Nigeria’s apex bank, the Central Bank of Nigeria (CBN), days away from introducing new currencies into the economy, announced a new policy mandating financial institutions in the country to limit cash withdrawals for individuals and corporate entities to N100,000 and N500,000, respectively, per week.
Driving the news
The new policy, which would take effect nationwide on January 9, 2023, attracts a processing fee of 5 percent and 10 percent, respectively, for cash withdrawals above the stipulated limit.
- Also, any third-party cheques above N50,000 will not be processed over the counter by any local bank. Weekly withdrawals through automated teller machines (ATMs) have been cut to N100,000 per individual, with a daily limit of N20,000.
- Other sources of withdrawal, such as point of sale (POS) terminals, also have a daily limit of N20, 000. And Nigerians cannot withdraw the new N500 and N1000 banknotes through ATMs, as only N200 and below will be made available through the channel.
Why it matters
The new withdrawal limits set by the CBN encourage the cashless policy, which the apex bank has continuously preached over the last few years. The newly imposed policy is also part of CBN’s plans to protect the newly redesigned banknotes against misuse, counterfeiting, and hoarding.
The big picture
To complete financial transactions that involve large sums of money and avoid the exorbitant processing fees which the newly established daily limits do not permit, Nigerians would seek alternative means including mobile banking, USSD, debit cards, POS, eNaira, etc.
- On one hand, analysts believe that this new policy wouldn’t still solve Nigeria’s inflationary problems against CBN hopes as the country’s economic challenges hinge on lack of revenue sources, lack of capital investments, corruption and so on.
- On the other hand, as Nigerians result to other means of completing transactions including mobile banking, USSD, debit cards, POS, eNaira, etc., financial agencies in the country would be able to easily flag suspicious transactions and take actions. And include more people in the tax net.
Quick catch-up
The governor of the CBN, Godwin Emefiele, shocked citizens in October when he announced the plans of the apex bank to introduce new designs of the N200, N500, and N1,000 notes by December 15th 2022.
The proposed plan aims at mopping up excess cash and combating inflation and insecurity by forcing Nigerians to add currencies currently in circulation into the banking system. The period of exchange would run from December 15th 2022 – January 31st 2022.
Since the announcement, the Naira has crashed ridiculously as people seeking to hide their huge stack of cash from financial institutions in the country have opted to convert Nigeria’s Naira to forex.