CBN threatens banks with 400% penalty for circulation of mutilated banknotes

The Central Bank of Nigeria (CBN) has warned Deposit Money Banks (DMBs) against the practice of circulating composed banknotes which is part of their deposits with the apex bank. The CBN has expressed concerns over the increasing number of these composed banknotes which the members of the public usually request for their replacement. Composed banknotes are mutilated currency notes that comprise of several parts of different banknotes of the same denomination. The parts of such currency notes are usually put together with the intention of receiving value The warning by the CBN is contained in a circular titled, ‘Treatment of Composed Banknotes’, issued to all deposit money banks on March 31, 2022, and signed by the apex bank’s Director, Currency Operations Department, and can be seen on its website. Umar in the circular said that the existence of such banknotes in the economy falsifies the true value of the currency in circulation and could also be avenue for fraudulent activities. 

The CBN noted in the circular which is to take effect from April 1, 2022, that violation of this directive by any deposit money bank will attract a penalty of 400% of the value of the banknote on such financial institution. The circular from the CBN reads, “The management of the CBN observed with concern the increase number of composed banknotes deposited by DMBs and request for replacement of such banknotes by members of the public. “The existence of composed banknotes in the economy falsify the true value of currency in circulation, and can also be avenue for fraudulent activities. Consequently, any composed banknote discovered in the deposit of DMBs shall attract penalty of 400 per cent of the value. This circular takes effect from 1st April 2022.’’ The apex bank has been at the forefront of the fight to end the circulation of bad and mutilated currency in the financial system. In February 2022, the CBN said that about 100 tonnes of bad naira notes were generated as waste and destroyed weekly through open air burning at its 12 disposal centres across the country.