
The heavy N1.35 billion fine the Central Bank of Nigeria’s (CBN) slammed on nine deposit money banks (DMBs) last week for failing to dispense cash via their Automated Teller Machines (ATMs) during the last festive season appears to be way of demonstrating that its determined to end the lingering cash scarcity in the country, writes Tony Chukwunyem
Although as the apex industry regulator, the Central Bank of Nigeria (CBN) regularly fines financial institutions for one infraction or the other, it does not usually make these fines public except on rare occasions.
Clearly, the apex bank’s announcement, last Tuesday, that it had sanctioned nine deposit money banks (DMBs) for failing to make naira notes available to members of the public through Automated Teller Machines (ATMs) during the yuletide season, was one of such rare occasions.
N150m fine
In the statement it issued announcing the sanctions, the CBN said each of the DMBs was fined N150 million for non-compliance, in line with its cash distribution guidelines, following spot checks on their branches.
The statement said that the enforcement followed repeated warnings from the CBN to financial institutions to guarantee seamless cash availability, particularly during periods of high demand, adding that the affected banks included, Fidelity Bank Plc, First Bank Plc, Keystone Bank Plc, Union Bank Plc, Globus Bank Plc, Providus Bank Plc, Zenith Bank Plc, United Bank for Africa Plc and Sterling Bank Plc.
It also said that the fines would be debited directly from the affected banks’ accounts with the apex bank. The statement reported Acting Director of Corporate Communications at the CBN, Mrs. Hakama Sidi Ali, as confirming the regulatory action against the nine banks.
She was quoted as saying: “Ensuring seamless cash flow is paramount to maintaining public trust and economic stability. The CBN will not hesitate to impose further sanctions on any institution found violating its cash circulation guidelines.”
Indeed, the statement said: “The CBN’s investigations and monitoring will continue to scrutinise cash hoarding and rationing, both at bank branches and by Point-of-Sale (POS) operators.
The Central Bank is working with security agencies to crack down on illegal cash sales and operational violations, including enforcing POS operators’ daily cumulative withdrawal limit of N1.2 million.”
It noted that, in his address at the Annual Bankers’ Dinner of the Chartered Institute of Bankers of Nigeria (CIBN) in November last year, CBN Governor, Olayemi Cardoso, warned banks to strictly adhere to cash distribution policies or face severe penalties.
According to the statement, Cardoso emphasised that the apex bank was committed to maintaining a robust cash buffer to meet Nigerians’ needs.
“Our focus remains on fostering trust, ensuring stability, and guaranteeing seamless cash circulation across the financial system,” the CBN Governor was quoted as saying.
As industry watchers noted following the announcement that the CBN’s hammer had descended on the financial institutions, the nine DMBs should have no excuses for getting sanctioned as the regulator had been making it very clear over the last few months that it was going to descend heavily on any bank that was found not to be complying with its cash distribution guidelines.
Mystery shopping
Specifically, on November 15, 2024 the CBN issued a circular in which it directed DMBs to prioritise cash disbursement through ATMs.
In the circular titled, “Mystery shopping & spot checks on cash disbursement activities of deposit money banks (DMBs),” signed by its Acting Director, Currency Operations Department, Solaja Olayemi, the CBN said it commenced spot checks to ensure efficient and responsible cash disbursement to the public and prevent the disbursement of mint banknotes to persons hawking naira notes.
The circular read: “Please refer to the subsisting circular on mystery shopping exercise and periodic spot checks on cash distribution/ disbursement activities of deposit money banks (DMBs).
“As you will recall, these initiatives were introduced to: Monitor and prevent practices that facilitate flow of mint banknotes to ‘hawkers’ of naira cash, thereby discouraging abuse of the naira; and ensure that DMBs support efficient and responsible cash disbursement to the public.” The circular also warned that
The naira is not merely a currency; it embodies our national identity. Its stability is vital for economic growth and development
the apex bank will penalise banks found disbursing naira notes to persons hawking the naira.
“For the avoidance of doubt, it should be noted that: DMBs, to whom cash seized from ‘hawkers’ of cash is traced, will be penalised 10 per cent of the total value of cash withdrawn on the day the seized cash was withdrawn from the Central Bank of Nigeria (CBN).
