Central Bank of Nigeria Reports on Cash for 2020

The Central Bank of Nigeria (CBN) has made progress in 2020 with introducing and updating new systems to help with its cash management, according to its recently published annual report on cash operations.

It has also rationalised its sorting systems to simplify their maintenance and operations. While cash in circulation has risen, CBN’s indent has fallen sharply and cash distribution has been a challenge. At the same time, counterfeiting has also fallen.

CBN has a busy agenda for 2021.

Currency issue

The volume and value of cash in circulation in Nigeria rose 11% and 19% respectively, with withdrawals exceeding deposits.

This demand was driven by the pandemic and as a response to Deposit Money Banks (DMBs) reducing their opening hours. The four highest value denominations – the 100, 200, 500 and 1,000 naira (₦) – represented 63% of the number of notes ordered.

Currency indent and production

At the same time, the CBN reduced its order on Nigeria Security Printing and Minting (NSPM) by 34%, the lowest indent since 2016. NSPM, which is 89.5% owned by the CBN, has the capacity to produce 4 billion banknotes annually.

In 2019 NSPM was unable to deliver 100% of the indent (NSPM produced 3.05 billion of the 3.83 billion ordered). In 2020 it delivered the full indent despite the restrictions and challenges imposed by the pandemic. The reduction in output in 2020 was, therefore, 17% less compared with 2019.

The cost of printing fell 29% to ₦58.6 million (US$142,000).

Cash management

During the year the Cash Activity Reporting Portal (CARP) has been upgraded so that currency management data from the financial industry is provided to the Nigerian Inter-Bank Settlement System.

The Mint Tracking System was launched following the completion of an assessment of the infrastructure, user sensitisation tests which were run at five branches and an end-to-end system test. The system is now in a pilot phase.

The currency laboratory for banknote quality assessment, authentication, independent investigations and the adjudication of cases of suspect counterfeit banknotes has started operations.

A ninth cash-in-transit company has been approved for operations.

CBN has implemented a framework of CBN direct interventions for the disbursement of low denomination banknotes to approved beneficiaries through their bankers to enhance availability and accessibility.

CBN has continued its routine monitoring of DMB’s conformity to its clean note policy and banknote fitness guidelines.

Currency distribution and processing

Banknotes shipped to CBN branches fell 18% in volume compared with 2019. Banknotes moved across the branches fell 23% in volume terms due to the reduction in the annual indent and COVID-19 containment measures. The costs of distribution fell 23% to ₦4.5 million.

The 23 processing branches processed 52% fewer banknotes than the target set and 33% fewer than in 2019. The number of boxes designated ‘Counted Audited Clean’ fell 42% and ‘Counted Audited Dirty’ fell 22%. Again, the disruption to operations required by COVID-19 measures caused these reductions.

CBN started 2020 with 106 BPS 1000 sorting machines, but also deploys 22 CPS 1800 processing systems, 24 BDS 400 systems for banknote destruction and four currency disintegration systems (CDS). A rationalisation has been undertaken which has reduced the number of machines to 53 BPS, 12 BDS and 3 CDS machines. CBN also uses 50 BPS-CI-F and 95 SBM machines to authenticate foreign currency.

Giesecke+Devrient Currency Technology Africa and Interprods provide maintenance services to CBN for this equipment.

Counterfeiting

67,265 counterfeits were discovered in 2020, 21% fewer than in 2019. The two highest denominations effectively accounted for all counterfeits, the ₦1,000 being responsible for 69% and the ₦500 31%.

Measured as a ratio of the volume of banknotes in circulation, with a unit of parts per million (ppm), counterfeits were 13ppm, down from 20ppm in 2019.

Future actions

CBN is focusing on a range of initiatives for cash in 2021, including the automation of currency operations in the branches, continuing interventions to address the sub-optimal circulation of lower denomination banknotes, recycling of banknote waste, collaboration with relevant stakeholders and reinforcement of the cashless policy to stem the tide of the sale of naira notes, curb counterfeiting and discourage poor handling of naira notes.