The Central Bank of Nigeria (CBN) recently announced a new policy mandating financial institutions in the country to limit cash withdrawals to N100,000 for individuals and N500,000 for corporate entities per week. 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.
The new withdrawal limits set by the CBN further impose the cashless policy, which the apex bank has continuously preached over the last few years. The FG/CBN policy would also encourage and boost digital transactions and commerce, such as mobile banking, USSD transactions, POS, eNaira, etc.
- The policy would generate revenue for both the federal government and the apex bank in the form of taxes due to an increase in the conduct of digital transactions. As with the newly designed notes, financial agencies in the country could include more people in the tax net as they perform more digital transactions and easily flag suspicious transactions.
- The new policy could also cut the cost of minting or printing currency as with many developed economies around the world.
In the short term, the struggle to exceed the withdrawal limit without paying the processing fees could open up a “naira black market” of which customers can get a certain amount of cash for a discounted rate. Nigeria is still facing a bureau de change crisis which recently crashed the naira to over N900/$1.
- Furthermore, digital financial platforms have been seeking inclusion in the country’s banking system but have faced the challenge of educating and penetrating rural areas. With the apex bank imposing the new withdrawal policy, FG/CBN would have to launch awareness campaigns to boost the growth of these digital channels. For now, internet subscribers stand at 152 million subscribers as of July 2022.
- Another significant threat to digital transactions apart from low internet users in the country is the tendency of scammers and internet fraudsters to prey on the ignorance of customers, especially in rural communities.
- Businesses such as construction companies who have to pay workers daily would have to adjust their payment schedules to avoid paying exorbitant processing fees.