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CBN Battles to Limit Cash-Crunch Fallout

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By Shehu Salmanu

As Nigeria’s Central Bank tries to rebuild trust following a disastrous introduction of new naira bills, customers’ faith in the financial system is being tested, as many still battle to obtain cash.

CBN Battles to Limit Cash-Crunch Fallout

Nigeria’s Central Bank (CBN) has doubled supply of banknotes to commercial banks for circulation among customers.

The country’s apex money authority has also directed all commercial banks to load their ATMs and conduct physical operations over weekends to ease the monthslong cash crunch that plunged Africa’s largest economy into financial disarray.

It also ordered the old naira bills to be circulated until the end of this year.

Nigeria has battled a cash crunch since October 2022, when the CBN gave a February 2023 deadline to

The new change old 200, 500, and 1,000 naira bills for newly redesigned ones.

Customers still can’t get cash

The new notes were introduced to mop up excess cash outside the banking system, counter corruption and discourage ransom payments to bandits and kidnappers.

Stories of long lines and frustrated customers sleeping outside banks to get cash have been widely documented in Nigeria.

Yet, despite the CBN’s efforts, it appears that some Nigerians are shunning the banking sector, saying the poorly-implemented naira redesign policy has exposed the system’s inefficiency.

Last week, the country’s National Labour Congress (NLC) union threatened strikes over the cash scarcity.

The strike was postponed for two weeks, with NLC president Joe Ajaero saying the organization would monitor how Nigerians were accessing cash.

But many customers, like Samson Adebo, say the situation has not eased.

“There are a lot of crowds because people have been struggling to get cash,” he told DW near a bank in northern Nigeria.

“In fact, I came here several times, and I couldn’t get what I wanted. I think that if you went to any bank in Nigeria, there would be crowd despite the fact they said there is cash.”

Counting the cost

Financial analysts believe the crisis has cost Africa’s largest economy about 20 trillion naira (around Ꞓ40 billion).

It also inadvertently increased the banking sector’s risk of collapse as customers are now shunning cash deposits. The CBN has urged customers to be patient.

While commercial banks have been directed to load their ATMs with new bills, not all are complying, according to some customers DW spoke to.

“Even though there is court ruling on the usage of old naira notes, people should not expect normal business as it was before because the policy didn’t support so much cash in circulation,” Kaduna-based economic analyst Fatimah Salihu Abubakar told DW.

“Government has now realized that 75% of the businesses in Nigeria are dominated by small and medium scale businesses and they heavily rely on cash transactions,” Abubakar added.

“Its advice has been that these enterprises should start accepting the other available channels of payment such as mobile banking, the internet banking, and use of the USSD.”

Central Bank fights to retain faith

According to Fatimah Salihu Abubakar, the Nigeria’s Central Bank should take responsibility for its poorly implemented currency shift, which has hit the informal sector particularly hard.

“At first when the CBN gave out the deadline for old naira notes, people believed it was impossible and didn’t take serious action. Most of people in rural areas found it difficult to transact, and gave rise to a lot of complaints that made the Supreme Court intervene with the extension. People are a bit more relaxed but to the policy is not healthy,” she told DW,

The policy shift was initially intended to promote cashless transactions in Nigeria, where businesses operating in the informal sector, which relies heavily on cash, hardly use the banking system. The CBN also said the new policy would help remove excess cash outside the banking system, counter corruption and discourage ransom payments to bandits.

This article has been adapted from a radio report which was originally broadcast on DW’s daily radio show, AfricaLink.


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E-Financial

CBN Permits BDC Operators to Buy FX from NAFEM During Festive Season

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Central Bank of Nigeria (CBN) has announced that eligible Bureau de Change (BDC) operators will have temporary access to the Nigerian Autonomous Foreign Exchange Market (NAFEM) to purchase $25,000 weekly. This arrangement, aimed at addressing seasonal foreign exchange (FX) demand, will be effective from December 19, 2024, to January 30, 2025.

In a statement signed by T.G. Allu, CBN’s acting director of trade and exchange, the apex bank said BDC operators would buy FX from authorized dealers—banks licensed by the CBN—exclusively to meet retail market demand.

“To meet expected seasonal demand for foreign exchange, the CBN is allowing temporary access for all existing BDCs to the NAFEM for the purchase of FX from Authorized Dealers, subject to a weekly cap of $25,000,” the statement read.

BDC operators must fully fund their accounts before accessing the market at prevailing NAFEM rates, choosing only one authorized dealer for transactions under this arrangement. A maximum price spread of 1% is allowed for retail pricing by BDCs, and all transactions will be reported to the CBN’s Trade and Exchange Department.

The CBN reiterated that personal travel allowance (PTA) and business travel allowance (BTA) remain available through banks for legitimate travel needs. The bank emphasized that all FX transactions must be conducted at market-determined exchange rates.

“The CBN remains committed to a fully functional foreign exchange market and will continue to provide liquidity when necessary to manage price volatility,” the statement added.

Earlier in September, the CBN approved FX sales to eligible BDC operators at a rate of N1,590 per dollar to cater to demand for invisible transactions, reflecting ongoing efforts to stabilize the FX market.


