In less than one month from today, Nigerians will no longer enjoy the luxury of carrying cash and spending it the way they are used to. This is because the Central Bank of Nigeria has declared war against dealing in cash in excess of N100, 000 per week for individuals and N500, 000 for corporate bodies. According to the apex bank, it is time for Nigerians to fully embrace its cashless policy but the people on the other hand are not comfortable with the position of the CBN. The legislative arm of government at the national level as well as some financial experts have argued that these are not the best of times for the policy to fly but some other stakeholders are of the opinion that the benefits of the policy exceeds the ills in it. BAMIDELE FAMOOFO writes.
In a bid to further digitalise the economy of Africa’s most populous nation, the CBN, after redesigning some of the existing currencies in circulation, has also placed restrictions on the amount of cash that can be withdrawn from banks and other financial institutions come January 9, 2023.
The cash restriction policy otherwise known as cashless policy is being planned to take advantage of the currency redesign policy to take full implementation. According to the Governor of CBN, Godwin Emefiele, the cashless policy which was introduced by the bank some 10 years ago, is now ready to be fully implemented.
Emefiele argued that the necessary infrastructure to run the cashless policy has been put in place, noting that a lot of electronic payment systems have been put in place to allow the policy to fly in the last 10 years.
He hinted that the CBN has so far licensed about 1.4 million super agents to drive financial inclusion in the country.
(Super Agents are companies licensed by the CBN to recruit agents for the purpose of agency banking i.e provision of financial services within communities on behalf of banks.)
He argued that Nigeria as the largest economy in Africa needs to leapfrog into a cashless economy, noting that countries around the world who have digitalized their economies have gone cashless.
“We cannot continue to allow a situation where over 85 percent of cash in circulation is outside the banks,” he lamented.
To ensure that the policy of depending on electronic means to settle business transactions begin to take its root in the country, the CBN, last week, issued a directive to all deposit money banks and other financial institutions to begin to limit the volume of cash made available to their customers.
“While some are saying the timing was wrong, others are of the opinion that it should not be a priority for the nation now, arguing that there are more pressing challenges in the economy for the CBN to tackle at the moment”
Director of Banking Supervision Department at CBN, Haruna Mustafa, in a circular stated: “Further to the launch of the redesigned Naira notes by President Muhammadu Buhari on Wednesday, November 23, 2022, and in line with the cashless policy of CBN, all deposit money banks and other financial institutions are hereby directed to note and comply with the following: the maximum cash withdrawal over the counter by individuals and corporate organisations per week shall henceforth be N100,000 and N500,000 respectively.
“Withdrawals above these limits shall attract processing fees of 5.0 percent and 10 percent, respectively; third-party cheques above N50, 000 shall not be eligible for payment over the counter, while extant limits of N10 million on clearing cheques still subsist; the maximum cash withdrawal per week via Automated Teller Machine shall be N100, 000 subject to a maximum of N20,000 cash withdrawal per day,” stated the CBN circular.
Mustafa also said: “Only denominations of N200 and below shall be loaded into the ATMs; the maximum cash withdrawal via the point of sales terminals shall be N20, 000 daily.
“In compelling circumstances, not exceeding once a month, where cash withdrawals above the prescribed limits are required for legitimate purposes, such cash withdrawals shall not exceed N5 million and N10 million for individuals and corporate organisations, respectively, and shall be subject to the referenced processing fees in (1) above, in addition to enhanced due diligence and further information requirements. “Further to (6) above, you are required to obtain the following information at the minimum and upload the same on the CBN portal created for the purpose.”
Stakeholders kick
Despite assurances from the CBN that the policy to make the economy cashless was designed for the best interest of the Nigerian people and that it was not targeted at any persons or group of persons, certain stakeholders in the economy have disagreed with the apex bank.
While some are saying the timing was wrong, others are of the opinion that it should not be a priority for the nation now, arguing that there are more pressing challenges in the economy for the CBN to tackle at the moment.
For instance, Kola Ayeye, a former banker and economist, says the recent cash withdrawal policy is not a bad policy but insists that it is not Nigeria’s biggest problem at the moment.
Ayeye who made his views known on a television programme, said he understands that the CBN wants to reduce reliance on cash and wants to accelerate the digitisation of the economy but maintained that the apex bank should not be investing a lot of energy trying to control cash at the moment.
“I think coming shortly after the naira redesign policy it sends a signal to want to reduce reliance on cash and wants to accelerate the digitisation of the economy, so my view about the policy is that in itself I don’t think it’s bad, if individuals can withdraw N100, 000 a week it means they can withdraw N400, 000 a month.
“In terms of the policy itself maybe there isn’t a problem with it per se, my concern is the focus, do we need to invest as much energy as we are doing in controlling cash? Is that our biggest problem now?
Noting that all of these efforts on cash are six per cent of the money supply, Ayeye argued that even if the CBN achieves all its objectives that it is dealing with only six per cent of the supply, it may not be enough to move Nigeria from its current troubles to where it should be.
The economist said that rather than waste energy on controlling cash, the CBN should rather be engaging its attention in trying to pay the debts the current government has accumulated which he said is almost half of the total money supply of the country.
Similarly, Olisa Metuh, a former National Publicity Secretary of the People’s Democratic Party condemned the new cashless policy of the CBN as being “counter-productive to petty trading”.
He also advised the CBN “to mitigate these measures with a freeze on withdrawal charges by banks and introduce policies to ensure that transfers and transactions are not impeded by network problems”.
“The recently released circular on new cashless policy by the CBN is counter-productive and an inconvenience to poor Nigerians,” Metuh said in a statement.
