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HomeTop NewsCBN cash withdrawal limit: Implications for Politicians, rural dwellers, economy

CBN cash withdrawal limit: Implications for Politicians, rural dwellers, economy

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By Oludare Mayowa

The Central bank of Nigeria (CBN) on Tuesday rolled out a new policy to curtail the volume of cash in the financial system and further strengthen its financial inclusion scheme by encouraging electronic banking transactions in the economy.

The kernel of the circular issued by the regulatory bank includes limiting the amount of cash an individual and corporate entity could withdraw through a Point of Sale (PoS) machine, Automated Cash Machine (ATM) and over-the-counter in the banking halls.

The policy, however, makes provision for individuals and corporate organizations that want to breach the limit of N100,000 and N500,000 per week for individuals and corporations to pay 5 and 10 percent process fee for the amount being withdrawn.

However, the amount above the limit is not expected to be more than N5 million and N10 million for individuals and corporate entities, respectively “In compelling circumstances, not exceeding once a month, where cash withdrawals above the prescribed limits are required for legitimate purposes,” according to the circular.

Although the regulatory bank did not disclose the intendment of its new policy, from the previous pronouncement of the CBN Governor, Godwin Emefiele, it can be deduced that it was part of the measures to arrest the growing trend where people build personal cash reserves in their homes or secret vaults.

Speaking through the regulatory bank’s spokesman last month, Emefiele stated that the redesigned naira notes will, among other goals, deepen Nigeria’s push to entrench a cashless economy in the face of increased minting of the eNaira.

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This, he said, is in addition to helping to curb the incidents of terrorism and kidnapping due to access of persons to the large volume of money outside the banking system used as a source of funds for ransom payments.

He also reiterated that some persons were hoarding significant sums of banknotes outside the vaults of commercial banks. This trend, he said, should not be encouraged by anyone who means well for the country.

Furthermore, he noted that currency management in the country had faced several escalating challenges which threatened the integrity of the currency, the CBN, and the country, adding that every top-rate Central Bank was committed to safeguarding the integrity of the local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy.

Also, Emefiele had while unveiling the redesigned naira note said the regulatory bank would gradually withdraw the N1,000 from the system with the view to discourage huge volume of cash movement and transactions in the economy.

It would be recalled that the CBN had also introduced its digital currency, eNaira as part of measures to encourage the use of electronic transactions in furtherance of its desire to achieve a cashless economy.

With the move, the regulatory bank expects that more Nigerians will embrace eNaira and electronic banking and reduce the volume of cash transactions in the system.

This in itself would ensure that the CBN spend less on the management of cash, including the frequency of printing naira notes to replace the old and defaced ones and also on the logistic of moving huge cash around the country.  

Aside from the fact that the regulatory bank intends to achieve a cashless economy, its new measure would prevent naira cash hoarding, while the level of bribery may also reduce as tracking of movement of money would be easier than before with both the regulatory bank and security agencies placing all transactions on check. 

The implication of the new policy is that terrorists who prior to now kidnapped innocent Nigerians for ransom would have to devise new measures to collect money from the families of their victims who may no longer have free access to excess cash as it was hitherto.

The policy will definitely be a disincentive for such crime as access to cash would reduce the ability of victims to deliver ransom and this may curb the frequency of kidnapping to extort money from their victims.

Also, politicians who had prepared to deploy huge cash to buy votes and bribe electoral officials for the purpose of winning elections may also face serious challenges and they may have to re-strategize ahead of the forthcoming general election in February 2023 and explore other means to obtain cash for electoral expenses.

It will also mean that many party lovers who are already looking forward to ‘spray’ cash during the festive period and other ceremonies slated for this December would have to look for other means of conducting their pass time.

The offside of the new policy will mean that those in the rural areas who have no access to electronic banking and where there are limited presence of banks would face a difficult time in selling their goods since cash is expected to become scarce going forward.

Like any policy, there are going to be some people who will position themselves to devise ways to exploit whatever loopholes in the new policy for personal enrichment. It could mean that people who transact business in cash may want to hoard cash with the hope of selling for those who may be desperate to obtain cash from outside the system

Supermarkets, market women, and other merchants of perishable goods and services may become sources of cash supply for those who are desperate for cash, such as politicians and victims of kidnapping.

Many people may also explore the opportunity to open multiple bank accounts in a bid to circumvent the cash withdrawal limit policy while unscrupulous bankers may also take advantage of the new measures to make a quick gain.   

While the measures could eventually help to curb crime in the country as kidnappers would no longer have access to easy cash from their victims since many criminals may not be willing to go through the banking system to transact business.

Bribe takers would have to look for other ways to get bribe in huge quantum as the CBN tighten the nose of cash withdrawal.

However, the CBN may have to deploy more measures to monitor the activities of officials within the system from sabotaging the policy and turning it into an opportunity to extort and circumvent the system.

The security agencies may also have to work in sync with the regulatory bank to ensure that all loopholes are blocked while they should also expand their dragnet to ensure that criminally minded bankers are not allowed to sabotage the system.

In all, the policy coming a few months to a crucial election may be a master stroke by President Mohammadu Buhari to stop vote buying and discourage money bags from hijacking the electoral process in their favour.

We, however, hope the country may also not see a resurgence of armed robbery as a result of desperation by some people to have access to more money above what they can access through legitimate means from the system.

The new cash withdrawal limit may be tested in court by civil society in view of the possibility of it violating the right of citizens to have access to their own money unhindered.

It is also envisaged that operators of PoS may be impacted by the restriction placed on cash withdrawal as a possible decline in patronage may lead to job loss in the business with the attendant consequence on the economy.

The days ahead would tell how efficient the measure would be and the possible impact on curbing inflation and reducing the cost of currency management in the country.

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