“Every subsequent offense will be charged incremental penalty of five per cent,” it said.
Furthermore, the CBN warned that 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”.
“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 access to cash, we encourage banks to prioritize cash distribution through ATMs,” the CBN said.
In addition, the regulator announced that during the Christmas season, it would collaborate with relevant law enforcement agencies to intensify spot checks and mystery shopping activities to monitor and enforce responsible cash distribution and prevent naira abuse.
Fine threat
In fact, on December 13, the apex bank issued a circular announcing a fine of N150 million per branch on DMBs and financial institutions found guilty of facilitating the illegal flow of mint naira notes to currency hawkers.
In the circular, the CBN said it was concerned about “the prevalence of illicit flow of mint naira notes to currency hawkers and other unscrupulous economic agents that commodify naira banknotes, thus impeding efficient and effective cash distribution to banks’ customers and general public.”
The regulator, which stressed that it would continue to intensify periodic spot checks to banking halls and ATMs while deploying mystery shoppers to all identified cash hawking spots across the country, said that any branch of a financial institution found culpable will face a penalty of N150 million for the first violation.
Subsequent infractions, the regulator warned, would attract stricter sanctions under the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020.
The circular read: “The CBN has noted with dismay the prevalence of illicit flow of mint banknotes to currency hawkers and other unscrupulous economic agents that commodify naira banknotes, thus impeding efficient and effective cash distribution to banks’ customers and the general public.
“CBN will continue to intensify the periodic spot checks to the banking halls/ATMs to review cash payouts to banks’ customers, as well as mystery shopping to all identified cash hawking spots across the country.
“In this regard, any erring deposit money banks or financial institutions that are culpable of facilitating, aiding, or abetting, by direct actions or inactions, the illicit flow of mint banknotes to currency hawkers and unscrupulous economic agents that commodify naira banknotes shall be penalised at first instance N150 million only, per erring branch, and at later instances, apply the full weight of relevant provisions of BOFIA 2020.”
CHBO conference
Interestingly, the inaugural Stakeholders Conference hosted by the Committee of Heads of Banks Operations (CHBO) in Lagos, over the weekend, which had as its theme, “Commoditisation of naira: The Way Forward,” expectedly provided the CBN an opportunity to speak on its efforts to tackle commoditisation of naira.
In his keynote address at the conference , delivered by his Senior Special Adviser, Fatai Kareem, Cardoso, stressed that the commoditisation of the naira poses a significant threat not only to the banking sector but also to the daily lives of Nigerians who rely on the currency for transactions.
He described naira commoditisation as a process by which the national currency is being treated as a tradeable asset with its intrinsic national value being subjected to the principles of capitalism rather than being seen as a means of exchange for economic and items of value.
According to him, “the naira is not merely a currency; it embodies our national identity. Its stability is vital for economic growth and development.
Recent trends, however, have seen the naira treated as a commodity rather than fulfilling its primary function as a medium of exchange.
“The commoditisation of the naira, our national legal tender, has become a critical challenge for Nigeria’s financial ecosystem.
It is a problem that not only affects the operations of the banking industry but also the lives of every Nigerian that relies on the currency for his day to day transactions.”
The Governor said the CBN, as a regulator of the financial system and the integrity of the national currency, was committed to working closely with all stakeholders in the banking system to achieve that goal.
He said the apex bank’s strategies to tackle the commoditisation of the naira included, enhancing public engagement awareness on the responsible use of the naira, strengthening cash management system to ensure fair distribution across the country, collaborating with law enforcement agencies to enforce existing regulations and bring perpetrators to book, promoting digital payment channels to reduce the use of cash transactions and the need to escalate digital errors to the banks and the CBN.
However, in his remarks, Chairman of the Executive Committee of CHBO, Abraham Aziegbe, attributed the commoditisation of the naira to severe scarcity which led to its monetisation.
He noted that over the past two years Nigerians have faced significant challenges as a result of cash shortages, leading to instances where citizens pay premiums for everyday transactions.
Conclusion
Actually, the consensus among analysts is that while the N150 million fine imposed on each of the nine banks for failing to dispense cash via their ATMs during the last festive season may make more lenders to comply with its cash distribution guidelines, the cash scarcity crisis, occasioned by the commoditisation of the naira, among other factors, may not be resolved in the short term.