Fake Naira Notes In ATM’s: CBN Blames Commercial Banks

The Central Bank of Nigeria (CBN) has blamed operational inefficiency on the part of some commercial banks for the alleged fake naira notes dispensed by some automated teller machines (ATMs) in the country, stressing that some people were not doing what they ought to be doing.

CBN governor Mallam Sanusi Lamido Sanusi, who briefed journalists on the outcome of deliberations at the end of the two-day Monetary Policy Meeting, yesterday in Abuja, stated that banks are supposed to process currency before they go to the ATM during which fake notes ought to have been identified and taken out.

According to him, if customers find fake notes in the ATMs it means that somebody in the commercial bank did not do what he/she was supposed to do by just putting in notes without ensuring their due processing.

"It is really an operational issue. Banks are supposed to process currency before putting them in the ATMs and their machines should identify fake notes. So if you find fake notes in an ATM somebody in the bank did not do what he/she should do."

He also said that the problem could also arise from ATMs that receive and dispense cash which also suggests that many of the sensors are not working.

He however assured that the deputy governor, operations, is working with the banks to make sure that they are addressed.

The CBN also introduced a new component to its monetary policy instruments with the increase to 50 per cent of the cash reserve ratio (CRR) on public sector deposits in banks in a bid to curb banks' 'perverse' behaviour of lending only to the government at the expense of the private sector.

This means that banks must henceforth keep as reserves 50 per cent of all deposits collected from the federal, state and local governments and all ministries, departments and agencies (MDAs) of government.

Other decisions taken by the Monetary Policy Committee (MPC) included retaining the monetary policy rate (MPR), its lending benchmark for deposit money banks (DMBs), at 12 per cent and the symmetric corridor of +/-200 basis points around the midpoint.

With the development, the DMBs handling government deposits would be retaining as reserves an estimated N650 billion of their deposits from public sector, from an estimated N1.3 trillion currently in their balance sheets, thus reducing the amount of government deposits that can be used for lending.

Sanusi, who is chairman of the MPC, said the new monetary measures were being undertaken to contain the increasing liquidity in the banks and the attendant negative implications for naira exchange stability, in order to achieve overall macroeconomic stability in the months ahead.

Sanusi explained that the committee voted in favour of increasing the CRR for public sector deposits to 50 per cent; that measure was taken to effectively manage the liquidity surfeit in the banking system, the need to create appropriate monetary mechanisms to mitigate the likely negative impact of fiscal entrenchment that would characterise the election years and ensuring stable exchange rate for the naira in the face of worrisome developments in the global financial environment.

According to him, the committee observed the build-up in excess liquidity in the banking system, and expressed concern over the rising cost of liquidity management as well as the sluggish growth in private sector credit, which was traced to DMBs' appetite for government securities.

"This situation is made more serious by the perverse incentive structure under which banks source huge amounts of public sector deposits and lend same to the government through securities and the CBN via OMO bills at high rates of interest."

Sanusi said: "We introduced it for a number of reasons; first of all you have got liquidity surfeit in the banking industry. As I speak, we have about N1.3trillion sitting in banks belonging to government agencies. Now the funds are basically there at zero per cent interest and the banks are lending about N2trillion to the government and charging 13, 14 per cent. Now that is a very good business model, is it not? Give me your money for free and I will lend it to you at 14 per cent. Why would I go and lend to anyone else?

"If you want to discourage such perverse behaviour, what you need to do is to basically take away some of that money and therefore the reserve requirement is supposed to make sure that that excess liquidity in the banks' balance sheets is taken away. We have about six or seven banks that really account for the bulk of this money; we have done the numbers and we are not going to put them into distress.

"Secondly, this is just the beginning. If there continues to be spending and we are concerned about liquidity conditions, we foresee in the future continued increase in the CRR across the board as we continue to maintain the liquidity conditions. Election years everywhere in the world are difficult years, not just in Nigeria. In America, France, in every election year, politicians spend money and spending money means pressure on exchange rate, pressure on reserves, pressure on inflation.

"The next 12 months will be difficult, we will have to respond at every stage and make sure that no matter what happens, we do not have stability threatened. This is a first step in addressing one major chunk. We have not done it across the board, we have done it across public sector deposits and if the government decides that public sector deposits come back to the CBN, then the CRR is zero, but if it is out there, then CRR is 50 per cent," Sanusi added.

The committee also expressed strong concerns about the risks posed to government revenues from oil theft, less than expected production, new discoveries of shale oil, the fast-increasing number of African oil exporters, and the resultant dwindling market for Nigerian crude.

Sanusi noted that the inevitable fall in global oil prices as well as capital flow reversal may impact the current global (dollar) carry trade, for which Nigeria has been a major beneficiary.

The committee articulated the monetary policy risks of dwindling fiscal revenues to include: the crowding-out effect of government borrowing, depletion of excess crude savings and pressure on the exchange rate. Available data indicates that capital expenditure is the first casualty of dwindling government revenues as available resources were being channelled into funding non-discretionary recurrent expenditure.