December 4, 2023

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CBN Explains Cash Policy, Others


 CEM REPORT, FINANCE | The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has further justified the need for the redesign of the high denomination bank notes stressing that it would help control inflation.

He added that the exercise would help mop up currency outside the banking system, thereby ensuring more reliable data on money supply, which will in turn facilitate better monetary policy formulation and effectiveness.

Emefiele, addressing the House of Representatives on CBN’s implementation of the cashless policy and new withdrawal limits, said the policy would boost the appreciation of the naira, as the higher denomination and the volume of banknotes outside the banking system used to speculate on the currency would reduce.


Emefiele told the lawmakers that CBN’s recent redesigning of the N1, 000, N500, and N200 notes and the nationwide implementation of the cashless policy were intended to further sustain the achievements recorded since the introduction of the cashless policy in 2012.

The CBN governor was represented at the hearing by the Deputy Governor of, the Financial System Stability (FSS) Directorate, Aisha Ahmad, who said following the successes achieved in the payment system, Nigeria had been adjudged Africa’s undisputed real-time and digital payments leader, with over 3.7 billion real-time transactions in 2021.

Emefiele stated that the naira redesign programme would help fight banditry and terrorism, as the large volumes of cash used to pay ransom to bandits/terrorists would be reduced.

It will assist in the fight against corruption as the exercise would rein in the higher denominations used for this purpose and the movement of such funds from the banking system could be tracked easily.”

He also pointed out that electronic banking adoption had significantly increased among the Nigerian populace while the cashless policy had further spurred policy innovation that had expanded the breadth and depth of financial system participants, transaction channels, and financial access points.

He insisted that the cash withdrawal policy was neither targeted at any segment of the society nor intended to disenfranchise hardworking Nigerian citizens and businesses, as insinuated in some quarters noting that the cost of currency management had been on the increase, reaching N47.25 billion between January and October 2022.

He however noted that despite the dominance of highly advanced payment systems, many countries carried out currency redesign to remain ahead of counterfeiters, ensure durability, fight corruption, and reduce the cost of currency management, among other reasons.

“It is instructive to note that the implementation of the cashless policy in six states resulted in a reduction in the cost of currency management by 15.20 per cent, from N36.97 billion to N31.35 billion between 2013 and 2014.“

“The trend, however, reversed in 2014 following the suspension of cash deposit charges in the six states currency handing cost increasing by 17.20 per cent between 2014 and 2015 following the suspension.”

“It is against the backdrop of the foregoing that the CBN, in line with its statutory powers as enshrined in Section 2(b) and 19 of the CBN Act 2007, sought and obtained the approval of Mr. President to redesign and issue new series of naira notes in the N200, N500, and N1000 denominations.”

Commenting on the revised cash withdrawal limits, Emefiele noted that the CBN was not unmindful of the concerns raised in response to the new cash withdrawal policy and remained flexible to make the necessary adjustments to ensure wider public acceptance of the policy.

“Consequently, we have reviewed the cash withdrawal limits upwards to N500,000 weekly for individuals (from N100,000) and N5,000,000 weekly for corporates (from N500,000). Furthermore, the applicable charges above the limit have been reduced to three per cent and five per cent, respectively.“

Further justifying the cashless policy, Emefiele pointed out that the CBN carried out an in-depth analysis of over-the-counter intra-bank cash transactions over 12 months (November 2021- October 2022) to assess the impact of the policy on the generality of citizens.

He said the outcome showed that a significant volume of cash transactions was below the maximum thresholds indicated under the extant cashless policy and was, thus, not subject to the cash processing charges.

“It is worthy to note that 94.04 percent and 62.63 percent, respectively, of volume and value of cash transactions by individuals were below the threshold while 82.36 percent and 39.38 percent of the volume and value of cash transactions by corporates was below the threshold.“

“Transactions at agent locations are also below the thresholds. For instance, 99 percent of cash withdrawals at agent locations are below N300,000, average cash out transaction size per individual is N18,000, whilst average cash withdrawals by agents is between N1, 000,000 and N2,150,000.”

Additional, he said mobile money agents who provide cash-in, cash-out services in rural areas have also been recognised and provided for in the revised guidelines.

“The proliferation of financial access touch points and e-payment channels across urban and rural areas, which presents citizens with ample alternative for financial transactions further justifies the nationwide implementation o the policy.”

“There were 6,500 branches of deposit money banks, and OFIs, 1.4 million agent locations, 900,000 POS and 14,000 ATMs, including 31 commercial banks with 4,603 branches; 878 MFBs with1,966 branches; 1.4 million agents; 899,642 PoS Terminals and over 14,000 nationwide.”

Similarly, Emefiele said currency denominations of N5, N10, N20, N50, and N100 remained legal tender and were unaffected by the naira redesign policy. The denominations were available for use across the country, including at markets in rural areas and the informal sector of the economy, while there were currently no processing fees applied to cash deposits.

He stressed that unlimited amounts could be deposited without charge, to enable seamless and unrestricted deposit of any notes affected by the currency redesign.

On the processing fees he said, “The processing fees on cash withdrawals are not new, as these have been in place in Lagos, since 2012, and in the five other cash-less states and FCT, since July 2013.

“The charge applies on the excess over the prescribed limit only, not on the entire transaction amount. For instance, a withdrawal of N550,000 by the individual- fee is in excess of the N500,000 limit (i.e. N50,000x 3%= N1,500); Withdrawal of N6,000,000 by a corporate- fee is in excess over N5,000,000 limit (i.e.N1,000,000 x 5%= N50,000).

“The policy does not prohibit cash transactions above the prescribed limits. Such transactions shall attract the processing fees to serve as an incentive for account owners to embrace more efficient electronic payment channels.“The policy applies nationwide in recognition of the plethora of financial touchpoints that are available in all the States of the Federation. Nationwide implementation is effective January 9, 2023.”

On the way forward, Emefiele said the CBN had commenced nationwide stakeholder engagement and sensitisation to promote understanding of the cashless policy, particularly in rural areas, markets, and underserved communities across the six geopolitical zones of the country that stood to benefit the most.

He also said the CBN, Bankers Committee, and SANEF would intensify agent rollout across the country (especially in underserved locations) and enhance agents’ ability to carry out a wider variety of financial services in addition to cash in and cash out (electronic card distribution, wallet/account opening, BVN on boarding, bills payment, etc), which would also be enhanced.

He added that the CBN would continue to be flexible in its implementation of a cashless policy and monitor its impact, especially on vulnerable segments of society, but ensure the multiple advantages were achieved.

Emefiele assured during the hearing in the House that the central bank would continue to monitor the implementation of its monetary policies and be flexible on the limits in response to feedback received.

“We crave the National Assembly’s continued support as the bank continues its implementation of transformational payments and financial industry initiatives in line with its mandate.”


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