Central Bank Of Nigeria: Maintenance of the Integrity and Lustre of Naira

By Professor Nwudego Nkemakonam Chinwuba, Ph.D.

A NEW REGIME FOR HANDLING THE NAIRA

The findings made are based on an account of the observable fact that Nigerians are generally amenable to reason when they are persuaded rather than pressured or jaded about a point. Nigerians are a happy people, so the style of approach must be one in which they are partners. A persuasive approach is likely to have more effective outcome. Such approach ought to be consistent for a period, not a touch and go approach.

Maintaining the integrity and lustre of the Naira has positive outcomes. There is a pleasantry associated with having and knowing that one will receive and spend clean currency notes. Well-being and good health come with cleanliness.

Nigerians and other stakeholders do not readily appreciate the health hazards associated with wrong use and handling of the Naira. To remedy this situation, education, learning, unlearning, and re-learning are keys to re-orientation and shift of paradigm. This requires co-operation from all stake holders who administer and operate in the lines and processes of the ‘use’ and ‘circulation’ of the Naira.

To this end, implementation strategies must include education and sensitisation on diseases associated with improper handling of currency notes. In addition, hygienic monitoring equipment should be sourced and acquired to complement education. Such equipment should be kept and maintained by the apex bank as well as Deposit Money Banks and used for testing the Naira for microbial activities. Further research is however, required on the time frame and intervals for this process to be applied to determine the clean status of the Naira.  This should also enhance the efficiency of the Central Bank and its agencies in determining the appropriate time for withdrawal of unfit notes from circulation. As has been noted above, the Naira note is classified as unfit, dependent on loss of integrity or lustre.

The ATMs should be primed to dispense notes that have been duly checked for authenticity and fitness. The handlers of these equipment should be required to disinfect the notes before paying out to customers. The deposit safes and bank vault should also be constantly sanitised and inspected by a Central Bank Team.

Nigerians have imbibed a practice of spraying currency notes at events and parties. Before now, Naira was mainly used in this practice, however, in recent times, the practice has been extended to use of the United States Dollar.  

The punitive laws for spraying the Naira at events should be reconsidered and redirected rather, at appropriate ways to do so. In engaging society to address a culture that appears wrong, but the same culture gives people a social sense of wellness, such as with the culture of spraying Naira, punitive law works to make persons evade consequences of such actions rather than, avoiding taking the action. By this, the consequences are not the subject of focus, rather, the focus is how to take the action without concern for consequences. This ultimately leads to breach of the punitive law and drives the law into disuse. This is the fate of laws such as bigamy in Nigeria. Bigamy and the punishment for it appears, in the Criminal codes, as well as all Marriage Laws in Nigeria and yet is breached without consequences. In such cases, compliance with the objective of the law comes only through negotiation with the social spirit of a people. This is always best achieved through a Law commission engagement.   

In the case of spraying money, engaging the stakeholders on action plan will aid in distilling the best options to gain compliance.

In the light of the circumstances, a preliminary finding is that it is a better option to identify ways in which the culture of spraying notes can be carried out with minimal damage to the currency notes. Sanctions should only follow when such appropriate methods, considered reasonable to people are flaunted. This will encourage society to be the monitor rather than the law enforcement agents.

Open markets are still the norm in Nigeria. This means that they are populated by traders who are not very versatile and mostly conservative. What would appeal to this class of persons will be that which is closer to nature. Thus, monies made would have to be in a place where it is felt, and this is around the body. To keep notes clean, enclosures such as wallet and knapsacks are important. However, the fear of losing a wallet and its content make it more difficult for people who trade to consider use of wallet or knapsack. Alternative options to this are, therefore, very important. The role of cashless receipt of funds by electronic means such as transfers, and the use of POS must be underscored. For this to be efficacious, the Central Bank must maintain a key supervision over the Money Deposit Banks, on transparency of transactions, security of transfers and sensitisation on liens for recall of transfers and ease of reversal.

Religious gatherings in Nigeria usually take offerings and the large population of Nigeria makes the offering processes a vehicle for wrong handling of currency notes. As a result, providing suitable coins for offering will ease the pressure on using currency notes. Some higher denominations of the Naira can thus, be converted and minted into coins. This proposition does not limit the offerings since those who wish to make larger offerings can do so by electronic transfers or the POS.

In 1973, the kobo had five denominations namely 1/2k, 1k, 5k, 10k and 25k.

In 1989, the 50K and ₦1 which were previously notes were changed to coins. In recent times the kobo coins have been phased out as the value can no longer purchase items. Considering a conversion of some denominations of the previously higher notes which are now lowered from inflation and depreciation to coins is a worthwhile exercise. This will enhance use of these denominations of coins in large assemblies and small petty trades. In the United Kingdom for instance, it is rare to see notes in use in offering baskets in religious assemblies, one hears only clinks of coins particularly the £1 and £2. The coins are even treasured. The most used are 50 pence, £1 and £2. At today’s published official exchange rate, the 50 pence is ₦273; £1 is ₦554.

The Central Bank should, therefore, facilitate and encourage the use of coins. Naira, ₦100, ₦50, ₦20, ₦10 and ₦5 should be redesigned as coins.

The CBN is wholly empowered to make and effect the changes on the notes. This falls within the powers vested in the CBN by section 20 of the CBN Act.

Money Deposit Banks, Microfinance and Merchant banks, government agencies, Cash-in-Transit (CIT), Currency Management Equipment Manufacturers are key links in the chain of processes for money circulation.

Money Deposit Banks should receive only fit notes from the Central Bank and its agencies. To achieve this, the Central Bank should create a process by which it is ascertained that the currency notes leaving its custody at all point in time are of requisite integrity and lustre.

As, has been the case, effective and further sensitisation should include informing persons that when notes are unfit, they should be returned to the Money Deposit Banks or a branch of the apex Bank anywhere in Nigeria where they should be exchanged. Use of approved processing infrastructure for such actions by Money Deposit Banks and other approved channels is another useful aid in curbing the challenges faced in achieving best practice in currency handling.

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Professor Nwudego Nkemakonam Chinwuba, Ph.D. BL is of the Faculty of Law, University of Lagos, Nigeria.