Did Central Bank of Kenya (CBK) violate the Constitution in including the statue of founding president Jomo Kenyatta on the new generation bank notes?
The answer to this question, and its effect, is at the heart of a case filed by activist Okiya Omtatah and whose verdict is expected from the High Court on September 27.
The ruling will come only days to the expiry of the CBK deadline of September 30th for return of the old Ksh1,000 bank notes that are set to be withdrawn from circulation.
Chief Justice David Maraga appointed judges George Kanyi Kimondo, Anthony Charo Murima and Lady Justice Asenath Nyaboke Ongeri to handle the case.
Mr Omtatah accused the Central Bank of Kenya and its governor Patrick Njoroge of violating Article 231 (4) of the Constitution that prohibits the use of individual portraits in currency notes and coins.
He also argued that the designs of the new generation currency note and coins were not subjected to public participation in line with the requirements of the Kenyan Constitution.
“Notes and coins issued by the Central Bank of Kenya may bear images that depict or symbolise Kenya or an aspect of Kenya but shall not bear the portrait of any individual,” states the Constitution.
According to Mr Omtatah, the Legal Notices used by CBK to legalise the issuance of new generation bank notes — No. 235 of December 7, 2018, No. 72 of May 31, 2019, and the Kenya Gazette Notice No. 4849 of May 31, 2019—are invalid, null and void because they were issued in violation of the Constitution and statutes without being tabled in parliament for scrutiny and approval.
On June 1, Central bank announced that it was withdrawing Ksh1,000 ($10) notes from circulation effective October 1 to deal with counterfeits and money laundering.
Last week, the Kenya Bankers Association (KBA), the industry’s lobby, said no banks should now be dispensing the old Ksh1,000 notes because now it’s about receiving them and forwarding them to CBK,”
However, The EastAfrican has learnt that some lenders are still dispensing old Ksh1,000 notes through their automated teller machines (ATMs)
“No bank should be dispensing the old Ksh1,000 notes because now it’s about receiving them and forwarding them to CBK,” Habil Olaka, KBA’s chief executive told The EastAfrican.
“We are working to ensure come the deadline day banks have in processes to feed into CBK and submit details of exactly where they are in receiving the old currency and have it surrendered to CBK and exchanged for the new notes. I can’t tell exactly where we are now in terms of return rates, only CBK has the capability to have that data because they are the ones that keep track.”
However, some traders, particularly the retailers, are confused on how to deal with the old notes they expect to receive from sales during the last day of trading with them.
As a result, a number of supermarkets and eateries have started issuing notices to customers that they will not accept the old notes between September 26 and 29 — a day ahead of the CBK deadline for withdrawal.
In June, CBK released rules to guide replacement of the Ksh1,000 notes, which accounted for 83 per cent of the Ksh540 billion in circulation or Ksh217 billion.
The Ksh500 notes accounted for 5.9 per cent, Ksh200 (4.2 per cent), Ksh100 (4.8 per cent) and Ksh50 (1.9 per cent).
About 217.6 million pieces of Ksh1,000 were in circulation when CBK announced the demonetisation drive in June
According to CBK about 100 million pieces of the old Ksh1,000 note had been returned to the Central Bank of Kenya by end of August ahead of September 30 deadline, translating to about 50 per cent of old Ksh1,000 in circulation. This meant that members of the public have less than a month to return remaining 117 million pieces of old notes which will be obsolete come October 1.
CBK expected the return rate to increase as the deadline approached.
Mr Njoroge has warned the public that their old Ksh1,000 bank notes will be worthless by October 1 since this deadline will not be extended.
“Our mothers and grandmothers are epic savers. They may have some money around their homes,” he said on Twitter.
“I want you to take this message to every corner of the country that people have to dispose of their old Ksh1,000 bank notes by September 30. We shall not extend the period,” Mr Njoroge said.