CBN finally gives reasons for cash scarcity, sends warnings to banks limiting fund

• It has been established that employee actions at banks were reportedly preventing money from flowing into the economy
• This is on the back of reports that the banks were limiting money to customers and that ATMs were constantly empty
• The CBN also acknowledged that bank executives who own PoS terminals give operators priority to maintain their business

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

The activities of bank staff members were allegedly impeding the cash flow in the economy, and as a result, the Central Bank of Nigeria (CBN) read the riot book to banks yesterday.

There are concerns that cash was missing from ATMs due to bank currency exchanges with PoS operators. Photo Credit: Vgajic, CBN
Source: Getty Images

The central bank reported that it had seen that the effective flow of cash was being hampered by the malpractices and desperation of Point of Sale (PoS) operators to further their profiteering goals in collusion with bank employees, who frequently control the terminals.

Banks supply money to PoS

The warning to banks came after concerns about missing cash from Automated Teller Machines (ATMs) due to bank currency exchanges with PoS operators.

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According to the Apex Bank, it has regularly provided banks with cash upon request for withdrawals at any of its 37 sites around the country, as shown by the substantial increase in currency in circulation between the last quarter of 2023 and the end of June 2024.

The CBN also admitted that bank executives who possess PoS terminals prioritise the operators to sustain their enterprise.

It further stated that inspections also showed that PoS operators operating near ATMs frequently take advantage of stranded clients.

The CBN further revealed that to finance their operations, these operators corner or buy cash at a premium from large cash-generating businesses like supermarkets and gas stations, impeding money flow to banks for processing and redistribution.

It announced that it had sent circulars instructing deposit money banks to promptly implement the necessary procedures to address these observations in reaction to this development.

“CBN will not hesitate to apply dissuasive sanctions on erring institutions for failure to comply with any of its regulations or where any of its officials is found guilty of sabotaging the system.”

Additionally, the CBN ordered banks to check all agents affiliated with their organisations more closely and make sure they abide by the rules as they currently stand.

Thisday reported that this came at the same time as the nation's top banking industry regulatory body announced that it was currently reviewing the rules governing agency banking in the nation to make sure that, as intended and mandated, agent banking operations are concentrated in rural and remote communities to serve the unbanked population, rather than concentrating in urban areas.

CBN warned banks

Earlier, the CBN issued a warning to Point-of-Sale (POS) operators and Deposit Money Banks (DMBs) in December 2023 regarding actions that could jeopardize the availability and movement of cash throughout the nation.

The bank also declared that it was looking into incidents that were reportedly able to thwart the economy's ability to function normally.

The bank made references to purported instances of collaboration amongst banks' point-of-sale (PoS) operators in a statement released by acting Director of Corporate Communications, Sidi-Ali Hakama. The claimed collusion reportedly disrupted the flow of Naira and hampered the availability of cash.

Currency in circulation fails to enter banks

Legit.ng reported that a recent CBN report stated that by the end of May 2024, the amount of money in circulation had increased to N3.97 trillion, a 1.07% increase from the previous month.

Additionally, the CBN stated that as of April 2024, the money supply stood at N96.97 trillion.

According to information on the Central Bank of Nigeria website, the amount of money in circulation has steadily increased, from N3.87 trillion in March to N3.92 trillion in April.

Source: Legit.ng