CBN’s Cash Policy: The road to a cashless economy?

Like a thunderbolt, the Central Bank of Nigeria (CBN) has hit the banks and the Nigerian polity with an ‘extension’ of the Naira redesign policy that drastically limits the quantum of cash that could be withdrawn from banks by individuals and corporate entities per time. In a “Letter to all deposit money banks (DMBs) and other financial institutions (payment service providers (PSPs), primary mortgage banks (PMBs) and microfinance banks (MFBs)” on Tuesday, December 6, 2022, the apex bank issued what it termed, “Naira redesign policy—revised cash withdrawal limits.” In the letter signed by the Director of Banking Supervision, the CBN says the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week shall henceforth be N100,000 and N500,000 respectively; adding that withdrawals above these limits shall attract processing fees of five percent and ten percent respectively.

Furthermore, the apex bank stipulated among others that 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. It also says only denominations of N200 and below shall be loaded into the ATMs, while maximum cash withdrawal via point of sale (POS) terminal shall be N20,000 daily. These regulatory directives, according to the apex bank, would come into effect on January 9, 2023. The CBN said these directives were  further to the launch of the redesigned naira notes by President Muhammadu Buhari on Wednesday, November 23, 2022, and in line with its cashless policy — an initiative that had its pilot run ten years ago (2012) in Lagos.

There is no doubt that part of the core challenges of the Nigerian economy has always been so much dependence on cash transactions; a situation that gives much room for theft, burglary, currency counterfeiting, money laundering, armed robbery, bribery and sundry corrupt practices. But like the Naira redesigning initiative, the latest cash management policy is drawing the ire and wrath of not a few stakeholders in the polity. Indeed, the highest legislative house in the land—the Senate—is determined to ‘shoot down’ the latest policy. At its plenary session on Wednesday, December 7, 2022, the Senate’s minority leader called for caution on the cash withdrawal limits, saying the policy would hurt the economy. Another senator and former governor of Benue State, Gabriel Suswam, asked that the Senate should debate the matter “immediately”, adding that “people are extremely worried”. On his part, President of the Senate, Ahmad Lawan said: “My personal opinion is: if we want to be a cashless society, we should take time to be [a] cashless society and not jump onto it at once. Most Nigerians will be out of business.”

Also, on their own part, the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) kicked against the CBN’s cash dispensing policy, saying “it will not fly” and warned that it would dampen business for mobile banking agents. According to the president of AMMBAN, Victor Olojo: “They want to send us out of business.” He said, “We are against this. It is counterproductive; it does not represent what the CBN initially stood for in terms of financial inclusion.” Also, president of Bank Customers Association of Nigeria (BCAN), Uju Ogubunka, while commending the CBN for the new initiative, noted that such a policy “cannot function in a country where most of its citizens are market women who cannot make use of electronic payment channels.”

From all indications, however, the apex bank has crossed the Rubicon, and is determined to pursue the Naira redesigning and the complementary policy of minimal cash transactions in the polity. It has, indeed, vowed to take all necessary steps to ensure that the country operates on a 100 percent cashless economy, at a time its e-Naira transactions have hit over N8 billion in its first year of operation. Speaking recently at the first-year anniversary of the e-Naira (the country’s Central Bank Digital Currency (CBDC)) in Lagos, the CBN governor, Godwin Emefiele, said the goal of the apex bank was to make Nigeria 100 percent cashless. He assured that all infrastructure that was needed to ensure this, such as the CBDC, online banking, Payment System Banks (PSBs), point of sale terminals (POS), agent banking, mobile banking and ATMs had since been deployed to ensure the smooth operations of a cashless economy.

Really, for over 12 years, the CBN has been having a bumpy ride in its efforts to make substantial progress with its financial inclusion and cashless economy initiatives. Specifically, with respect to the cashless economy, the pilot was run in Lagos State from January 2012, while the policy took effect in Rivers, Anambra, Abia, Kano and Ogun states and the Federal Capital Territory (FCT) on the 1st of July, 2013. The policy was implemented nationwide on July 1st, 2014. It, however, suffered several adjustments and poor implementation/monitoring along the way. Digital infrastructural challenges were some of the key hurdles all along. Indeed, it appeared like after the tenure of the former CBN governor, Sanusi Lamido, the policy went into total oblivion, until around 2017, when there was a renewed drive to implement the initiative: reintroducing ceilings, penalties, and charges across various locations of the country in phases.

A key pillar of the cashless economy policy has been the financial inclusion drive — aimed essentially at getting the banking culture (and spreading financial services) to the widest possible number of the Nigerian populace. In recent years, Nigeria has been acknowledged to have made visible progress in pushing financial services further into the hinterland. For instance, the World Bank in its report tagged: ‘The Global Findex Database 2021: Financial Inclusion, Digital Payments, and Resilience in Age of COVID-19’, counted Nigeria as one of the countries that recorded a double-digit financial inclusion rate of citizens in ten years to 2021. In real terms, financial inclusion in Nigeria rose by 16 percentage points to 45 percent in 2021, the Word Bank reported. That means from 30 percent, adults who owned accounts at regulated institutions like banks, microfinance institutions, or mobile money service providers, climbed to 45 percent. On its own part, however, the CBN claims that Nigeria has attained a 65 percent financial inclusion rate as at mid-2022; it has also set a target of 95 percent inclusion rate by 2024.

Against this backdrop, the current minimal cash withdrawal limits initiative and its adjunct policies are deliberately targeted at fast-tracking financial inclusion in Nigeria. By no means can the Naira redesigning and or the minimal cash withdrawal limits policy be the ‘silver bullet’ for the multifaceted socio-economic challenges confronting Nigeria at this point in time. However, barring (digital) infrastructural hurdles and other implementation challenges, the latest initiatives by the apex bank will, for sure, give Nigeria a quantum leap on the financial inclusion ladder. The CBN must, however, deploy all in its arsenal to ensure the widest and deepest public enlightenment, education and monitoring in pursuit of the desired objectives. Where necessary, possible adjustments and flexibility must be applied through appropriate stakeholder engagements. Certainly, there are no magic wands!

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