The Trouble With CBN Cash Withdrawal Limits

The Trouble With CBN Cash Withdrawal Limits

Six weeks after announcing its intention to redesign the naira notes of N200, N500, and N1000 (effective October 26, 2022), the Central Bank of Nigeria (CBN) has sparked further controversy by introducing new cash withdrawal limits for the banking public.

Among other things, the apex bank limited the maximum cash withdrawals over the counter (OTC) by individuals and corporate organizations per week to N100,000 and N500,000, respectively, as well as the maximum cash withdrawal per week through Automated Teller Machines (ATM) to N100,000 with a daily limit of N20,000. Despite the fact that the policy is set to go into effect in early January 2023, the average Nigerian businessperson who has to transact primarily with cash.

Read Also President Muhammadu Buhari Dumped Us After 2019 Elections – Miyetti Allah

The controversies surrounding these past two CBN policy moves are still in the public domain and many have wondered whether the apex bank took time to do its homework before embarking on these projects. This line of thought is not surprising since in recent times, the CBN has been in the news for the wrong reasons. It is not surprising given that under the watch of Godwin Emefiele as CBN governor and with the tacit approval of President Muhammadu Buhari, the policy framework on the management of the naira has been by and large, a gross failure.

This is so since, under the watch of these two, the value of the naira has plummeted from N197 to which it exchanged to a United States Dollar in 2015 to over N700 in the foreign exchange parallel market. In addition, under their watch, the CBN failed woefully in its primary function of price stability since the single digit inflation rate they met in 2015 is now over 20 per cent and still worsening. Real incomes have fallen drastically for all economic agents especially for the fixed income earners. The worst of the controversies coming from the CBN was the very frightening moves of Mr. Godwin Emefiele to vie for the Office of the President under a political party whilst still holding unto his position as CBN governor.

This is a taboo for Central Bank governors globally. These series of controversies from the Emefiele-led CBN has cast doubt on the genuineness of these latest policies emanating from the apex bank to the extent that many have called for a revisit of the two policies, particularly, if the development of the banking system and the growth of the Nigerian economy is anything to go by.

In addressing the merits and demerits of the latest CBN policy on cash withdrawal limits it would be opportune to identify the key tenets of the policy itself. As indicated in the letter dated December 6, 2022 addressed to all Deposit Money Banks and Other Financial Institutions, Payment Service Banks (PSBs), Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs) and signed by Mr. Haruna Mustafa, its Director of Banking Supervision, the CBN clearly indicates that these cash withdrawal limits are real.

The policy states that withdrawals above the thresholds would attract processing fees of five per cent for individuals and 10 per cent for corporate organisations and that third party cheques above N50,000 shall not be eligible for OTC payments. The CBN policy also hits an area very dear to the heart of virtually every Nigerian particularly those in the urban areas, namely the use of the ATM.

In this regard, it pegged the maximum cash withdrawal per week through the ATM at N100,000 subject to a maximum of N20,000 cash withdrawal per day and that only N200 denomination and below will be loaded into the ATMs. Why the choice of N200 for dispensing at the ATM? Would that not make transactions at ATM points bulking in cash handling?

The policy also specified that at the Point of Sale (POS) terminals, the limits of N20,000 cash withdrawals per day would be set. It stated that it is only under compelling circumstances that the prescribed limits can be exceeded but not above N5 million for individuals and N10 million for corporate organisations maximum of once a month. Aside from advising bank customers to use alternative channels such as internet banking, mobile banking apps, USSD and eNaira among others for their banking transactions, the apex bank also warned that financial institutions that aid and abet the circumvention of the new policy would be severely sanctioned. All these would need to be re-evaluated.

In all these, the basic question that comes up is what could have been the motive of the CBN in embarking on this policy at this time? Is it because of the usual infractions and vote buying practices that could manifest in the forthcoming General Elections in February 2023? Indeed vote buying has been an emerging negative development in Nigeria’s electoral process. If that is the benefit that could emanate from the policy, it could be worth it in the short term.

In that case, it could be sustained up to the period after the elections. Otherwise, the negative consequences are overwhelming in the medium term and thus need a further interrogation in its implementation. Or could it be the need to further facilitate the implementation of the cashless policy which was vigorously pursued by the CBN prior to 2014, under the watch of Sanusi Lamido Sanusi as Governor? These puzzles have led to the assertion in some quarters that the CBN might not have done a thorough job in evaluating the possible implications of the policy on the Nigerian society.

Read Also Southeast Does Not Need Atiku Abubakar’s Greek Gift – Onoh