Mixed reactions as CBN limits cash withdrawals

By Seun Ibiyemi, Ogaga Ariemu and Matthew Denis

The Central Bank of Nigeria (CBN) has put a limit on cash withdrawal made by individuals and organisations with effect from January 9, 2023.

In a memo issued on Tuesday, signed by the Director of Banking Supervision, Haruna Mustafa, the apex bank directed all banks and other financial institutions to ensure that over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000, respectively, per week.

The decision is coming after the CBN began the distribution of its newly redesigned bank notes. The bank said redesigning the notes will help check inflation, counterfeiting and corruption.

In the new development, CBN directed that only N200 and lower denominations should be loaded into banks’ ATM machines.

“Further to the launch of the redesigned naira notes by the President of the Federal Republic of Nigeria on Wednesday, November 23, 2022, and in line with the cashless policy of the 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 percent and 10 percent, respectively.

“Third-party cheques above N50,000 shall not be eligible for payment over the counter, while extant limits of N10,000,000 on clearing cheques still subsist,” it read.

The bank also said the maximum cash withdrawal per week via ATM should 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,” it said.

“The maximum cash withdrawal via the point of sale terminal shall be N20,000 daily.”

The CBN said in compelling circumstances, not exceeding once a month, where cash withdrawals above the prescribed limits would be required for legitimate purposes, such cash withdrawals shall not exceed N5,000,000.00 and N10,000,000.00 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.

It also said banks were 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 Identity Card, International Passport, Drivers License.) b. Bank Verification Number of the payee. c. Notarised customer declaration of the purpose of the cash withdrawal. d. Senior management approval for the withdrawal by the Managing Director of the drawee, where applicable. e. Approval in writing by the MD/CEO of the bank authorising the withdrawal.

“Please further note the following: i. Monthly returns on cash withdrawal transactions above the specified limits should be rendered to the Banking Supervision Department. ii. Compliance with extant AMUCFT regulations relating to the KYC, ongoing customer due diligence and suspicious transaction reporting etc., is required in all circumstances. iii. Customers should be encouraged to use alternative channels (internet banking, mobile banking apps, USSD, cards/POS. eNaira, etc.) to conduct their banking transactions.”

It warned of severe sanctions against any bank caught aiding and abetting the circumvention of the policy.

In a Swift response, the Chief Executive Officer Centre for the Prootion of Private Enterprise (CPPE), Dr. Muda Yusuf said that “currency in circulation as at October 2022 was N3.3 trillion, out of which N2.8 trillion was outside the banking vaults.

“There is nothing abnormal about this. Currency in circulation is meant for cash transactions and it’s a mode of payment.

“It is a contradiction to expect currency to be largely kept in the vault of banks, rather than outside the banks.  Currency notes are printed primarily to facilitate payments in the economy by segments of the population that needs them. There is a difference between money supply and currency in circulation.

“Total money supply as at  October 2022 was N50.6 trillion.  Total currency in the economy was just N3.3 trillion, which is a mere 6.5 per cent of money supply. Currency outside banks as a percentage of total money supply is even less- 5.5 per cent. Currency as a percentage of GDP is a mere 1.8 per cent. Even in the advanced economies, the percentages are much higher.

“The implication is that the Nigeria economy is already substantially cash-less. It is therefore quite curious that so much energy and resources are being dissipated in this direction.

“The claim by CBN that there is too much cash outside the banking system is therefore erroneous. Currency as a percentage of GDP in Nigeria is 1.8 per cent, whereas in the United States it is about 10 per cent. We are more cash-less than many advanced economies.”

Implication of the directive on cash withdrawal

“It will negatively impact on the informal sector of the economy. The informal sector is a significant part of the economy accounting for over 80 per cent of trade and commerce in the Nigeria economy and substantial components of jobs in the economy.

“Many of them are in very remote locations where there are no bank branches.  And they transact business largely in cash. The distributive trade accounted for N23.3 trillion of the country’s GDP in 2021.

“This was about 15 per cent of GDP.  This restrictive policy will pose a major risk to this very critical sector of the economy.

“There is also the risk that this policy would negate the financial inclusion objective of the CBN.  Some of the informal sector operators may begin to avoid the banking system entirely.

“This could also be an infringement on the fundamental rights of the unbanked Nigerians. The CBN needs to think through this policy properly to avoid creating more problems than it sets out to solve.”

Also responding to the Executive Director of Nigerian Workforce Strategy and Enlightenment Centre (NIWOSEC), Dr David Kayode Ehindero said, “The decision of the CBN is a welcome development which will help to keep track of all the cash transactions in our economy.

According to him, “There are too many unexplainable wealth in Nigeria therefore we need to stabilise our financial system.”

He said, “Illicit funds will be easily discovered and payments for ransom and other criminalities will be reduced. The level of corrupt activities going on in our MDAs will be brought to bearest levels.

“You can’t believe that MDAs still operate cash transactions despite GIFMIS and other cubbing system. Go to offices of Ministers and Chief Executives of Government agencies, you will see safe and strong rooms to keep cash.

“If this Government had started this policies long before now, we would have put Nigeria in the right track. My only concern is the Rural populace, how are they going to be properly carried along in the scheme. They don’t have trust in our Banking systems, most of them are use to cash transactions. Buhari is waking up.”

A don of Accounting and Financial Development at Lead City University, Ibadan, Prof Godwin Oyedokun, urged the federal government to hand incentives to southern states.

“If I say I don’t expect this, I will be deceiving myself, but the magnitude of the cash contraction is shocking. I didn’t expect it that this low in terms of volume. If you ask me, it is not targeted towards the poor; nobody should blackmail this initiative because of their self interest.

“Some will say, what about people in the rural areas? I give it you that if you go to this so called rural areas, you won’t see anyone without a phone no matter the quality. In this rural areas, some have more than one phone. When we say poverty level, we are talking about the fact that people can’t have their basic needs. It pressupposes that they don’t have capacity to have cash to that magnitude. The set of people this policy will affect are those charged with governance in this country, they are the ones with a lot of money to toil with.

“The policy will reduce the volume of money in circulation and the capacity for the rich to spend anyhow.”

An economic expert, Dr Boniface Chizea said, “A circular issued by CBN Director of  Banking supervision has limited drastically Cash transactions within the economy. 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.

“With effect from January 09, 2023 individuals are restricted to maximum daily withdrawal of 20,000 Naira with a cap of 100,000 Naira a week while organisations are restricted to a maximum Cash withdrawals of 500,000 Naira percent. We must note that in case of justifiable needs these limits could be breached by the payment of 10 per cent of the amount in excess for corporate bodies while Individuals will pay a processing fee of the equivalent of 5 per cent.

“The challenge really will be how these change in policy would affect the underbanked; particular those in outlying areas of the country because most of such folks have not been included and mainstreamed into the financial sector.

“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 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 realised.

“There is the need to pay attention so that network issues will be minimised. Often these days as you use your debit cards the sing 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 expects that as we fully adopt the 5G network that definitive improvement in service experience will be the result.

“There is no doubt that these measures would push further down the road the desire to make the Nigerian economy truly cashless and to that extent impact on the effectiveness of CBN many policy thrusts. It should deal a heavy blow on criminality particularly the payment 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 address  for better productive engagements.

“We expect also that as cash is drained from the economy that 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 engage in POS transactions that might be also affected. And therefore there will be the inevitable needs for adjustments and repositioning.

“But a word of caution; the enemy is in effective implementation. Therefore to say the obvious; the CBN has its job cut out and must be intentional about effective implementation,” he said.