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Market Digest Nigeria

Finance

CBN set to give out lower currencies to microfinance banks

CBN

To stem the scarcity and hawking of the currency, the Central Bank of Nigeria (CBN), has released guidelines for the disbursement of lower denominations of the naira through microfinance banks (MFBs), across the country.

A circular issued by the CBN’s Director, Currency Operations Department, Mrs. Patricia Eleje, yesterday, in Abuja, indicated that all microfinance banks must have a composite risk rating (CRR) of above average in the most recent Risk Based Supervision (RBS) target examination before they are considered for the scheme. This, according to the CBN, is to ensure that only MFBs with good corporate governance practices take part. Under the terms, the participating MFBs must be willing to accept a mixture of new and other banknotes, and that the MFBs shall give 20 per cent of any withdrawal in lower denomination notes subject to a maximum of ₦50,000. Where beneficiaries withdraw more than once in a day, the circular said that disbursement will only apply to one transaction per day.

Similarly, the MFBs are allowed to exchange notes subject to a maximum of ₦50,000 for customers with bank accounts, and ₦10,000 for customers without bank accounts. In that situation, the banks must not exchange for same beneficiaries more than once a week. Also, MFBs are to maintain a register of amounts received from the CBN through their correspondent commercial banks. The MFB must also maintain another register of the beneficiaries of the lower denomination notes as well as ensure that withdrawal teller slips contain breakdown of the denomination of the currency to customers with accounts. It, however, warned MFBs against hawking, hoarding or using of funds obtaineid under the intervention for any other purpose. It also instructed the banks to put n place effective control measures that will ensure that banknotes disbursed to customers with or without accounts are not sold.

Furthermore, the circular directed the banks to render weekly and monthly disbursement return to CBN branches where the intervention would be monitored periodically, and appropriate sanctions applied to erring MFBs. This move will specifically check the sale of new notes, especially the lower denomination, which are being hawked at ceremonies and social gathering across event centres nationwide at higher amounts for lower value, which had made the apex bank to stop the “spraying” of naira at all such gatherings. Furthermore, as part of measures to sanitise the system, the CBN earlier in the year, commenced the withdrawal of dirty and mutilated notes in exchange for new ones.

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