ON December 6, 2022, the Central Bank of Nigeria (CBN) ordered all Deposit Money Banks (DMBs) and Other Financial Institutions (OFIs) to implement a set of measures that will limit the volume of cash individuals and businesses can withdraw from January 9, 2023.
This CBN order was in continuation of an already existing 2012 cashless policy and an addendum to a new policy to redesign some denominations of the Naira. As expected, every new policy or change must come up against resistance from those who stand to lose if the old way is disrupted; or those ignorant of what the new policy is all about.
Of course, the December 6 cash withdrawal limit decision was taken to serve two major purposes first to bolster and entrench the cashless policy and also for the country not to run afoul of the international Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) laws which had dire consequences for Nigeria’s financial system.
Some of the controversial issues from the cash withdrawal limit order are that from 9th January, 2023 “the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week shall be N100,000 and N500,000 respectively. Withdrawals above these limits shall attract processing fees of 5 percent and 10 percent, respectively. The maximum cash withdrawal per week via Automated Teller Machine (ATM) shall be N100,000 subject to a maximum of N20,000 cash withdrawal per day. Only denominations of N200 and below shall be loaded into the ATMs. The maximum cash withdrawal via point of sale (PoS) terminal shall be N20,000 daily.”
Where a bank customer has compelling reasons to require more cash than is stipulated by the order, “such cash withdrawals shall not exceed N5,000,000.00 and N10,000,000.00 for individuals and corporate organisations” and can only be performed once a month, and shall be subject to the referenced processing fees of 5 or 10 percent as the case maybe.
Bank customers desiring to make cash withdrawals above the stipulated limits will be required “to obtain the following information at the minimum and upload same on the CBN portal created for the purpose: valid means of identification of the payee (National ID, International Passport, Driver’s License); bank verification Number (BVN) of the payee; notarised customer declaration of the purpose for the cash withdrawal; senior management approval for the withdrawal by the Managing Director of the drawee, where applicable and approval in writing by the MD/CEO of the bank authorising the withdrawal. Banks have been instructed to encourage their customers to “use alternative channels (internet banking, mobile banking apps, USSD, cards/POS, eNaira, etc.) to conduct their banking transactions.
This is where the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) measures comes in. The now demands that “monthly returns on cash withdrawal transactions above the specified limits should be rendered to the Banking Supervision Department. Compliance with extant AML/CFT regulations relating to Know Your Customer (KYC), ongoing Customer due diligence and suspicious transaction reporting etc. is required in all circumstances.”
International dimensions of cash withdrawal limits
According to the World Bank, “Money laundering and the financing of terrorism can damage national financial systems. Illegitimate financial holdings, assets, and enterprises are considered unreliable sources of investment capital for sustainable economic development. Money laundering, destabilises national economies by increasing the demand for cash, increasing the volatility of interest and exchange rates, and even contributing to higher inflation.
“Developing economies like Nigeria are struggling to become reputable members of the global payments network in order to increase their ability to access capital flows, and consequently are doing all they can to conform to international codes to combat abuse of this system. Countries with weak enforcement of AML/CFT controls could damage their reputations in international financial markets, and may not attract international flows such as foreign direct investment and/or donor funding.
“Countries therefore have a public policy interest in making sure that their AML/CFT regime is comprehensive and appropriately includes financial service providers working with low-income clients. Likewise, these institutions have an interest in protecting themselves from the adverse effects of being involved, or even the perception of being involved, in money laundering and the financing of terrorism.”
Opposition to cash withdrawal limit
The moment the announcement on cash withdrawal limit was made, the political class has been up in arms against the policy. Adamawa State, governor, Ahmadu Fintiri has accused the Central Bank Governor, Godwin Emefiele, of targeting the political class with the cash withdrawal limit policy. Governor Fintiri said the policy could only have been retaliatory towards politicians was likely to worsen poverty among the citizens.
According to Fintiri, “what is breeding poverty? Economic policies. Look at the one that is about to be implemented by the Central Bank which would further throw the country into poverty. Nobody is saying the economy shouldn’t be cashless. Take time and do it systematically. We shouldn’t do it as if some people wanted to be politicians and they were denied the opportunity, then they use their office to punish the politicians.”
Fintiri cautioned against such policies and tasked holders of key national institutions to act in the overall national interest.
Another politician Senator Philip Aduda (PDP FCT) moved a motion on the cash withdrawal limit development. Aduda had sought to rally other senators to deliberate on the policy but the Senate President Ahmed Lawan, interrupted him, saying it was too early to debate the decision.
Also, Senator Gabriel Suswam (PDP Benue North-East) while supporting Aduda’s stance, pushed that the motion should be allowed to fly “considering the innocent Nigerians that would be affected by the CBN policy.
Addressing Lawan, he said, “I think you should have allowed us to discuss this motion for the sake of Nigerians.”
However, the CBN through the Director Corporate Communications Mr Osita Nwanisiobi said “Nigerians must not think this policy is targeted at anybody. It is for the good of the country. At CBN, we are bankers and not politicians and don’t take decisions based on elections.”
Expatiating, he said, “Members of the public have also cried out that the policy would make kidnappers and bandits more vicious towards their victims. There are concerns that those in captivity may be murdered by their abductors if/when they are unable to collect the ransom they demanded. The overall objective of the Naira redesign and the cash withdrawal limit policies towards kidnapping and banditry is to starve these criminals of funds thus discouraging them from continuing with the dastardly venture.”
As more people take to alternative channels of banking especially electronic, there will be increase in the number of fraud cases.
A new report has revealed that fraud attempts in Africa have increased by 50% in the last two years. The report published by popular KYC service; Smile Identity found that the first half of 2022 alone saw a 30% increase over 2021.
“In 2020, 17% of all Smile Identity KYC checks were flagged as attempted fraud, and in the first half of 2022, this number increased to 26%. For the foreseeable future, as businesses adapt to the new virtual reality, we expect to see more and new types of fraud emerge increasingly,” the report stated.
As for the sectors experiencing fraud, the report found that Buy Now Pay Later (BNPL) platforms have become the leading target, while crypto was the least affected despite the sector’s attention.
Mr. Abiodun Taiwo a building contractor said the policy would make life difficult for many Nigerians given the poor state of internet connectivity in the country.
According to him, “Twice last week, I attempted to pay for services and goods with my ATM card but despite the decline given by the POS machine, I was debited by my bank. I was later asked to go to my bank to resolve it. If the deducted money was all I had in my account, how would I have coped? How can the CBN impose a limit to cash withdrawal without taking care of all these hitches? It is akin to subjecting Nigerians to unnecessary hardship.”
A woman who deals in farm produce, Mrs Fatimo Alao, wondered how she would pay farmers for their produce without having cash.
She said, “This business is cash and carry. Usually, we go to farms to buy from farmers every other day. Oftentimes, we buy items worth over N100,000 from the farmers. How are we going to pay when we cannot access more than N20,000 per day. We can’t stop the government from rolling out their policies but they should also bear in mind the fact that Nigeria goes beyond the major cities such as Lagos, Abuja and Ibadan. There are many villages without electricity, internet and even banks, how will the residents survive without cash?”
Support for cash withdrawal limit
Former CBN Sanusi Lamido Sanusi has given his support to the policy. Sanusi advised Nigerians, especially the poor, not to be deceived by the narratives of politicians who are only interested in whipping up sentiment to gain sympathy from the masses they have impoverished.
On her part, the Deputy Governor Financial System Stability (FSS) of the CBN Mrs. Aisha Ahmad when she appeared before the senate for reconfirmation screening said “Nigerians have continued to embrace the cashless policy by using electronic channels for their transactions, whilst the Nigerian payments system and telecommunications infrastructure continued to develop.”
Ahmad said, “Under the CBN’s Shared Agent Network Expansion Facilities (SANEF) initiative, agent network have grown to 1.4m agents with agents available in every local government in Nigeria. “While the growth in the network was not even, there was representation in every state.”
She added that in furtherance of its mandate to develop an efficient payments system, the CBN had continued to license more financial institutions including allowing the telecommunication firms to participate in financial services through the Payment Service Bank license, recognising their extensive technology platforms and wide agent network.
The CBN Deputy Governor reiterated the various options open to Nigerians to perform financial transactions including mobile money, USSD, Internet banking, mobile apps, e naira, agents and mobile POS, among others.
She said, “All of these would ensure that Nigerians would seamlessly adapt to the cashless policy to enable financial inclusion and economic growth.”
She told the committee that indeed the cashless policy had been amended in the past in response to feedback from stakeholders and that the January 9, 2023 date was set to enable such engagement and feedback be held.
Mr. Gbolade Idakolo, Managing Director/CEO SD&D Capital Management Limited told The Nation that, “the measure will also boost the value of the Naira when there is less of N500 and N1000 naira notes in circulation as it is being done with the US dollars, Euro and Pounds Sterling.
This policy implementation will go a long way to increase the use of other means of transactions like the internet banking, USSD, ATMs and POS to boost the cashless policy of the CBN.
“We know that our economy has been a cash economy for a long time so these measures will initially cause disruptions in the economy but things will settle on the long run and the economy will be better for it.”
Professor Uwaleke of Nasarawa state University noted that, “it goes without saying that cash withdrawal limit is an integral part of currency redesign meant to reduce the amount of currency circulating outside the banking system.
It now behooves the CBN to ensure that Bank charges on money transfers and other related charges are reduced to the barest minimum.
Dr. Boniface Chizea Chief Executive Officer (CEO) of BIC Consultancy Services and one time contributor to CBN’s Quality Assurance FSS 2020 project said “many people want the cashless policy as announced reversed particularly politicians.
“You cannot have growth if all the liquidity in your economy is outside the banking system. Such a situation will make monetary policies ab initio ineffective. Therefore in the interest of the massive numbers of the unemployed in our country the imperatives of cashless policy couldn’t have been more urgent.”
He added that “there is also some concerns with regards to the costs of the sustenance of a cash based economy. The costs of withdrawals of dirty notes and reprinting could be substantial. Which explains why the CBN introduced the Clean notes policy programme.
“There was also the problem of counterfeiting by unscrupulous elements amongst us as this culture of a cash based economy persists. On the part of the individual Nigeria excessive possession of cash exposed one to robbery and theft and therefore avoidable losses. But an overall consideration is that as we aspire to join the league of the first World countries, our overriding situation must also be consistent and mimic theirs. There is no developed country anywhere that has a cash based economy even Italy with its formal sector that compares favourably with that of Nigeria does not have such amount of cash in circulation outside the banking system.”
Impact on monetary policy
The CBN believes the cash withdrawal limit policy will enhance efficacy of the monetary policy decisions and makes interventions more Impactful. Haruna Mustafa Director Banking Supervision stated that “as we edge closer to the cut-over date, we expect that the volume of cash deposit will go up significantly. Our objective of mopping up all that excess cash outside the banking system will be met. When more deposits come in, that will translate to more cash reserve that will be charged against banks.”