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E-Financial

Diaspora Remittances to Nigeria Reach $4.22 Billion in 2024, Says CBN

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Central Bank of Nigeria (CBN) has announced that diaspora remittances through international money transfer operators (IMTOs) reached $4.22 billion between January and October 2024.

This figure represents a 61 percent increase, or $2.62 billion more than the amount recorded during the same period in 2023.

CBN Governor Olayemi Cardoso shared the figures during an interactive session with the Senate Committee on Banking, Insurance, and Other Financial Institutions at the National Assembly on Wednesday. “The year-on-year increase reflects significant growth,” Cardoso noted.

He also reported that remittances rose from $336 million in September 2024 to $402 million in October 2024 on a month-to-month basis.

Cardoso expressed optimism about continued growth in remittance inflows, saying, “The remittance inflows would continue to rise by the end of the year, given the current trajectory.”

He attributed the surge to improved efficiency in the remittance system, the positive effects of President Bola Tinubu’s policies, and increased trust among Nigerians in the diaspora to contribute to national development.

In addition to remittance updates, Cardoso addressed the state of Nigeria’s external reserves, which he said had grown to $42.01 billion as of December 12, 2024, from $38.35 billion on September 30, 2024.

“External reserves rose largely due to receipts from crude oil-related taxes and third-party receipts in Q3 2024,” he explained.

He added that Nigeria’s external reserves could fund over nine months of goods and services imports, surpassing the international benchmark of three months. “Our external reserves level is a robust buffer against shocks,” Cardoso said.

On the issue of cash shortages, the CBN governor reiterated the enforcement of the new policy imposing a fine of N150 million on any bank branch found distributing new naira notes illegally to currency hawkers.

Cardoso also shared his outlook for the Nigerian economy in 2025. “Distinguished Senators, as we conclude this briefing, I want to highlight that despite the challenges facing our economy, there are clear reasons for optimism,” he said.

“The gradual stabilisation of the forex market, ongoing banking sector recapitalization, and positive growth trends in key sectors, especially the services sector, indicate a path toward recovery and stability.”

This comes as the CBN continues to implement measures to strengthen the economy. On October 17, the apex bank reported that remittance inflows had risen to almost $600 million by the end of September, while on June 25, it granted eligible IMTOs access to trade on the official FX window.

 


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E-Financial

Fraud in Bank Branches Surges by 31 Percent in Q2 — FITC

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The Nigerian banking sector has witnessed a concerning rise in fraudulent activities, with incidents of fraud in bank branches increasing by 31 percent in the second quarter of 2024.

Fraud in Bank Branches Surges by 31 Percent in Q2 — FITC

This alarming statistic was disclosed by the Financial Institutions Training Centre (FITC) in its Fraud and Forgeries report, highlighting significant challenges to the integrity of the country’s financial system.

Fraudulent activities in Nigerian banks led to a staggering N42.33 billion in reported losses during the first half of 2024.

This sharp rise was driven by escalating fraud across multiple channels, most notably within physical bank branches.

The FITC report revealed that fraud in bank branches rose dramatically to N42.2 billion in the second quarter, compared to N133.9 million in the first quarter.

The FITC data also pointed to a massive 1,560.3 percent increase in computer and web fraud. Losses in this category surged from N24 million in the first quarter to N400.8 million in the second quarter.

In contrast, mobile fraud witnessed a significant decline, dropping by 59 percent from N216.4 million in the first quarter to N88.7 million in the second quarter.

Interestingly, no cases of ATM-related fraud were recorded during the period under review.

The figures also indicate a shift in fraudulent activities involving various financial instruments. Card fraud saw a notable decline of 47.66 percent, with cases dropping from 21,469 in the first quarter to 11,231 in the second quarter. Conversely, cheque-related fraud rose by 36.67 percent, increasing from 30 cases in the first quarter to 41 in the second quarter.

Mobile fraud recorded an even steeper decline in value terms, dropping by 99 percent from N21.6 billion in the first quarter to N216.36 million in the second quarter.

These figures suggest evolving strategies among fraudsters, with some methods becoming less prevalent while others gain traction.

Amid the rising tide of fraud, legal actions have also intensified. In one notable case, an Abuja Federal High Court issued a 30-day freeze on 818 bank accounts linked to a N10 billion cyberattack on a Nigerian bank.

The court’s directive, issued on October 15, 2024, was based on a motion filed by the police against James Akagwu Isaac and other suspects, including several financial institutions.

Analysts say the surge in fraudulent activities underscores the urgent need for heightened vigilance, enhanced security measures, and robust regulatory interventions in Nigeria’s banking sector.

While the decline in some fraud categories, such as mobile and card fraud, offers a glimmer of hope, the sharp rise in branch-based and web-related fraud highlights the evolving tactics of fraudsters.

To combat these threats effectively, experts recommend that banks must invest in advanced fraud detection systems, conduct regular staff training, and strengthen internal controls.

Collaboration between financial institutions, law enforcement agencies, and regulators will also be crucial in mitigating the impact of fraud and safeguarding the financial ecosystem.

The FITC report serves as a stark reminder of the vulnerabilities within the banking sector and the need for proactive measures to address them. Without sustained efforts, the rising trend of fraud could pose significant risks to Nigeria’s economic stability and the trust of consumers in the financial system.

 

 

Credit: Tribune


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