CBN Recirculated Dirty Banknotes: Auditor-General Flags Major Policy Breach
The Office of the Auditor-General of the Federation has raised serious concerns over the Central Bank of Nigeria’s compliance culture following revelations that the apex bank re-issued dirty and unfit currency valued at N29.77bn, a direct breach of its own Clean Note Policy.
The findings are contained in the Auditor-General’s Annual Report on Non-Compliance and Internal Control Weaknesses in Ministries, Departments and Agencies for the year ended December 31, 2022.
According to the detailed report, several branches of the CBN across Abuja, Lagos, Bauchi and Jos released banknotes officially categorised as “Counted Audited Dirty”—a classification reserved for notes already processed, confirmed unfit, and marked for destruction.
The Abuja branch alone accounted for N28.6bn of the re-issued notes between October and December 2022, while Lagos released N970m, Bauchi N30m, and Jos N150m across several dates in April and May of the same year.
The Auditor-General stated that the actions of the CBN branches were inconsistent with the regulatory standard which mandates that only authenticated fit notes may be issued into circulation.
Under the Clean Note Policy (Version 0.1, 2018), unfit notes must be withdrawn permanently from the system and destroyed through defined procedures including briquetting and shredding.
The re-circulation therefore represented a critical breakdown of the apex bank’s internal control and cash-processing procedures.
Regulatory Standards Ignored Despite Clear Guidelines
The report stressed that the mishandling of condemned banknotes posed serious consequences for the financial system, including reputational damage to the CBN, loss of public confidence in currency management, and reduced lifespan of notes in circulation.
Beyond those, the auditors warned that recirculating dirty notes could undermine the integrity of Nigeria’s cash-processing framework.
While the CBN attempted to defend the breach at different branch levels, the explanations were rejected as “not satisfactory.”
The Abuja branch attributed the release of unfit notes to disruptions caused by the COVID-19 pandemic, arguing that severe cash shortages at the time made it necessary to supply unfit banknotes to meet demand.
The Lagos branch blamed the surge in end-of-year cash withdrawals, while the Jos branch said its release of dirty notes was linked to military cash requests during heightened insecurity periods. The Bauchi branch denied issuing unfit notes altogether.
Despite these varied responses, the audit office concluded that none of the justifications aligned with the bank’s own cash-management protocols.
It insisted that the infractions would remain unresolved until the CBN implemented reforms to prevent further breaches.
Clean Note Policy Violations Coincided with Naira Redesign Crisis
The re-circulation of nearly N30bn in unfit currency occurred during a particularly turbulent period for the CBN.
In October 2022, the apex bank launched the controversial naira redesign policy which later contributed to an unprecedented nationwide cash scarcity.
The accelerated withdrawal of old notes, delays in distributing new currency, and policy inconsistencies triggered public frustration, economic disruptions, and eventually a Supreme Court ruling extending the validity of the old notes beyond the original deadline.
Sources within the banking sector told our correspondent, at the time that cash handlers observed an unusual influx of worn-out notes as customers struggled to access new currency.
Bank tellers and bulkroom operators expressed concern that the deteriorated notes could spread diseases, raising public health fears while highlighting gaps in the CBN’s quality-control processes.
The Auditor-General’s latest report reinforces those concerns, suggesting that the CBN’s chaotic cash-management environment during the redesign programme may have contributed to the decision to release condemned notes.
However, the report stops short of linking the breach directly to the redesign policy, instead focusing on institutional lapses within the apex bank.
Billions in Unfit Notes Still Undestroyed
Beyond the issue of re-circulation, the audit document also uncovered worrying delays in the destruction of condemned notes.
As of October 2023, 997 boxes of N10 notes valued at N99.7m and 695 boxes of N500 notes worth N3.475bn remained in the CBN vaults despite being classified as unfit since 2021 and 2022 respectively.
In total, N3.57bn worth of condemned currency had accumulated due to delayed briquetting.
The auditors warned that prolonged storage of condemned notes posed risks of pilferage, misappropriation, and further erosion of public funds.
Although the CBN claimed that destruction was ongoing, the Auditor-General maintained that the explanation lacked verifiable evidence and failed to address systemic weaknesses.
Accountability Demands Intensify
The report recommended that the Public Accounts Committees of the National Assembly summon the current CBN Governor to explain the breaches and the failure of internal systems.
Where such explanations are deemed insufficient, the Auditor-General advised that sanctions under Nigeria’s Financial Regulations be applied.
These sanctions include penalties for gross misconduct, dereliction of duty, and willful violation of established guidelines.
The findings intensify the scrutiny already surrounding the leadership period of former CBN Governor, Godwin Emefiele, who currently faces multiple corruption and abuse-of-office charges brought by the Economic and Financial Crimes Commission and the Office of the Attorney-General of the Federation.
Although the audit report does not indict him personally, it squarely places the responsibility for compliance breaches on the CBN management structure under his administration.
Emefiele is currently battling a 19-count fraud case in Lagos and an amended 20-count procurement-related case in Abuja, alongside other forex-allocation and official misconduct charges pending before federal courts.
The new revelations are expected to strengthen calls for a broader forensic review of the apex bank’s operations during his tenure.
Broader Implications for Nigeria’s Currency Management System
Analysts note that the recurrence of currency-handling failures reinforces the urgent need to modernise Nigeria’s cash-processing and distribution framework.
Experts have long urged the adoption of advanced currency-sorting technology, stronger audit trails, and improved transparency in the destruction of unfit notes.
The Auditor-General’s report serves as another reminder that robust governance, not merely policy announcements, is critical to safeguarding public trust in national financial institutions.
As Nigeria continues to navigate post-naira-redesign reforms under the Tinubu administration, the clarity and urgency of the audit’s findings may shape new legislative actions, stronger oversight mechanisms, and reforms in the CBN’s internal operations.
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