Widespread illegal Naira note hawking at outrageous prices has increased throughout Nigeria, made worse by banks’ restricted supply of cash. The practice is still in place in spite of the Central Bank of Nigeria’s (CBN) warnings and threats to punish negligent institutions. Bank officials and cash hawkers are reportedly working together to take advantage of consumers by hoarding cash and reselling it at exorbitant prices, especially for recently issued notes. Since some bankers demand greater fees, Hawkers freely acknowledge that they charge more for cash.
For instance, bank officials earn by selling ₦200,000 for ₦230,000, while ₦20,000 in mint notes is sold for ₦7,000 more in Lagos. At social gatherings, cash is also resold, and hawkers benefit handsomely from this. Similar patterns have been seen in Imo State, Osogbo, and Ibadan, where stores and supermarkets have joined the hawking craze and are making money by selling to Point-of-Sale (PoS) operators. Although the CBN insists that such behavior is illegal, there hasn’t been much enforcement. Bank directors and other interested parties denounce the practice, blaming it on the inadequate cash supply brought on by CBN policies meant to stabilise the currency rate and lower inflation.
Economists caution that illegal sales and cash hoarding might raise inflation.
In Nigeria, the illegal naira note Trade has grown, with hawkers charging 10% to 40% surcharges for currency. For instance, ₦20,000 in brand-new notes sells for an extra ₦7,000 in Lagos, while ₦100,000 sells for ₦120,000 in Abeokuta. In order to undermine the Central Bank of Nigeria’s (CBN) efforts to preserve currency integrity, some bank employees aid this activity by diverting cash to hawkers. Economists caution that illegal sales and cash hoarding like these might raise Inflation and erode public confidence in banking institutions.
According to Dr. Adebayo Adedeji, an economist at the University of Lagos, “economic activities, particularly in the informal sector, are disrupted by the artificial scarcity of cash, which leads to higher transaction costs and price instability.” The CBN has responded by taking action to stop this practice. Penalties for banks discovered to be involved in cash hawking include 10% of the entire amount of money taken out on the day the money was taken out of the CBN, with fines increasing for repeat offenders. The CBN also performs spot checks and “mystery shopping” to keep an eye on currency distribution and stop naira abuse.
Internal controls should be strengthened by banks.
By improving cash supply management, the CBN can alleviate cash scarcity and stop hawking while guaranteeing adequate distribution to satisfy public demand. Internal controls should be strengthened by banks to stop money from being diverted to unapproved dealers. Citizens can learn about the economic and legal ramifications of participating in or endorsing cash hawking through public awareness campaigns. Most Nigerians are affected by this problem. “We used to sell ₦5,000 for ₦1,000, but now it’s ₦2,000,” a dismayed Ibadan dealer said. Despite the slight disparity, the country’s circumstances have caused it to increase.
Citizens’ financial hardship is made worse by such activities, particularly for those who depend on cash transactions for daily needs. Despite regulatory measures, naira hawking continues to exist, which underscores structural issues in Nigeria’s financial system. To resolve this problem and lessen the financial burdens experienced by citizens, regulatory bodies, financial institutions, and the general public must work together. After The Central Bank of Nigeria (CBN) decided to revamp the naira and phase out outdated notes, Nigeria experienced a major and comparable currency crisis in February 2023.
Related Article: Banks may Face Penalty Over ATM Cash Scarcity
Due to the newly created notes’ inability to satisfy public demand, this approach caused acute cash shortages across the country. The shortage caused massive demonstrations throughout the nation and interfered with everyday transactions, especially in the unorganised sector. People complained that they couldn’t buy necessary items and services because they couldn’t afford the cash. The crisis brought attention to the difficulties in implementing currency reforms and emphasised how crucial it is to have sufficient supply and distribution networks in order to avoid economic disruptions.