of the nation’s economy.