CBN Makes Money From Dirty Naira Notes In Circulation

Nigerians may continue to spend dirty and mutilated notes if the recent findings are anything to go by.

Nigeria’s currency, the Naira, in all its denominations, has been severely mutilated, overused and over-circulated such that it has become an issue of luck to come across a clean note.

However, Saturday Punch learnt that the scarcity of the clean notes is due, in part, to the fact that the Central Bank of Nigeria has refused to recycle the old notes while it imposes charges on commercial banks that want to change the dirty notes to cleaner ones, thereby turning it into a money-making practice.

Access to clean notes is now by luck, special request with pleas and sometimes, financial inducement and purchase from sellers who have taken to the streets to sell the clean notes to legitimate customers who have no access to them.

Many Nigerians wonder why the CBN has refused to withdraw the bad notes from circulation and replace them with clean ones.

A cross section of bank workers who spoke to Punch correspondent alleged that the CBN has refused to recycle bad notes because it makes a lot of money from the dirty notes in circulation. They alleged that the CBN imposes a charge on commercial banks when they return dirty notes for replacement.

A senior executive in one of the new generation banks, who pleaded anonymity, said that the CBN charges N12,000 flat rate on each box of naira notes the commercial banks take to the CBN for exchange to clean notes, regardless of the denomination.

“No commercial bank wants to take responsibility for the dirty notes that it did not give out because CBN imposes a charge on returned notes. That is why banks do not want to collect bad notes from customers again and it is one of the reasons the bad notes are everywhere.

“Sometimes you see the notes and you won’t be sure if it’s the same naira or a bleached note for scientific experiment.”

However, another source said the amount being charged by the CBN was 5% of the total amount taken for exchange.

A teller in a commercial bank, Mr. James, wondered why the CBN compels banks to pay for replacing what they did not spoil. He described it as an exploitative act by the CBN to make money.

“A bank with so many dirty notes in stock is forced to go and change them because if you give them to the customers, they reject them. If you load them in the Automated Teller Machines, the machines push them to reject bin or even tear them in some cases,” he said.

James said that even though the money that the CBN charges appears small, it is not something that the commercial banks are willing to part with, more so that some staff members of the CBN make money from selling the much-needed  clean notes to street sellers. A cash management officer in another commercial bank, Miss Chime (not real names), said the charge on the exchange prevents commercial banks from changing notes for customers.

“What the CBN charges for exchange of bad notes to clean ones is half of the total value of the notes. Ideally, a customer should be able to enter any bank with a dirty note and get it changed into a cleaner one but it doesn’t come that easy again because of the imposed fee.

“In fact,  in my own bank, tellers have been instructed not to change notes for people unless it’s a withdrawal.

“If you take dirty notes worth N10m to the CBN, it would deduct half of it which is N5m as commission and it makes us wonder why the apex bank should make us pay for its responsibility.”

A top executive in a foremost commercial bank who preferred to be anonymous said, “Yes, CBN charges commercial banks on the exchange of dirty notes to new ones, but the money is minimal which is not enough to deter banks from approaching it even though it’s a loss in profit.

“The thing is that CBN is not printing new notes as often as it should. I have also heard that CBN sells mint to banks but I cannot substantiate that allegation.

“CBN is the only statutory regulatory body that has the responsibility of recycling money; removing bad notes  from circulation and printing new ones, but we find out that we have bad notes in circulation for a long time which should not be so.”

He refused to disclose how much the CBN charges but admitted that it was wrong for the apex bank to impose charges on commercial banks who want to change bad notes into good ones and that the apex bank should not let notes circulate for so long in spite of the cost of printing.

“Fairly, what I believe to be part of the issues is that the cost of printing the notes is very huge; it’s almost like the cost of the notes you are printing. Maybe that is the reason why CBN is rationalising printing the notes, but we also don’t know why it prefers to import our currency,” he said.

However, due to the crave and increasing demand for clean notes by the citizenry for various reasons, most people who are in need of the clean notes resort to buying them on the streets.

The naira has become an object of trade in many places, as people now sell the clean notes on the street, usually at major parks, garages and parties. Visits by our correspondent to many parks within the Lagos metropolis revealed that Nigerians now patronise the hawkers on the street to get clean notes, an act which the CBN described as unlawful.

Investigations revealed that people pay as much as N200 on every N1,000 clean notes, regardless of the denomination. Even though most of the money-changers approached by our correspondent said that N50 clean notes have not been available since last year, other denominations are available in surplus.

Even though CBN recently denied the allegation that its members of staff sell naira notes, the hawkers who confided in our correspondent said they get the large chunk  of the new notes from the CBN while the remaining comes from the commercial banks, all through informal means.

It was also learnt that concerned bank officials who sell the notes would prefer to sell to the hawkers and make money than make them available to the customers at no extra cost.

Reasons for dirty notes

Findings showed that many reasons could be responsible for the dirty notes in circulation. These range from poor maintenance culture, over-used notes, non-renewal of circulated notes to intentional mutilation.

A senior bank executive who spoke to Punch correspondent on the condition of anonymity decried the poor maintenance attitude of some Nigerians.

“The thing is that when we have a clean culture as it obtains in other countries, then we will start to have clean notes. The users will always use the notes anyhow but it is the responsibility of the government to recycle the notes and educate the users on how to keep them clean.

“In other words, the over-circulation of the notes could be responsible for the bad ones. By the time a note spends a year or more in circulation, moving from one hand to the other, it could wear out.”

He identified the persistence of Nigerians to spraying money at parties as inimical to sustaining the flow of clean notes.

However, medical experts have advised members of the public to wash their hands thoroughly after handling money to prevent infectious diseases, as paper currency could aid transfer of germs.

According to an online report culled from mlalonde@thegazette.canwest.com, money germs come from sweaty back pockets, food covered bills, floors, stripper G strings, drug exchanges, casinos, and dirty people.

Close observation revealed that if the CBN issues clean notes, when people spray them at parties; they step on them and rub them against hard surfaces which wear them out. Some hold them with dirty hands, some keep them in unhygienic places such as inside the bras (as reported by Saturday PUNCH recently) and engage in other unpleasant practices.”

Saturday PUNCH observed that some people have converted the naira into jotters where they write their plans, names, calculations, even people eating oily foods still handle the naira with the dirty hands, hence the note becomes dirty.

Some shrink the notes, fold them in their hands, some put them in their wet pockets, bras while some squeeze them in nylons.

Though Sections 20 and 21 of the CBN Act of 2006 stipulate how the naira should be handled, not much attention has been given to adherence to the instructions.

However, the commercial banks have also claimed that most of the cash they get from the CBN are not clean, hence it is the same dirty notes they get that they pay to the customers, either on the counters or through the ATMs.

Some bank officials however said they do not pay to get mint from the CBN.

“The only thing is that we apply for mint to be included in the cash they supply to us and we apply formally for it.

“Most times, what you get is below what you apply for, which gives an impression that the clean notes are not available or some people are hoarding them for their personal interest,” one of them told Saturday PUNCH. A teller in a commercial bank, Toyin Oluseun, said, “If we have some new notes remaining after all the sharing and deductions from the top, the tellers and other bank staff also help themselves with some.

“Even bankers are on the lookout for new notes. A customer once brought clean notes (the one people call ‘untouch’) of N40,000 in N200 denomination for deposit. He told me that if he had other notes that were not clean, he would have changed them. The moment he left, my colleagues and I shared the notes and replaced them with our tattered notes. In fact, they were giving me signs before he left.”

It was also observed that the scarcity could also be due to hoarding by customers who, sometimes, sweat to get them.