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How CBN Makes Money From Dirty Notes In Circulation




Nigerians may continue to spend dirty and mutilated notes if findings by Saturday Punch are anything to go by.

Nigeria’s currency, the Naira, in all its denominations, has been severely mutilated, overused and over-circulated such that it has become an issue of luck to come across a clean note.

However, Saturday Punch learnt that the scarcity of the clean notes is due, in part, to the fact that the Central Bank of Nigeria has refused to recycle the old notes while it imposes charges on commercial banks that want to change the dirty notes to cleaner ones, thereby turning it into a money-making practice.

Access to clean notes is now by luck, special request with pleas and sometimes, financial inducement and purchase from sellers who have taken to the streets to sell the clean notes to legitimate customers who have no access to them.

Many Nigerians wonder why the CBN has refused to withdraw the bad notes from circulation and replace them with clean ones.


A cross section of bank workers who spoke to our correspondent alleged that the CBN has refused to recycle bad notes because it makes a lot of money from the dirty notes in circulation. They alleged that the CBN imposes a charge on commercial banks when they return dirty notes for replacement.

A senior executive in one of the new generation banks, who pleaded anonymity, said that the CBN charges N12,000 flat rate on each box of naira notes the commercial banks take to the CBN for exchange to clean notes, regardless of the denomination.

“No commercial bank wants to take responsibility for the dirty notes that it did not give out because CBN imposes a charge on returned notes. That is why banks do not want to collect bad notes from customers again and it is one of the reasons the bad notes are everywhere.

“Sometimes you see the notes and you won’t be sure if it’s the same naira or a bleached note for scientific experiment.”

However, another source said the amount being charged by the CBN was 5% of the total amount taken for exchange.


A teller in a commercial bank, Mr. James, wondered why the CBN compels banks to pay for replacing what they did not spoil. He described it as an exploitative act by the CBN to make money.

“A bank with so many dirty notes in stock is forced to go and change them because if you give them to the customers, they reject them. If you load them in the Automated Teller Machines, the machines push them to reject bin or even tear them in some cases,” he said.

James said that even though the money that the CBN charges appears small, it is not something that the commercial banks are willing to part with, more so that some staff members of the CBN make money from selling the much-needed clean notes to street sellers. A cash management officer in another commercial bank, Miss Chime (not real names), said the charge on the exchange prevents commercial banks from changing notes for customers.

“What the CBN charges for exchange of bad notes to clean ones is half of the total value of the notes. Ideally, a customer should be able to enter any bank with a dirty note and get it changed into a cleaner one but it doesn’t come that easy again because of the imposed fee.

“In fact, in my own bank, tellers have been instructed not to change notes for people unless it’s a withdrawal.


“If you take dirty notes worth N10m to the CBN, it would deduct half of it which is N5m as commission and it makes us wonder why the apex bank should make us pay for its responsibility.”

A top executive in a foremost commercial bank who preferred to be anonymous said, “Yes, CBN charges commercial banks on the exchange of dirty notes to new ones, but the money is minimal which is not enough to deter banks from approaching it even though it’s a loss in profit.

“The thing is that CBN is not printing new notes as often as it should. I have also heard that CBN sells mint to banks but I cannot substantiate that allegation.

“CBN is the only statutory regulatory body that has the responsibility of recycling money; removing bad notes from circulation and printing new ones, but we find out that we have bad notes in circulation for a long time which should not be so.”

He refused to disclose how much the CBN charges but admitted that it was wrong for the apex bank to impose charges on commercial banks who want to change bad notes into good ones and that the apex bank should not let notes circulate for so long in spite of the cost of printing.


“Fairly, what I believe to be part of the issues is that the cost of printing the notes is very huge; it’s almost like the cost of the notes you are printing. Maybe that is the reason why CBN is rationalising printing the notes, but we also don’t know why it prefers to import our currency,” he said.

However, due to the crave and increasing demand for clean notes by the citizenry for various reasons, most people who are in need of the clean notes resort to buying them on the streets.

The naira has become an object of trade in many places, as people now sell the clean notes on the street, usually at major parks, garages and parties. Visits by our correspondent to many parks within the Lagos metropolis revealed that Nigerians now patronise the hawkers on the street to get clean notes, an act which the CBN described as unlawful.

Investigations revealed that people pay as much as N200 on every N1,000 clean notes, regardless of the denomination. Even though most of the money-changers approached by our correspondent said that N50 clean notes have not been available since last year, other denominations are available in surplus.