“It is inconceivable that in an economy bedeviled with random and multiple bank charges, the nation’s Central Bank will decide to inflict the lowest level of citizens with a mandatory acquisition of Point of Sales (POS) machines. This exposes the poor to multiple deductions by banks and may be an opportunity to fleece the people.
“How do you expect Nigerians to patronise the banana and fruit sellers? Should we stop buying from petty traders because of network delays in effecting transactions? What of the attendant ceaseless and multiple deductions from the accounts of these petty traders? What of the security scare of waiting to confirm payments by the roadside?
“Is this a good time to effect a sudden, immediate and almost total cashless policy in our economy?
“We have witnessed cash transactions even in developed economies of the world. There is no thriving economy where people are restricted from withdrawing less than $30 in a day and $120 in a week. This new directive by the CBN is as draconian as it is counter-productive to self-employment at the lowest cadre.
“Finally, I call on the CBN to mitigate these measures with a freeze on withdrawal charges by banks and introduce policies to ensure that transfers and transactions are not impeded by network problems. Otherwise the policy will be reminiscent of Idi Amin’s order to print more money in the old Uganda. The CBN should not allow the lives of very poor Nigerians to be frustrated to such an extent as openly embracing crime as an alternative to mean policies of the government.
“At times like this, we all expect our elected and appointed representatives to defend the interest of the ordinary people.
“A society that does not care for the poor will eventually witness anarchy and violent revolt.”
“The policy is intended to cause discomfort, to move you from cash to cashless because they (the CBN) have said they want to make it uncomfortable and expensive for you to hold cash,” economic analyst Kalu Aja said.
“That is a positive for the CBN, because the more discomfort they are able to achieve, the more people can move,” Aja said.
Through the withdrawal limits, the CBN is “directly attacking” such agency banking services and “people will essentially begin to hoard their money,” said Tunde Ajileye, a partner at Lagos–based SBM Intelligence firm.
“It is not going to drive people to start to try doing electronic transactions. On the contrary, it is going to move people away from financial institutions,” he said.
In his reaction to the policy, President of the Nigerian Senate, Ahmad Lawan, is of the opinion that the policy will destabilise the economy as he claimed many Nigerians will be affected.
He however noted that there is a need to engage the CBN in discussions to get more details of the policy and he directed the committee on banking to discuss the matter during the screening of the CBN Deputy Governors expected to hold soonest.
Also in its reaction, the Association of Mobile Money and Bank Agents in Nigeria has kicked against the CBN’s cash-dispensing policy.
The Association stated that the directive would not work, as it protested that it would dampen business for mobile banking agents in the economy.
Olojo Victor, President of AMMBAN, during an interview argued that the policy will send people out of business.
“We are against this. It is counter-productive,” he said.
“This does not represent what the CBN initially stood for in terms of financial inclusion. This is not driving us forward,” he argued.
Arguing further, Olojo said: “Cash still remains king whether we like it or not. Go to the average market we still have more cash transactions than PoS and suddenly you want to seal cash without bringing alternatives and education and sensitising Nigerians on how the alternatives work.
This will not fly. It is not suitable. It is a good idea but not at the right time.”
The Chief Executive Officer, BIC Consulting, Boniface Chizea, was not surprised about the implementation of the policy by the CBN at this time but he is worried about the readiness of the bank to monitor its implementation.
Chizea is equally worried about how the CBN will cater for the needs of the rural dwellers, arguing that most people in the rural communities are yet to be dragged into the formal financial system.
His words: “As a matter of fact what has just been announced has been on the cards since the commencement of the CBN cashless policy. One already expected that CBN would not allow the opportunity of the currency change to go by without the bank taking maximum advantage to push the cashless policy.”
“As it becomes increasingly difficult to find cash and as the awareness gains ground some bad individuals among us might be forced to change addresses for better productive engagements”
Challenges identified
Chizea believes one of the biggest challenges the cashless policy will face is the ability of the CBN to drag rural dwellers into the net of financial inclusion.
“The challenge really will be how these changes in policy would affect the under banked; particularly those in outlying areas of the country because most of such folks have not been included and mainstreamed into the financial sector.”
He noted that there will be the urgent need for the Central Bank to embark on aggressive, urgent enlightenment particularly as most of such compatriots might not have the luxury of the use of alternative transactions channels.
“What leaves one wondering is how CBN will be able to implement effective monitoring schemes which will be largely automated and electronic. For the restrictions not to be observed in the breach this is one area we can envisage some challenges as this is implemented. Of course it is axiomatic to note that without enforcement that the laudable objectives of this policy will not be realized,” he said.
He also called on the CBN on the need to pay attention to network issues to minimize it.
“Often these days as you use your debit cards the song of “Declined” could be frustrating. This is the logic behind the maintenance of many bank accounts and holding of several debit cards by bank customers. One expected that as we fully adopt the 5G network that definitive improvement in service experience will be the result.”
Benefits
Chizea is of the opinion that the cashless policy will deal a heavy blow on criminality, particularly the payments of ransom.
“As it becomes increasingly difficult to find cash and as the awareness gains ground some bad individuals among us might be forced to change addresses for better productive engagements,” he argued.
Also, he said that it is expected that as cash is drained from the economy that might reduce demand pressure for dollars thereby impacting positively the exchange rates of the Naira.
“There is no doubt that there will be collateral negative consequences for those who deal largely in cash. Collections at churches and other prayer places where cash is the medium will be impacted negatively. There are many compatriots who engage in POS transactions that might also be affected. And therefore there will be the inevitable need for adjustments and repositioning.”
Warning
There is however a word of caution for the CBN as the enemy of implementing the cashless policy is lack of effective implementation.
“Therefore to say the obvious; the CBN has its job cut out and must be intentional about effective implementation,” Chizea disclosed.
