NIGERIA: CBN limits cash withdrawal to N100,000 weekly

A SWEEPING new currency management policy announced yesterday by the Central Bank of Nigeria (CBN) has put a cap on cash withdrawals by individuals and corporate bodies.

Beginning from January 9, individuals and companies will only be able to withdraw a maximum of N100, 000 and N500, 000 cash respectively in a week across the counter, the apex bank said.

The revised cash withdrawal limits also affect other payment channels; including Automated Teller Machine (ATM), Point of Sale (PoS) and cheque-based transaction.

It applies generally to all commercial banks and other cash-transaction banks such as payment service banks (PSBs), primary mortgage banks (PMB) and microfinance banks (MFBs).

Under the policy, individuals and companies withdrawing cash directly from the banking hall will pay five per cent and 10 per cent on withdrawals above the approved threshold.

The bank also pegged the maximum cash withdrawal through ATM is set at N100, 000 per week, subject to a maximum daily withdrawal of N20, 000.

In the same vein, the maximum cash withdrawal through PoS terminal shall be N20, 000 per day.

The apex bank also imposed more stringent conditions with special documentation and approval for such compelling above-limit withdrawals

“Only denominations of N200 and below shall be loaded into the ATMs,” the bank stated in the circular.

The CBN directed that third party cheques above N50, 000 shall not be eligible for payment over-the-counter but retained the N10 million limits earlier placed on clearing cheques.

According to the apex bank, in compelling circumstances, not exceeding once a month, where cash withdrawals above the prescribed limits is 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 as well as additional enhanced due diligence and information requirements.

The policy was announced in a letter to deposit money banks and other financial institutions, signed by CBN Director, Banking Supervision Department, Haruna Mustafa.

The letter, titled: “Naira Redesign Policy- Revised Cash Withdrawal Limits” was addressed to all Deposit Money Banks (DMBS) and Other Financial Institutions (Payment Service Banks (PSBs), Primary Mortgage Banks (PMB) and Microfinance Banks (MFBs).

It reads: “Besides, individuals and companies seeking above-limit withdrawals must be made to provide and submit additional information to a special, purposely created CBN portal.

“These information include valid means of identification of the payee such as national identity, international passport, driver’s license; Bank Verification Number (BVN) of the payee and notarized customer declaration of the purpose for the cash withdrawal.

“Also, such above-limit withdrawal must be under special approval of the managing director of the drawee and an approval in writing by the managing director and chief executive officer of the bank authorising the withdrawal.”

According to the new policy directive, monthly returns on cash withdrawal transactions above the specified limits should be rendered to the Banking Supervision Department while compliance with extant Anti-money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations relating to Know Your Customer (KYC) ongoing customer due diligence and suspicious transaction reporting among others are required in all circumstances.

The CBN said that customers should be encouraged to use alternative channels (internet banking, mobile banking apps, Unstructured Supplementary Service Data (USSD), cards/Point of Sale (POS), eNaira, among others ) to conduct their banking transactions.

The decision is not unconnected to the CBN’s determination to curb inflation, reduce money supply in the system and make Nigerians embrace alternative channels of banking transactions that promote financial inclusion.

CBN Governor Mr. Godwin Emefiele gave a hint to this development at the last Monetary Policy Committee (MPC) meeting.

Emefiele drew people’s attention to the fact that the highest denominations in the United States (U.S.) and the United Kingdom (UK) though still legal tenders are barely in circulation and draw attention when seen in use.

According to him, this is what the CBN wants to target to promote the cashless policy and financial inclusion.

Fiscal Policy Partner and Africa Tax Leader, PwC, Mr. Taiwo Oyedele, said it was clear that the CBN was trying to drive cashless economy by placing stiffer restrictions on cash withdrawals.

Oyedele said: “However, a more effective strategy could have been to enhance the cashless economy infrastructure to remove or significantly reduce the challenges and irritations that people experience when transacting using electronic payments.

“Each of us regularly experience unsuccessful electronic payment transactions either due to bad network, switch failure or even lack of electricity to charge the devices. “We can make cashless economy attractive as is the case with MPESA in East Africa so people voluntarily embrace it rather than the stick approach which will unfortunately punish many people for circumstances that are beyond their control.”

Managing Director, Globalview Capital Limited, Mr. Aruna Kebira, said the new policy was a continuation of the apex bank’s inflation-targeting stance and cashless drive.

Kebira said: “In elementary economics, we were taught that inflation is a situation where more money chases few goods. Our economy responds to the happenings in the international space because we don’t have a buffer.

“The disruption of the global supply chain by the Ukraine and Russia imbroglio left the world with high and imported inflation over the world.

“The CBN has been forced to increase interest rates in all their meetings for 2022 trying to combat and stem inflation to no avail. The only choice available to CBN is contractional monetary policy.

“What this withdrawal limit is set to achieve is to mop up as much cash as possible from the system. It believes that the much money in circulation is what is responsible for the high demand for the dollar and the attendance pressure on the naira. It is also targeted at the payment of ransom.

“It is an attempt by the CBN to make every transaction pass through the bank and to discourage the situation we just witnessed where notes that were printed in 2002 were kept outside the banking system.”

He, however, noted that the result of the decision may not be immediate pointing out that “policy is not a light bulb switch that you press and immediately there is light, policies take time to come to shape but in the end, the desired effect will be achieved”.

Former Executive Director, Keystone Bank Limited, Richard Obire, said the policy will encourage cashless economy.

He said the use less of higher denominations like N1, 000 notes will help tackle rising inflation and such higher denominations will now serve as store of value.

Obire said: “We do not need N1, 000 notes for spending. The lower denominations will be widely used in the new policy plan and makes a lot of sense.”

Managing Director, SD & D Capital Management Limited, Mr. Gbolade Idakolo, said the measure will, to a large extent, reduce the volume of cash in circulation.

He said: “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 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, dollars, 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 in the long run and the economy will be better for it.”

SOURCE: THE NATION / Taofik Salako, Nduka Chiejina and Collins Nwese