Law of Banking Law Review Legal Articles Nigerian Law Trade and Commerce


How do you feel when the person with whom you transact rejects the banknotes you offer for the goods or services rendered? You feel bad, I guess. Some would even get angry and ask you, “Is it not a Nigerian currency again?” Think further. If you are on the receiving end of such transaction and you reject the currency, the person may accuse you of too proud and rejecting the Nigerian legal tender. Well, you might just be very “lucky” that person offering you the currency is not a Nigerian “danfo (bus) conductor”; the story would be a different one. This is a little display of the scenario that has been in Nigeria for donkey years now.

Anyway, I am glad to make this announcement now. The story is bound to change as the Central Bank of Nigeria (CBN) has risen up to the occasion to curtail this menace.

On the 23rd of January, 2019, the CBN published a Guideline on Regularisation of the Fitness and Standard of the Nigerian Banknotes. This Guideline was made pursuant to the powers donated to CBN by Section 2 of the CBN Act, 2007, imbuing CBN with the power to regulate, print and manage the circulation of currency in Nigeria and offshore. This article carves a quick review of the new Guidelines. The author attempts a summary of the content of the guidelines, then moves into a quick appraisal of the relevance of the same Guidelines’ to the Nigerian economy today. Recommendations and suggestions also follow suit.

The guideline was made pursuant to section 2 of the CBN Act 2007. It divided banknotes into two categories:

Fit and Unfit banknotes
Article 1.2 of the Guidelines defines “fit” and “unfit” banknotes as follows:

“Fit Banknote
A banknote that is suitable for continued circulation and is sufficiently clean to allow its authenticity and value to be readily ascertained.

Unfit Banknote
A banknote that is unsuitable for further circulation because of its physical condition, which may be soiled, dirty, limp, worn out, defaced or has a hole that is larger than 10 mm. Unfit notes should be returned to Deposit Money Banks (DMBs) or a branch of the CBN anywhere in Nigeria for exchange.”

In essence, the Guidelines in Article 1.3 provide for the standards for the quality banknotes permitted to be in circulation for transactions; that is, the banknotes that the public may reject or accept. According to the Guidelines, the following are the criteria:

  • The durability and functionality of the security features on the banknotes
  • Banknotes structure and durability
  • Banknotes quality i.e printing and appearance of THE BANKNOTES ( soiling/ ink) e.t.c.

Article 1.4 addresses the concept of Banknotes Performance Review (“the Review) which is a process that “involves the visual inspection of sample of notes, using defined inspection procedures.” The Review process shall also give regards to the following;

  • Visual quality and functionality of security features.;
  • Note structure and quality; and
  • Visual quality of the printing features on the notes and note appearance.”

How then do we know the right banknotes to accept? The answer to this question is provided for in Article 1.5, where the criteria for fitness of banknotes were listed. The following are the criteria;

  1. Genuine, not counterfeited;
  2. Has a defined and acceptable area dimension;
  3. Free from holes, tear, tape or missing part, folded portion, etc.;
  4. Has uniform brightness and is not heavily soiled;
  5. Free from excessive ink wear, particularly in the portrait area;
  6. Free from defacing;
  7. Correct denomination, serial number details, etc.; and
  8. The series that has been approved for redistribution by the Bank

By the concluding portion of Article 1.5, the afore-itemized criteria are CUMULATIVE, and where a note fails to meet up with any of the criteria, it becomes legally unfit and unsuitable for recirculation.

Moving on, in Article 2, the guidelines set out various classifications of the levels of fitness of the banknotes for recirculation.

Article 2.1 the freshly printed banknotes from CBN itself.
Article 2.2 deals with Automated Teller Machines (ATM)-fit banknotes. Here, the Guidelines provide that ATM requires high quality banknotes. This structurally and textually implies that the banknotes in ATMs are to be fitter than other points of transactions.
Article 2.3 recognises Teller-Fit Banknotes as those banknotes that have been checked by banks and have been considered to be fit for recirculation. They may be in lower qualities than the ATM-fit banknotes, but they are required to meet the proper quality or standard as set out by the Guidelines, in order ‘to maintain a clean appearance, enhance customer satisfaction and reduce transaction time

In Article 3, the Guidelines outline the different manifestations of unfit banknotes.
Article 3.1 recognises soiling as a feature of unfit banknotes. According to the Guidelines: ‘A banknote is soiled where there is general distribution of dirt or moistures across it’.
This manifests where the lighter part of the banknote has become darker than it ought to be. The Guidelines provide pictures on this see pictures below.

All pictures are from the Guidelines

In Article 3.3, limpness is seen as a feature of unfit banknotes. Limpness is based on the texture and structure of the banknotes. It is based on the crispness to flexibility and weakness of a banknote. The guideline provides that a crisp banknote should stand at 0 degree. The fit banknotes crispness range from 0 degree to 71 degrees when held at a standing position. An unfit banknotess will have its crispness at a range of 75 degrees to 90 degrees at which point, it will no longer be fit for recirculation.

In Article 3.4, stain of any grade or magnitude on the banknotes (any part thereof) renders the note unfit.

In Article 3.5, where there is any missing security feature (such as the security thread) of the banknote it is unfit.

In Article 3.6, the availability of pictures, lettering or external graphics on the banknote renders it unfit. This feature is called “graffiti” by the Guidelines.

By Article 3.7, any Banknote having or ‘suffering from’ a hole of 10mm and above is unfit.

