Nigeria: CBN Lists Conditions for Disbursement of Lower Currencies to Microfinance Banks

The Central Bank of Nigeria (CBN) on Thursday released guidelines for the disbursement of lower denominations of the naira through microfinance banks (MFBs) across the country.

The Director, Currency Operations Department of the Bank, Patricia Eleje, in a circular in Abuja gave conditions for microfinance banks to meet before they qualify to enlist in the scheme.

According to the director, all microfinance banks must have a composite risk rating (CRR) of above average in the most recent risk-based supervision (RBS) target examination before they are considered for the scheme.

The CRR is the framework's "final" rating reflecting the assessment of the safety and soundness of the financial institution by the CBN.

The CBN describes a stable financial system as one in which financial institutions, markets and market infrastructures promote economic growth by facilitating the smooth flow of funds between savers and investors.

The RBS, on the other hand, places premium on risk mitigation rather than risk avoidance, by encouraging banks to develop and continuously update its internal risk management systems to align with the scope and complexity of its operations.

The RBS is performed by appraising all the risks faced by a bank and how it controls them.

The CBN said the stipulated condition was to ensure only MFBs with good corporate governance practices take part in the currency disbursement scheme.

Old versus new notes

Meanwhile, the CBN said participating MFBs must be willing to accept a mixture of new and other banknotes.

Besides, the MFBs shall give 20 per cent of any withdrawal in lower denomination notes subject to a maximum of ₦50,000.

Wherein beneficiaries withdraw more than once in a day, the CBN circular said disbursement will only apply to one transaction per day.

Similarly, the MFBs would be allowed to exchange notes subject to a maximum of ₦50,000 for customers with bank accounts, and ₦10,000 for customers without bank accounts.

The CBN statement said in such a situation, the banks must not exchange for same beneficiaries more than once a week.

Also, MFBs are expected to maintain a register of amounts received from the CBN through their correspondent commercial banks.

Other requirements

Again, the MFB must also maintain another register of the beneficiaries of the lower denomination notes as well as ensure withdrawal teller slips contain the breakdown of the denomination of the currency to customers with accounts.

It, however, warned MFBs against hawking, hoarding or using of funds obtained under the intervention scheme for any other purpose.

The apex bank instructed the banks to put in place effective control measures that will ensure that banknotes disbursed to customers, with or without accounts, are not sold.

The circular directed the banks to ensure they render weekly and monthly disbursement return to CBN branches where the intervention would be monitored periodically, and appropriate sanctions applied to erring MFBs.

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