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Insight & Analysis - November 5, 2021

Why do Countries Destroy Mutilated Money?

Nigeria Disposed Bank Notes of Up to N698,480.00 Million in 2020. But why?

It’ll interest you to know that most of the money created before 1990 are no longer in existence. These cash don’t just disappear, the governments of the world destroy mutilated or unfit money for several reasons. 

Here in Africa, the Nigerian government released a recent Annual Report 2020 disclosing that it disposed of up to N698,480.00 Million in 2020. The Central Bank of Nigeria deploys open-air burning as the major means of disposal for mutilated money. This practice is commonplace around the world. But why do governments destroy mutilated or unfit money?

Before we answer this question, we must consider that It is common practice for banks or individuals to take their mutilated currency to the central bank or agencies responsible for creating the notes, for an exchange. The minting agencies will validate the authenticity and issue a Treasury check in return. Usually, there are certain requirements that must be met before this exchange is performed. Let’s look at what’s obtainable in the United States.

  • A submission, or any portion thereof, demonstrates a pattern of intentional mutilation or an attempt to defraud the United States.  In such instances, the entire submission will be destroyed or retained as evidence.
  •  A submission appears to be part of, or intended to further, any criminal scheme.  In such instances, the entire submission will be destroyed or retained as evidence.
  •  A submission contains a material misrepresentation of facts.
  •  Fragments and remnants presented are not identifiable as United States currency.
  •  Fragments and remnants presented which represent 50% or less of a note are identifiable as United States currency but the method of destruction and supporting evidence does not satisfy the Treasury that the missing portion has been totally destroyed.

In 2019, The Central Bank of Nigeria made a call for Nigerians to return mutilated banknotes to their banks for exchange and ever since the country has continued in that vane. As bizarre as it may sound, burning or shredding the mutilated banknotes is necessary to prevent fraud or abuse of the currency. 

READ ALSO: eNaira: Why Nigerians May be Slow to Adopt the Digital Currency

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