AS a follow-up to its redesign of the N200, N500, and N1000 banknotes, the Central Bank of Nigeria (CBN) recently announced a new policy that mandates deposit money banks and other financial institutions to ensure that, on a weekly basis, over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000 respectively. In the same vein, weekly withdrawals through automated teller machines (ATMs) have been pegged at N20, 000 per day and a maximum of N100,000 per week for individuals. By the same token, daily withdrawals by individuals through point of sales terminals (POS) is N20,000. According to the CBN, the new N500 and N1000 banknotes will not be withdrawn through ATMs, as only N200 and below will be made available through the channel. Third-party cheques above N50,000 will not be processed over the counter by any bank, and the “extant limits of N10,000,000 on clearing cheques still subsist”.
Again, cash withdrawals above the stated limits will attract 5 percent and 10 percent processing fees, respectively. The bank however added a caveat: “In compelling circumstances, not exceeding once a month, where cash withdrawal above the prescribed limits is required for legitimate purposes, such cash withdrawals shall not exceed N5,000,000 and N10,000,000 for individuals and corporate organisations, respectively, and shall be subject to the referenced processing fees in (1) above, in addition to the enhanced due diligence and further information requirements.” The beneficiaries will be expected to provide a valid means of identification, Bank Verification Number (BVN), notarised declaration by the customer stating the reason for the excess cash withdrawal, and written approval by the Managing Directors for drawees withdrawing on behalf of companies. The revised cash withdrawal limits are expected to take effect on January 9, 2023.
Naturally, the policy has been received with mixed feelings, particularly as the dust over the bank’s naira redesign policy is yet to subside. Largely because a substantial number of Nigerians operate within the informal economy, critics have wondered how a cash limit of N20,000 per day will pan out when so many communities across the country do not even have any banks. Rejecting the policy, the Arewa Consultative Forum (ACF), in a statement by its Secretary General, Murtala Aliyu, acknowledged that cash-based economies are notoriously costly, inefficient and prone to attacks by evil people. It also posited that a huge amount of time and money is needed to print currency and a lot more still to steer it through; that currency notes have a shelf life after which they have to be replaced, and that, above all, “cash is the lifeblood of the underworld: difficult to trace and quite convenient for terrorists, money launderers, smugglers and vote buyers.” It however added that if the CBN went ahead with the policy, there would be a catastrophic collapse of the informal sector of the economy, especially given that transactions in commodity markets especially in the rural areas are entirely cash-based.
Indeed, the Association of Mobile Money and Bank Agents in Nigeria has expressed optimism that the CBN will revise the policy before 2023. In a petition dated December 16, the POS operators called on the CBN to review its policy and save 1.4 million bank agents from losing their means of livelihood. The association has however soft-pedaled on its position following the assurances given by the CBN and the National Assembly that POS operators would not be affected by the policy. All the same, it has indicated that its members would take to the streets to demand its reversal and also take the apex bank to court if a review is not forthcoming. But the CBN has been keen to stress that the policy will help in tackling electronic fraud (e-fraud), pointing out that as electronic payments continued to gain traction, fraudulent transactions this year reduced by 35 percent compared to last year. It believes that the policy will prevent criminals from defrauding innocent people because of the withdrawal limits which would automatically trace and block such compromised accounts before the money is illegally withdrawn.
Apparently, the essence of the CBN’s cash limits is to drive the cashless policy of the government. The policy will make it easier to track money. Cashless transactions within the economy make for easier monitoring and ease of evaluation of monetary policies and should therefore be supported. It is a no-brainer that if the CBN can control the money in circulation, it would be in a strong position to drive effective monetary policy. It is also true, as the bank itself has pointed out, that the policy can potentially aid efforts to address fraud and insecurity in the country. However, although the policy seems to be a good one, it is not without drawbacks. One major issue that Nigerians can apparently not wrap their heads around is the issue of network problems. Electronic transactions, regardless of their increasing popularity, have been dogged by ineffectiveness for as long as Nigerians can remember. Many a time, Nigerians make transfers but cannot take away the goods they have paid for because the sellers are yet to receive alerts. The banks’ networks break down almost as a matter of routine. Another snag is that the policy contradicts the inclusiveness championed by the CBN. If POS operators cannot withdraw more than N20,000, how will they survive?
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Yet, it has to be said that such a laudable goal should not be arbitrarily imposed on the society. That would make it counter-productive instead of being promotive of good order, progress and development in the final analysis. And this is essentially because the whole essence of working for a cashless economy is to make it more formal and therefore more susceptible to the positive policy orientations from the government given the continuing reality and presence of a huge informal sector of the economy. In actuality, the informal sector operates the way it does because of its functionality to those it serves, so the government should not be seeking to coerce them into formality as if being informal is illegal and against the norm. Rather, it should be co-opting those within the informal sector with the advantages inherent in formal economic interactions even while making the processes of uptaking easy for them. The way the government is going about things now gives the impression that holding cash is a crime. That is a big disservice, because it actually should be helping more people to see the advantage in not holding cash.
It is not surprising that an economy reputed to have almost half of its transactions within the informal sector would have problems with the cashless turn, even if the cashless policy has been on for some time. We urge the government to revisit the policy and tweak it slightly, with a view to ensuring that it does not impose unnecessary burden on hapless Nigerians who survive through cash in the informal sector of the economy. In this regard, the CBN should keep enlightening Nigerians on the inherent benefits of cashlessness.