Also, by Article 3.8, torn banknotes are generally unfit for circulation or use.

Turning to Article 3.9, “Mutilated Banknotes” come to significant focus. They are banknotes with certain parts missing, or where the size or shape of it has either increased or reduced.

By Article 3.10, where banknotes have been repaired with glue, sellotape or staple pin, such will be unfit for recirculation.

Article 3.11 provides that where a banknote has across it, multiple random folds and such as affected its visual appearances, it will be unfit. This includes shrinkage of the note due to excessive exposure to heat.

By Article 3.12, folded notes which have the visual appearance affected or any parft of the note covering another is unfit.

Pursuant to Article 3.13, burnt, termite-infested or mould-affected notes are also unfit.

Article 3.14 – Composed banknotes containing different parts from different notes are generally unfit.

Article 3.15 – Provides for banknotes whose ink or colours have worn out due to print, malhandling or aging. Check the picture below for the unfit banknotes due to ink-wear.

Article 3.16 – Provides that old-series banknotes are not only unfit but are no longer legal tenders.

Article 4.0 provides ways of ensuring banknotes fitness standards in banks as follows:

  • The quality of banknotes must be checked in the course of withdrawal by all the major cash handlers.
  • The Deposit Money Banking (DMBs) and third party service providers are advised to adhere strictly to the provisions of the Guidelines as any violation would attract appropriate sanctions.
  • Fit banknotes should be re-circulated to the public, while unfit banknotes are to be returned to CBN for authentication and disposal.
  • All banknote processing machine parameters must be configured in line with the quality criteria set by the Bank to ensure consistent quality output.
  • Cash handlers (DMBs, Micro-Finance Banks, etc.) shall pay only fit banknotes to the public. In a situation where the demand for banknotes exceeds the available stock of issuable notes, the problem should be escalated to the Issuing Authority (CBN) for necessary action.”

Commendably, by these Guidelines, the CBN commits itself to properly sensitizing the public on the proper handling habit of the Naira, special security features of the banknotes as well as the dangers of sale of the Naira. It also warns that any defaulter will be punished according to the CBN Act 2007.

Article 5.0 provides that the CBN shall ensure compliance with the standard set in the Guidelines. Monitoring shall be done with a view to:

  • Determining the adherence of the cash handlers to the specifications of the fitness standard.
  • Gauging stakeholders’ deviations from the fitness standards.
  • Measuring if deviations are within the acceptable tolerance.
  • Sampling randomly the quality of banknotes in circulation.
  • Obtaining feedback and document findings for continuous improvement.”

The Guidelines conclude with Article 6.0 where the CBN notifies the public of the form with which the Guidelines will be reviewed. It also makes known to the public, its intention to withdraw unfit banknotes from circulation and print new notes in replacement. The general public has been instructed to take unfit banknotes to all Deposit Money Banks (DMBs) and CBN nationwide. This is a reminder of the function of the CBN as the sole agency with the rensponsibility of disposal of unfit banknotes.

The move by the CBN to regularise the fitness standard of banknotes is highly commendable. Nigerian banknotes have suffered greatly. I must confess that these Guidelines are long overdue. However, my commendation should not be a clog on my complete opinion. I have certain reservations against the guidelines.

First, the Unfitness Test must be brought into the critical focus. In as much as I am not a party to dirty, rough, mutilated, repaired and burnt banknotes, I still do not fathom the rationale behind limpness of banknotes being made to be a feature of unfitness. If we are to go by this provision of the Guidelines, we might practically impose an interesting legal obligation on the CBN to reprint banknotes more often than has ever been done. This does not look economically safe or sanguine as it will avoidably cost the Nigerian Government, fortune out of tax payers’ money. It is respectfully suggested that the level of probably be looked into and made more practical and appealing.

Second, the Guidelines leave hanging, the question of the time frame within which return will be made of unfit banknotes to Deposit Money Banks (DMBs) and Branches of CBN nationwide. It is important to set a date for people to know when to start rejecting unfit banknotes. The sad and pathetic case of the hundred naira (bank) note echoes in my head constantly. There has to be viral publicity on what fit and unfit banknotes truly are by law. The general populace must be made aware of when to stop accepting unfit notes during transactions. This is the rationale behind the clarion call for the CBN to set a time frame for the withdrawal the unfit banknotes.

Moreover, on the issue of defacing banknotes, it is submitted that publicity be intensified on the issue of Proper Handling of the Nigerian Naira (banknote). Publicity should be orchestrated based on the different backgrounds of Nigerians. Social media platforms, radio and television adverts will certainly be instrumental here. The National Orientation Agency (NOA) is also a major stakeholder in this battle; the Naira is an indispensable national symbol. Proper actions should be taken on ways of punishing persons caught defacing the banknotes. The publicity should also contain information on proper handling of the Nigerian banknotes.

In conclusion, the CBN must be on the move in sensitizing the general public on the illegality of improper handling the Nigerian banknotes. Nigerians should also do well in forming a culture of proper handling and saving of the banknotes. The idea of indiscriminate spraying of cash at parties should be stopped. The use of purses should be widely encouraged. In the final analysis, the onus is on all Nigerians to join in the fight against the defacing of Nigerian banknotes. Indeed if we have good looking banknotes, why should I reject money?

Adeyemi O. Owoade
Co-founder/Deputy Editor-in-Chief,
Law Axis 360°

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: