CBN cashless policy: Pain or gain?
By Idris Bakare
Today’s financial system is the product of centuries of innovation as Nigeria has come a long way in its financial inclusion pursuit.
From 2012, when the Central Bank of Nigeria (CBN) initiated the Nigerian Financial Inclusion Strategy, one of the advancements is a service which enables customers to withdraw cash via mobile money agents from their bank accounts without the use of an Automated Teller Machine (ATM) or card. This cardless cash withdrawal service utilises a secure gateway that protects customers against fraudulent transactions and requires validation using their bank PIN.
Before the introduction of the cashless policy by the CBN in 2011, the Nigerian economy was heavily cash-oriented in its transaction of goods and services contrary to the global trends.
However, the innovation and operations of the policy are not without its related limitations. There are various challenges associated with its practice, ranging from poor infrastructural facilities and difficulty in imbibing the e-payment culture due to illiteracy. Other socio-cultural factors that constitute an impediment include celebrations like weddings, birthdays and festivals among others. On such occasions, Nigerians prefer to ‘display or spray raw cash’ rather than issuing cheques.
The use of cash in carrying out transactions has remained relatively high in Nigeria, due to the poor network connections in the use of Point-Of-Sale (POS) and bank transfers which often results in debiting customers’ accounts more than once, high transaction charges by banks, as well as security and technical setbacks. These are some of the factors still posing challenges in crossing into a cashless society. The transition to a cashless economy raises a lot of concerns as it seems there is yet no substantial evidence to justify its implementation in Nigeria.
Recently, the CBN and commercial banks in Nigeria made a push to discourage reliance on cash for transactions by Nigerian for most of their transactions.
The CBN approved new limits on cash withdrawals at N100,000 and N500,000 for individuals and organisations respectively a week. Individuals are not to access more than N20,000 daily. The measure, coming after the bank announced the replacement of higher Naira notes, will begin to take effect from January 9, 2023.
However, cashless policy is an economic policy aimed at reducing the amount of produced currency in the economy; it involves more electronic-based payments. A cashless economy is an environment in which money is spent without being physically carried from one person to the other.
The cashless economy policy of the CBN has come with both pains and gains. As some are knocking it, others are hailing it.
Two weeks after the unveiling of the new policy on cash withdrawal limit by the CBN, operators in the nation’s financial system have launched into feverish negotiation, planning and strategy to ensure that the new policy which is bound to reduce customers’ traffic to banking halls does not affect their operations and balance sheets negatively.
The new withdrawal limit was approved after the CBN began the distribution of its newly redesigned bank notes, which it said would help check inflation, counterfeiting and corruption.
The directive on the new cash withdrawal limits was contained in the CBN letter dated December 6, 2022, which was addressed to all Deposit Money Banks, and other Financial Institutions, Payment Service Bank (PSBs), Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs).
The new policy followed the apex bank’s recent currency redesign project in which it had expressed concerns over the high volume of cash outside the banking system.
The CBN restricted the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week to N100,000 and N500,000 respectively, starting from January 9, which is the second Monday of 2023.
It stated, however, that withdrawals above the thresholds would attract processing fees of five and 10 per cent respectively for individuals and corporate entities going forward.
In addition, third-party cheques above N50,000 shall not be eligible for OTC payment while extant limits of N10 million on clearing cheques remain.
The new withdrawal regime further pegged the maximum cash withdrawal per week via Automated Teller Machine (ATM) at N100,000 subject to a maximum of N20,000 cash withdrawal per day. Many Nigerians considered this policy as not good enough, as these extra charges are seen as a means of extortion. However, many individual costumers might need more than N500,000 in a day for one purpose or the other because the citizens are already used to the system of going about with cash and this has been considered as one of the pains of the cashless policy.
It is also obvious that the financial infrastructure in Nigeria is grossly inadequate to meet the demands of a cashless society. Besides, the people’s low literacy level and the absence of constant power supply would discourage most citizens from embracing the policy and Nigerians had been variously defrauded of millions of Naira through electronic transactions.
It is also important to note that most communities in the country lack banking facilities that were designed to implement the policy. However, despite all the advantages of the cashless policy including the fact that it will save cost of printing currency notes, reduce theft and robbery etc. It is worth considering if the CBN cashless policy is a pain or a gain.
Reacting, the Executive Director of Nigerian Workforce Strategy and Enlightenment Centre NIWOSEC, Dr David Kayode Ehindero said that the condition given by the apex bank is not sustainable as more business owners withdraw and conduct transactions in millions.
According to him, the policy will have negative impact on business across the country considering the fact that business have grown beyond the stipulated amount by CBN on individuals and corporate organizations.
He stressed that limiting POS transactions to N20,000 will put them out of business. Hence, they have to return to their villages.
Dr. Enhindero emphasized that it would be really tough as Nigeria is still a cash-dominant society.
He said, “Nigerians should brace up, as this is a challenge that CBN is putting out to Nigerians to embrace technology. However, the difficulty would be felt as we still have a lot of transactions done with cash, especially those that are below the pyramid such as the market women and men who are petty traders, because this in essence means that once a bag of rice or flour is to be bought, which is above N20,000, it has to be via e-banking. Looking at it, how many of these people are technology-savvy?”
He equally lamented that most market women in the communities are even yet to be aware of the cashless policy not to talk of having accounts.
“What we expect from the apex bank is to ensure effective service and enlightenment to the market women for them to embrace the policies not enforcement at this critical moment.”
