The Central Bank of Nigeria (CBN) has issued a stern warning to Deposit Money Banks (DMBs) regarding their role in the illicit distribution of newly minted naira notes. The CBN expressed deep concern over the increasing prevalence of currency hawking, a practice that undermines the bank’s efforts to ensure efficient and equitable cash distribution to the public. Consequently, the apex bank announced a hefty fine of N150 million per branch for any DMB found complicit in facilitating the flow of mint naira notes to currency hawkers and unauthorized agents. This penalty, outlined in a circular dated December 13, 2024, signifies the CBN’s resolute commitment to combating the commodification of the naira and maintaining the integrity of the nation’s currency management system.
The CBN’s circular emphasized the detrimental impact of currency hawking on the financial system, highlighting how it impedes the smooth flow of cash to legitimate customers and disrupts the overall efficiency of cash distribution. The bank reiterated its commitment to upholding the principles of sound currency management and ensuring that banknotes are readily available to the public through authorized channels. The circular referenced an earlier directive issued in November 2024, which had already outlined the CBN’s intention to crack down on cash hoarding, diversion, and other practices that hinder the effective circulation of currency. The latest directive, however, introduces more stringent penalties, specifically targeting the involvement of DMBs in the illicit trade of mint naira notes.
The CBN outlined a multi-pronged approach to enforcing its directive and ensuring compliance among DMBs. The bank will intensify periodic spot checks in banking halls and Automated Teller Machines (ATMs) to monitor cash payouts to customers and verify that banks are adhering to prescribed procedures. Furthermore, the CBN will deploy “mystery shoppers” to identify and investigate locations where cash hawking activities are prevalent. This covert surveillance strategy aims to uncover the sources of illicitly obtained mint banknotes and expose any DMBs involved in facilitating these transactions. The combined approach of spot checks and mystery shopping will enhance the CBN’s ability to detect and deter unlawful currency practices.
In addition to the N150 million fine for first-time offenders, the CBN warned that subsequent infractions would attract even stricter sanctions under the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020. This legislation provides a robust legal framework for regulating the banking sector and empowers the CBN to impose a range of penalties, including fines, license suspensions, and other disciplinary measures. By invoking BOFIA 2020, the CBN underscores the seriousness of the issue and its determination to hold DMBs accountable for their role in maintaining the integrity of the currency distribution system. The escalating penalties aim to create a strong deterrent against any form of complicity in illegal currency transactions.
The circular further urged DMBs to proactively strengthen their internal controls, processes, and procedures related to cash management. This includes enhancing security measures at Cash Management Centres, branches, and teller operations to prevent their systems from being exploited for illicit activities. The CBN emphasized the need for DMBs to implement robust KYC (Know Your Customer) protocols and conduct thorough due diligence on all cash transactions to identify and prevent any suspicious activity. By reinforcing their internal controls, DMBs can contribute significantly to mitigating the risks of currency hawking and other forms of illegal cash transactions.
The December 13th circular builds upon an earlier warning issued by the CBN in November 2024, which addressed the broader issue of cash hoarding and diversion by DMBs. In that earlier communication, the CBN had already threatened stiff penalties, including fines proportional to the value of cash withdrawn from the CBN on the day of the offense. Repeat offenders would face even higher penalties for each subsequent violation. These measures, combined with the latest directive targeting the illicit flow of mint notes, demonstrate the CBN’s comprehensive approach to tackling challenges in the currency distribution system and ensuring the smooth flow of cash to the public. The CBN’s actions emphasize its commitment to upholding the Clean Note Policy and maintaining public trust in the nation’s currency.
