Uncertainty as banks grumble over inadequate supply of new naira notes by CBN

Commercial banks in Nigeria are grumbling because of inadequate supply of new naira notes by Central Bank of Nigeria (CBN) as pressure mounts ahead of the January 31 deadline for circulation of old notes, bank officials and security sources told PREMIUM TIMES on Saturday.

In a last minute move to increase the circulation of the new naira notes, the apex bank has stepped up its efforts by providing the new notes to banks for advanced circulation among Nigerians, especially in rural areas.

However, a source familiar with the details of CBN operations told PREMIUM TIMES on Saturday that the supply of new notes from the apex bank is insufficient, making it difficult for commercial banks to meet customer demand.

A security source told this newspaper that banks received an average of N12 million in some states, an amount the source explained was insufficient to meet operational demands.

“Cash needed for the operation of the ATM alone in this place is about N25m, and that is two of the other cash transactions in the bank,” said the source. “Banks are afraid to complain openly.”

Security agencies, especially the State Security Service, have been monitoring the implementation of the new note policy and have questioned bank officials including top banks, PREMIUM TIMES learnt.

The scarcity of new notes was also confirmed to this newspaper by bank managers of commercial banks in Lagos and Abuja.

“CBN has deceived Nigerians. Even I, as a branch manager, I don’t have new notes and customers keep calling me to help them get them,” said a branch manager of a new generation bank in Lagos.

The head of the bank said the bank usually needs about N10 million to top up ATMs used by customers.

“But during the last week, we only got a total of N2 million new notes. That’s why our ATMs are idle because we were told not to use old notes,” the source added.

Another branch manager of another new generation bank, in Abuja, expressed similar frustration.

“We don’t have enough money. Our ATMs don’t work because we don’t have enough money to open them,” said the bank official.

All the bank chiefs we spoke to asked not to be named to avoid sanctions from headquarters and the central bank.

In recent weeks, many Nigerians working in the cash-dependent informal economic sector have had to find new notes. Although the Nigerian government has tried to deepen financial inclusion and promote a cashless economy in recent years, many activities in the nation’s informal sector are still driven by cash. According to a report by the International Monetary Fund, the informal sector in Nigeria accounts for about 65 percent of GDP, which is higher than the sub-Saharan average of 34 percent.

Earlier this week, the CBN governor, Godwin Emefiele, said the deadline of January 31 announced by the apex bank for the validity of the old N200, N500 and N1,000 notes. Speaking after a meeting of the apex bank’s Monetary Policy Committee (MPC) in Abuja on Tuesday, Mr. Emefiele claimed that incidents of kidnapping and ransom have reduced since the three banknotes were redesigned. He also said that the time given to replace old naira notes with new ones is enough for Nigerians to get new notes from commercial banks.

“I have to say here, unfortunately, I do not have good news for those who feel the need to change the deadline. I am sorry,” said Mr. Emefiele.

“The reason is because 90 days, we think 100 days, should be enough for those who have the old currency to deposit, money, in the bank. And we take all measures to ensure that all banks are open to receive all the old currency. 100 days, we believe , more than enough.

However, while the CBN gave about 100 days’ notice, the lack of new notes has hindered a smooth transition, prompting calls for an extension.

On Saturday, President Muhammadu Buhari admitted that many Nigerians are ‘face adversity‘ because of the new notes policy.

“While noting that the poorest sections of the society are facing hardship because they often keep cash at home for various expenses, President Buhari gave a strong assurance that the government will not surrender to its own fate,” Mr. Buhari’s spokesman, Garba Shehu, wrote in a statement.

The Nigerian leader, however, did not understand the call for an extension of the deadline.

The background

Last November, weeks after the apex bank announced plans to redesign the three notes, President Muhammadu Buhari unveiled the redesigned N200, N500 and N1,000 notes while the apex bank set a January 31 deadline for the validity of the old notes.

Since the notes were introduced, many Nigerians on social media have expressed reservations about the circulation of the new notes. While many claimed that they were yet to see the new naira notes, others complained about the siphoning of money from depository banks even as the January 31 deadline to reject the old notes was approaching.

Last week, as part of measures to expand circulation, the CBN warned banks to open ATMs with new notes and threatened to sanction erring banks.

“If indeed, (commercial) banks are keeping new notes, why is the CBN not sanctioning any bank,” a bank manager told this newspaper.

The CBN also recently directed commercial banks to stop over-the-counter payments of old notes and open Automated Teller Machines (ATMs) with redesigned naira notes to boost circulation.

In addition, the apex bank has also launched a nationwide cash exchange program so that people in unbanked areas can exchange their old notes for new notes before the January 31 deadline.

However, the Nigerian Governors Forum (NGF) last weekend constituted a six-member committee to engage the CBN to address anomalies in the country’s monetary management and financial system, particularly in the issuance of new Naira notes.

Uncertainty

As the January 31 deadline approaches, many Nigerians continue to wonder how the apex bank plans to manage the amount of money in circulation and increase the circulation of new notes. Analysts say many old naira notes still remain in circulation as the only means of exchanging goods and services between people in many countries.

An investigation by PREMIUM TIMES last week showed that in major cities in Nigeria, the old notes in circulation still outnumber the redesigned new notes. However, in some local shops and among traders in the main market, old notes are rejected as legal tender.

On Friday, PREMIUM TIMES observed that many ATM points in Lagos were besieged by frustrated Nigerians lamenting the lack of new notes and complaining about bank ATMs dispensing old notes.

Amid the uproar, the CBN insisted that the deadline remains sacrosanct. On Saturday, amid concerns about the impact of the naira redesign policy on the state of the economy, the CBN in a tweet confirmed that the deadline for the return of old notes remains January 31.