Ending Naira Mutilation

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MARKET INDICATOR 

By Obinna Chima 

Following concerns of rising incidence of mutilated currencies in the economy, the Central Bank of Nigeria (CBN) recently reduced the amount of money it charges banks for sorting mutilated naira notes from clean ones to N1,000 per box from N12,000 per box.

The reduction was however, limited to lower denomination naira notes, or polymer notes, namely N50, N20 and N10 notes.

Also, the reduction to N1, 000 per box which became effective last month, is expected to last for three months till March 28, following which the charge will be raised to N2,000 per box.

A box of naira notes contains 10,000 notes, hence with the reduction, banks will now pay N1,000 as currency sorting fee for a box of N50 which contains N500,000; N1,000 for a box of N20 notes which contains N200,000; N1,000 for a box of N10 which contain N100,000; and also N1,000 for a box of N5 contains N50,000.

Nevertheless, from Lagos to Kano, Anambra, Rivers States, Federal Capital Territory and other cities in the country, the story is the same as Nigerians continue to lament the scarcity of lower denomination of the naira.

Apart from the clear health risk these dirty notes pose to the people who use them, the country’s national pride is greatly undermined in the eyes of the world.

Imagine paying for something, in clean N1,000 note and you are given your balance in dirty and disfigured N100 notes, you no doubt feel a sense of revulsion and anger, followed by immediate reaction.

 In fact, in public buses, markets and most business transactions in Lagos and some other cities in the country, “make sure you hold your change,” is now commonly heard.

Studies have also shown that dirty money poses serious health hazard to those who handle it as trillions of such currencies in circulation are full of disgusting germs.

For instance, a study in the Journal of the American Medical Association studied bacteria from coins and notes found potentially harmful germs like fecal bacteria, E. coli and Staphylococcus aureus on 13 per cent of coins and 42 percent of notes.

A separate study by an Irish researcher at the Cork Institute of Technology (CIT), Emma Gabriel, that also tested banknotes for Staphylococcus Bacteria showed that 97 per cent of the sample notes tested positive for the presence of potentially dangerous bacteria on their surface. This may be even higher with the dirty and awful smell from most dirty naira.

“The five notes which tested negative were in mint condition, and the older the currency was, the more contaminated it was. The coins were less contaminated because they are made from bacteria-static metals,” the study revealed.

Furthermore, the study showed that dirty money could specifically pose a risk to immuno-suppressed people — people whose defence against bacteria are already low.

According to Wiki, “currency changes hands constantly” and one never knows where the money in ones’ possession has been, particularly banknotes, which has the tendency to build up grime and may be loaded with bacteria. Notes collect dirt and discoloration from the germs that rub off of people’s hands. Of course, not minding how careful one is, our own local unit- Naira, can easily be put to unfit condition.

Based on the arrangement, banks are expected to return mutilated currency to the CBN for clean naira notes.

Hence, they are expected to sort mutilated naira notes from clean ones, before taking the mutilated notes to the CBN for replacement with new ones.

However, to avoid the cost of machines and process for sorting the naira notes, they return the notes unsorted to the CBN.

Confirming the reduction of the currency processing charge, theActing Director, Corporate Communications, CBN, Okoroafor, said that the reduction was done to encourage banks to bring the mutilated notes to the CBN in exchange for new ones.

He said: “On the January 2, we wrote a circular to banks, telling them that the cost of currency processing, which stands at N12,000 per box, will be reduced from N12,000 to N1,000 between January 2 and March 28.

“That is, there is window of three months. And that any bank that brings a box of lower denomination currency notes, that is N50, N20, N10, N5, those are the polymer denominations, we would process it for them at N1,000 per box instead of N12,000, because those were the ones that are more critical.

“It is done to encourage banks to return these new notes so that we can issue new ones. We have enough new ones to issue to them. Our problem is that banks have not been returning these notes because of the fear of sorting that we would charge them.

“Customers should insist that banks give them new notes because we are now giving them new notes and have reduced the cost of sorting from N12,000 to N1 per box within the window and to N2000 after March 28. So customers should insist on new notes from them. We believe that a combination of these, customer’s insistence and the large waiver we have given, I don’t see why people should not be getting those new notes.”

But beside the move by the central bank, in order to drastically reduce cases of currency mutilation in the country, experts have stressed the need for Nigerians to handle the nation’s currency with respect.

They also cited the need for financial institutions to create incentives for customers that adopt alternative banking channels, so as to reduce the dependency on cash.

For instance, Dr. Yinka Davis of the Lagos Business School had stated that digital financial services (DFS) areaffordable.

According to Davis, DFS among other things delivers lower transaction cost, ease of remittance, improved security and efficiency.

“It results into employment opportunities, it enhances commerce and supports microfinance”, she said, adding, “The potential of DFS is enormous if well exploited. It is not about big value transactions but low value transactions that happen frequently”
According to her, research had shown that there is an informal equivalent for every financial service offered by banks, and hence the challenge for banks is how to get people in the informal sector to patronise them.
This, she stressed requires that banks build products and services based on understanding of who the people are and what really

Speaking on the use of mobile phones to deliver digital payments, Davis had also noted that there is need for increased awareness and home grown mobile payment solution that incorporates use of local languages for payment transactions.
Also, the Chairman of SecureID, Mr. Adedotun Sulaiman, had made a case for digital payment products based on customers’ needs, stressing, this is one of the lessons the financial sector needs to learn from consumer goods and mobile services industries.

All these are aimed at reducing dependence on cash, saving the available notes and cutting down on the budget associated with replacement of unfit notes in circulation.

Besides, these offer Convenience, as they can be executed at the comfort of the home or elsewhere and any time, thus eliminating the barriers of closed operations during holidays and weekend. Of course, this will bring end to queues at ATM points. In addition, technological innovations help track spending and enables individuals to pay the exact amount of bills.

The experts stressed the need to continue to ensure the adoption of innovative digital payments solutions that offer convenient, affordable and reliable financial services.