Godwin Emefiele, Governor, CBN.

 

Anxiety is growing daily over the exact  amount of cash in circulation as analysts express deep concern over the implications of the recent discovery of the stealing of mutilated currency worth eight billion naira (N8b) by officials of the Central Bank of Nigerian and their commercial bank accomplices. The recent uncovering of the fraud which is alleged to have commenced sometime in 2011 has stirred fears that even the Central Bank of Nigeria (CBN), whose responsibility it is to print and circulate the local currency, the naira, cannot say with accuracy the volume of currency presently circulating in the financial system.

The controversy has thickened as a result of the recent uncovering of a syndicate of bank officials who have made a criminal business out of converting monies meant for incineration for personal use.

The alleged amount of N8b involved is by some accounts grossly inaccurate as it is believed that the recycling of dirty and mutilated money by the CBN syndicate is believed to have commenced much earlier than investigators reckon.

While six persons including CBN staff and employees of some commercial banks have been arrested, analysts have expressed the concern that what matters most is the inability of the nation to estimate the volume of legitimate currency in circulation.

Managing Director/Chief Executive of Financial Derivatives Company (FDC) Limited, Mr. Rewane Bismarck told Hallmark in a telephone interview that it was not only the size of the amount involved in the fraud that was worrisome but also the severe implications for national security.

 

Bismarck who said the development was a ‘dead man trigger’ for the economy, explained that the bigger challenge appears to be the difficulty in using the unknown volume of currency in circulation to gauge inflation.

“My advice is for the nation to go cashless. This will help to curb such controversial issues in the system,” he said.

According to Rewane, the volume of cash in circulation in Nigeria is far higher than that of other developed economies, adding that independent estimates put the amount at N14trillion.

In the last two years, the CBN has been under pressure to stem the overflow of liquidity in the financial system given the huge quantity of local currency in circulation as nobody could confirm how long the fraud of recycling dirty and mutilated currency had been going on.

This has increased the volume of money in circulation and created pressure on domestic inflation, hobbling CBN’s efforts at containing the annual Consumer Price Index (CPI) to a single digit. The latest inflation figure stands at 8.7%.

“Currency deposited in the CBN by the banks are processed and sorted to fit and unfit notes in line with the clean note policy.

The clean notes are re-issued while the dirty notes are destroyed,” CBN says on its website.

Similarly, JPMorgan placed Africa’s largest oil producer on “index watch negative” on Jan.

16, saying Central Bank measures in December had reduced foreign-exchange and bond trading and made it difficult for investors to replicate the gauge.

The Central Bank of Nigeria had last Monday dismissed some of its eight officials that were involved in the N8bn currency fraud in some of its branches.

The Director, Corporate Communications Department, Ibrahim Mu’azu, disclosed this in a statement, a copy of which was made available to Hallmark Newspaper, adding that the middle-level officers among the accused had been summarily dismissed while some of them were placed on indefinite suspension.

Mu’azu said, “The Central Bank of Nigeria will like to inform the general public of the chronology of events that led the Management of the CBN to hand over some unscrupulous staff to the Economic and Financial Crimes Commission for prosecution.”

According to Mu’azu, during a routine internal audit of the Bank’s Cash Destruction activities in September 2014, the CBN Briquetting Panel, comprising senior bank staff from different branches, noticed some anomalies at the Ibadan Branch, and immediately reported this to the bank’s management.

“It was discovered that a systematic scheme, which has been on for several years, was being run in which mutilated higher denomination notes, originally meant for destruction, were swapped with lower denomination currencies.

He described the fraud as interleafing, saying, “It is a practice in which boxes are labelled with a higher value than its true content.

As soon as the Bank’s internal investigators concluded beyond reasonable doubt that some wrongdoing had occurred, the affected members of staff, who are middle-level officers were, depending on the gravity of their offences, either summarily dismissed or immediately placed on indefinite suspension on October 21, 2014, and all handed over to the EFCC for further investigation and prosecution.”

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