A KEYNOTE ADDRESS DELIVERED BY PROFESSOR CHARLES C. SOLUDO, GOVERNOR, CENTRAL BANK OF NIGERIA AT THE NATIONAL SEMINAR ON CASH HANDLING, AUTOMATION AND MANAGEMENT HELD AT THE PROTEA HOTEL, LEKKI, LAGOS FROM 9TH – 10TH AUGUST, 2005

Protocol

  1. It is my pleasure to address you at this second edition of
    the “National Seminar on Cash Handling, Automation and
    Management” organized by the Financial Institutions Training
    Centre (FITC), in collaboration with the Central Bank of Nigeria
    (CBN). I have no doubt that the organization of the second
    edition of the seminar was motivated by the huge success
    recorded at the first edition held in March, 2004.
  2. This seminar is informed by the fact that the Nigerian
    economy is predominantly cash-based, reflecting the
    preference of economic agents, the weakness of the legal
    system to enforce contracts, and the level of development of
    our payments system. The seminar could not have come at a
    more auspicious time, given the problems of currency
    management in Nigeria and the urgent need to chart a new
    direction consistent with best practices, in order to engender greater efficiency and minimize costs in printing and minting currency.
  1. The problems of currency management in Nigeria which
    necessitated the hosting of the seminar in 2004 are still
    prevalent. These include, dirty notes in circulation;
    predominance of cash-based transactions; low level of
    automation; and near absence of private sector participation in
    currency management. The volume of currency-in-circulation
    is large, totaling 3.99 billion pieces as at end-December, 2004.
    The volume was as high as 8.2 billion pieces as at 2002 but
    declined steadily, following the on-going currency reforms. A
    significant proportion of the notes in circulation are not only
    dirty, but defaced and abused due to poor handling and lack of
    respect for the national currency. Our culture of “spraying
    notes” typifies the abuse of the national currency.
  2. A major dimension to the problem of currency
    management is the very limited use of coins, attributable partly
    to the many years of high inflation which eroded the purchasing
    power of coins and resulted in rounding-up of prices to the
    nearest banknote value. It is also partly due to the problems of
    size and weight.
  1. Over the years, the CBN has been involved in virtually all
    aspects of currency management, from strategic and
    directional functions to conventional operational activities, with
    minimal private sector participation. Currency management,
    which straddles the entire cycle of currency issue functions,
    from the printing of banknotes and minting of coins, storage,
    distribution and processing, to the disposal of unfit notes, is not
    only cumbersome with the attendant complex logistical
    arrangements but also very expensive.
  2. Ladies and Gentlemen, as many of you are aware, the
    core functions of the Central Bank of Nigeria are: issuance of
    the legal tender currency; maintenance and Management of
    Nigeria’s external reserves to safeguard the international value
    of the legal tender currency; promotion and maintenance of
    monetary stability and a sound and an efficient financial
    system; and acting as banker and financial adviser to the
    Federal Government. Over the years, the Bank had
    overstretched its capacity by undertaking several activities that
    are only ancillary to its core functions. In order to re-position
    itself to efficiently deliver on its core mandate, the Bank is
    implementing a comprehensive reform programme which is
    already at an advanced stage of implementation. It entails a reengineering of its structure, processes and deployment of appropriate information technology infrastructure. Specifically, in the area of currency management, the Bank is carrying out a comprehensive review of its entire currency series with a view to addressing issues of denominational structure; limited use of coins for transactions; dirty notes in circulation; and high cost of currency management. The N1000 note will be issued before the end of this year as an integral aspect of the currency restructuring that is aimed at enhancing the efficiency of currency management.
  1. Some non-core processes of the activities of the Central
    Bank are now being outsourced to create space for the bank to
    focus on its core functions. The processes being outsourced
    will include currency distribution and currency processing,
    while the CBN will ensure adequate regulatory and supervisory
    standards. We believe that these processes could be more
    efficiently performed by the private sector and we shall operate
    in line with the global trend of increasing collaboration between
    central banks and the private sector. This will free the CBN
    from routine operational activities in currency management to
    focus more on the directional functions, such as currency
    issuance, research and development, currency control and
    disposal, and supply chain facilitation.
  1. It is heartening to note that increasing interest is being
    expressed by private sector organizations in cash-in-transit
    operations as the Bank continues to receive enquiries on the
    requirements and modalities for such ventures. The CBN is
    favourably disposed to encouraging such pioneering
    investments. We further urge prospective investors who are
    interested in this line of business to explore both cash-in-transit
    and currency processing operations to take advantage of the
    huge economies of scale from both processes.
  2. Ladies and Gentlemen, as many of you are aware, the
    CBN has acquired majority shareholding in the Nigerian
    Security Printing and Minting (NSPM) Plc and has taken over
    the management of the company. The aim is to restructure
    and reposition the company as a world-class competitive firm.
    Our goal is to stop importation of finished banknotes within
    three years and sufficiently meet the banknote and security
    printing requirements of the Nigerian economy and those of
    West and Central Africa in the longer-term. The restructuring
    programme is on course and once the company stabilizes and
    becomes profitable, the CBN will divest its interest to the
    private sector to own and manage the Mint.
  1. Currency management in Nigeria poses a lot of
    challenges. The establishment of a Real Time Gross
    Settlement (RTGS) system for large-value payments which is
    expected to go live before the end of the year, the operation of
    the Nigeria Automated Clearing System (NACS) and increasing
    use of electronic payment devices will help relieve the pressure
    on cash. As part of the continued effort at enhancing the
    quality of Naira notes in circulation, the CBN plans to
    resuscitate its campaign against Naira abuse, especially
    sensitizing the public on the proper handling of the Naira. The
    national currency, the Naira, is a window on Nigeria, our
    people, heritage and culture, and portrays our national
    character.
  2. Ladies and Gentlemen, I have noted that the specific
    objectives of this seminar are to:
    (1) Examine the various problems associated with the
    management and handling of cash in Nigeria;
    (2) Acquaint the participants with the framework for
    maximizing cash-based transactions;
    (3) Discuss the various ways of developing and sustaining
    effectiveness in payments system and cash management
    in Nigeria; and

(4) Preview the challenges for integrating cash management
operations in Nigeria.
It is my expectation that the distinguished participants at this
seminar will come up with workable solutions to cash and
currency management problems in Nigeria. Looking at the high
quality of resource persons and participants at the seminar, I
am convinced that the seminar will identify viable options to our
cash and currency management challenges. I am therefore
looking forward to the outcome of the seminar.

  1. I thank you all for your kind attention and wish you fruitful
    deliberations.

PROF. CHARLES C. SOLUDO, CBN GOVERNOR,
9th August, 2005

Source: CBN

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