Hope for economy in CBN’s order on DMBs’ cash hoarding

The Central Bank of Nigeria (CBN) recently issued a stern warning to commercial banks in the country against hoarding and selling of bank notes particularly during the upcoming yuletide. This move, among others, aims to prevent the abuse of the local currency (Naira) and ensure efficient cash distribution to customers.

In pursuit of this objective, the CBN said it has introduced measures such as “mystery shopping” exercises and periodic “spot checks” on cash distribution and disbursement activities of deposit money banks (DMBs). The apex bank warned that DMBs involved in hoarding, diversion or any activity that hinders efficient cash distribution including violation of ‘Clean Notes Policy’ would incur appropriate sanctions.

In a circular to the banks titled ‘Mystery shopping & spot checks on cash disbursement activities of deposit money banks (DMBs)’, the CBN said that as the Christmas season approaches, banks are being encouraged to implement internal controls that would enhance cash distribution in a transparent manner, especially the use of Automated Teller Machines (ATMs) in the circulation of new notes.

According to the CBN, “DMBs to whom cash seized from ‘hawkers’ of cash is traced, will be penalised 10 percent of the total value of cash withdrawn on the day the seized cash was withdrawn from the Central Bank of Nigeria. Every subsequent offence will incur an incremental penalty of five percent.”

Without a doubt, the CBN’s directive to the banks at this point in time is most auspicious, given the bizarre trends in respect of cash management and other practices among Nigerian DMBs in the past couple of years. Wittingly or otherwise, cash hoarding and hawking, with covert and overt connivance of banks, has become the norm in the Nigerian financial services industry.

In point of fact, hawking of the local currency (Naira) which is the illegal sale of the notes on the streets contributes to the economic instability and undermines the CBN’s efforts at maintaining economic order. It borders on stating the obvious to say that as the Naira notes hoarding and hawking is booming, the ATMs have since been left as ‘empty containers’ by all the DMBs.

Somehow, the collusion between the DMBs and the ubiquitous Point-of Sales (PoS) machine operators has resulted in virtually all ATMs no longer dispensing cash. In other words, the cash meant to be dispensed (at no cost) to bank customers is now being ‘sold’ by the PoS operators almost everywhere across the country.

Directly or indirectly, the commissions and charges taken from bank customers by the PoS operators find their way back to the coffers of the DMBs. It is either some staff of the DMBs in some critical positions also serve as the PoS agents (through proxies) or the banks provide the PoS services through fronts.

Whichever way, what has become obvious in recent times is that the ATMs mounted by the DMBs either in their premises or customer locations have become ‘abandoned property,’ mere empty shells! At most customer locations, the DMBs have surreptitiously replaced the ATMs with PoS machines, without qualms or whimper.

The upshot of all these has been the suffering and desperation of ordinary Nigerians who must commute daily in search of livelihood. Intra-city transporters demand to be paid only in cash; roadside traders (including food vendors) would accept only cash. And the ubiquitous PoS kiosks operators are handy to sell cash and take their ‘commissions’; and eventually head to the bank vaults.

More recently, the spate of Information Technology (IT) systems upgrade by DMBs has unwittingly heightened the resort to demand for and use of cash by bank customers. This is because the IT processes being undertaken by many of the banks were riddled with glitches: failed bank transactions through practically all channels.

In desperation, and as a last resort, many bank customers swarmed back to banking halls, hoping to easily obtain cash and have seamless transactions, even if by analogue means. Alas, not a few such bank customers had to go through excruciating ordeals involving shortage of cash (or its non-availability) and standing endlessly in very long queues.

In some bank locations/branches, it is like the return to the dreaded era of “Tally Numbers”. At this time, in the banking halls, bank customers are given tally numbers as they arrive—but it takes several hours before it gets to their turn to be attended to.

Unfortunately, while these bank customers are waiting endlessly in the banking halls to withdraw cash from their accounts (for instance), just outside the bank premises, PoS kiosks dot almost every inch of the streets. And because of the glitches in the IT systems upgrade in many banks, bank customers could hardly successfully perform an otherwise simple transaction of funds transfer via mobile apps.

In the face of all these, many bank customers took a flight to safety by opting for manual/analogue banking transactions. In some cases, the lingering effect of the prolonged IT systems upgrade or re-engineering almost caused a run on the banks. Bank customers no longer had confidence in the capacity of some of the banks to effectively apply/utilise technology in their service delivery.

Now that the apex bank seems to want to redirect its attention to the burgeoning but illegal business of cash hoarding and hawking by the DMBs and their agents, it gives a flicker of hope for a return to normalcy. The ‘lucrative’ business of selling cash directly and/or indirectly by the DMBs and their agents must be dutifully checked. The banks must not do anything to sabotage or derail the cashless economy policy of the federal government.

IT systems upgrade or whatever process re-engineering by the DMBs should not be allowed to torpedo the successes already attained in the cashless economy and banking inclusion strides of the CBN. In this regard, the recent ugly experiences of bank customers in the hands of banks that were upgrading their IT systems are ready references. No doubt, these challenges have attracted the intervention of the apex bank.

It is now mandatorily required that any DMB wanting to upgrade its IT system must seek/obtain the approval of the apex bank. This is to enable the CBN to exercise proper oversight on the entire process. The overall objective is ensuring the stability and security of the Nigerian financial system — particularly in this era of pervasive cybersecurity challenges.

The IT architecture of the DMBs should no longer be left to vested interests to dump ‘untested’ systems that could pose unintended dangers and deleterious impacts on the industry. Ever raging competition in the banking sector cannot be sufficient reason for the blind adoption of archaic or largely dysfunctional technology by any Nigerian bank. All risks must be considered!

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