In a chat with our correspondent, one of the hawkers at the popular Oshodi park, who gave his name as Baba Tosin, said most of the people who come to them to change money request for the lower denominations such as N50, N100 and N200.


“On every N1, 000, we charge N200, even if you need N100, 000, we would change it for you. It is just that N50 note has not been available for some time now. Also, if the notes are used ones, the amount payable on every N1, 000 is N100.

“The only challenge is that N50 had been scarce since last year, because there is higher demand for it than other denominations which had led to its scarcity.

“Most people who spray at parties prefer N50 note because it is economical,” he said. At the popular Obalende park in Lagos Island, one of the naira notes hawkers who spoke to our correspondent, on the condition of anonymity for fear of being hunted and humiliated, gave the same amount as the cost of the exchange.

On further enquiry, he said that the main source of their supply is the CBN while they use commercial banks as a secondary source.

“Supply from the CBN is more reliable, consistent and readily available because they are in charge of the issuance of notes, but we also get the new notes from commercial banks. We have people who buy from the banks and supply us.


“We also buy from them and we pay between N100 and N150 on every N1,000. We have to make some profit, that is why we sell at N200 on every N1,000.”

Tina, a money-changer at Iyana Ipaja (Lagos) park, also gave the same rate of N200 on every N1,000.

When our correspondent asked if she could change N50,000 to mint, she said, “Even if you have more, you will get it. I have it.”

Asked how she gets the new notes, Tina said that that there are middle-men who buy the notes from the banks and sell to them.

“It is a chain-like business. We have some big people who buy the notes from both the CBN and commercial banks in large quantities, they sell to us and we sell to our customers.


“The thing is that the CBN is our main source because commercial banks do not have the clean notes in commercial quantity, hence, they can’t meet our demand. If you go to commercial banks, you would see tellers and other staff members scrambling to keep the notes anytime they come across them.

“Because of issues like confidentiality and security, we are not allowed to get direct supplies. Besides, CBN is not a place anybody can enter, so we don’t even know the top officials who supply us, but we get the supply unhindered which is more important.

Tina, however, refused to disclose how much they pay their suppliers for the new notes but assured our correspondent of steady supply anytime there is need for it.

Findings revealed that most of the hawkers who have the notes in large quantities get them from the CBN while those who need money to spray at parties get them from commercial banks.

Even though CBN recently denied the allegation that its members of staff sell naira notes, the hawkers who confided in our correspondent said they get the large chunk of the new notes from the CBN while the remaining comes from the commercial banks, all through informal means.


It was also learnt that concerned bank officials who sell the notes would prefer to sell to the hawkers and make money than make them available to the customers at no extra cost.

Our correspondent learnt, on further enquiry, that the hawkers or their middlemen have links with some senior staff members of the CBN and the Cash Management Units of the commercial banks.

One of them told our correspondent that it is not possible for the hawkers to operate without an insider who may likely be a senior staff member because not all bank workers have access to cash or its reserve in the bank.

While some banks have their CMU at the headquarters, some have them at the branch level.

A senior member of staff in one of the new generation banks, Mr. Seyi Aliu, said, “While it may be harder for those who have their CMU at the headquarters to sell new notes, it is easier for those who have their CMU at the branches to sell but the CBN is their best shot because that is where all notes come from; it issues the notes.


“All the cash coming into a bank, including from the CBN, is received at the CMU, from where they may be sent to other places. Hence, the officials in the unit have access to the notes than other bank workers.

“Even though the deposit at the end of each day would pass through them, they hardly get mint from deposits. Even if it comes, the tellers in the banks are also Nigerians who love to spend clean notes. They could have changed it for personal use which is not a crime.”

Also, another banker, Tosin, who claimed to be in the know, said that it had to do with knowing the right persons at the CBN and the Cash Management Unit of the commercial banks.

“Once the hawkers have insiders either directly or through some middlemen, they would pay the equivalent of what they need and the cost of purchase into the banker’s account, who would supply them the clean notes through an agreed method.

“Some people even pay ahead so that when the clean notes are available, they would be assured of getting something because there is also competition.


“The hawkers have more than one source and that is why they always have enough stock. Some have sources in the CBN and some in the commercial banks, and it is a very secret deal.”

Tosin added, “It is common practice for bank executives to instruct the workers at the cash management unit to reserve a certain amount of clean notes for them and no one would dare touch the mint.

“In fact, sometimes we are instructed to separate the box containing the mint so that we don’t tamper with it either intentionally or by mistake. It is only when the boss who hands down the instruction comes that we touch the box, and we give him whatever amount he needs.”

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