Dirty and mutilated naira notes

There is growing public concern over the widespread circulation of dirty and mutilated naira notes in the country. Almost all denominations of the naira currently in circulation have a large percentage of torn or dirty element. When customers approach banks to exchange bad naira notes for new and clean ones, such requests are usually turned […]

There is growing public concern over the widespread circulation of dirty and mutilated naira notes in the country. Almost all denominations of the naira currently in circulation have a large percentage of torn or dirty element. When customers approach banks to exchange bad naira notes for new and clean ones, such requests are usually turned down by most commercial banks, saying that new naira notes are not available. 

Most commercial banks are guilty of dispensing bad naira notes over their counters. The report that the Central Bank of Nigeria [CBN] charges commercial banks that return dirty and mutilated naira notes in exchange for new ones may have worsened the scarcity of new and clean notes. A bank official said CBN charges 5 percent of the total amount of dirty notes tendered by a commercial bank in exchange for new ones. He said this explains why commercial banks are reluctant to receive dirty notes from customers.

Another bank officer traced the scarcity of new naira notes to CBN’s failure to print them as often as required. However, CBN’s Acting Director, Corporate Communications Isaac Okoroafor said, “It is not true. We have been printing lower dominations of naira notes. A combination of currency abuse and the fact that N100 notes have high velocity of circulation all contribute to the fast wear and tear of lower naira notes.”

Commercial banks’ excuse that they use new naira notes to load into Automated Teller Machines (ATMs) is responsible for their scarcity is not tenable. If as they say dirty and torn naira notes cause ATMs to malfunction, the same bad notes have become a source of altercation between traders and customers. Traders who reject bad notes from customers are left with their goods unsold as customers are at liberty to buy goods from other shop owners. Customers exhibit the same attitude when they are to receive money from traders. The rejection of bad naira notes is also common among tricycle operators and bus conductors. Bad notes are therefore as challenging to transactions among individuals as they are to ATMs. Whether or not a transaction is automated, enough new and clean notes are required to be in circulation. 

Most commercial banks are accused of hoarding naira new notes for sale to bankers’ agents who in turn vend the notes for a profit. A bundle of new N100 naira notes which totals N10,000 is sold by vendors for N11,000, usually to people who are going for celebrations. A bundle of new N200 new naira notes which is N20,000 is sold for N22,000. A syndicate consisting of bank staff and their agents seems to be behind this illegal marketing of the naira. We implore CBN and the police to crack down on this trading in new naira notes but we also urge it to print enough new notes that will sufficiently replace mutilated ones.

The greatest challenge faced in the withdrawal and re-appearance of bad naira notes is the corruption that characterizes the process of destroying such notes. Reports in the past have shown that when certified bad notes are assigned for destruction to a team of CBN staff under the supervision of a senior police officer, a large part of such notes finds its way into the pockets of the team members. The situation allegedly did not change even when a commissioner of police was asked to oversee the exercise. This is how mutilated notes keep on re-circling back into circulation.

To take all bad notes out of circulation, it is important for CBN to comply with the directive of the House of Representatives which last month instructed the apex bank to stop imposing charges on commercial banks that return dirty and mutilated notes. Such charges by CBN are noted as the reason for banks’ refusal to withdraw bad notes from circulation. Similarly, we advise CBN to henceforth appoint one of its deputy governors to lead the team that would take mutilated notes out of its premises for destruction.