CBN Defends Cash Withdrawal Limit Policy, Clarifies Misconceptions

Aisha Ahmad, the Deputy Governor, Financial System Stability, Central Bank of Nigeria on Thursday defended the cash withdrawal limits policy while appearing before the House of Representatives.

Ahmad represented the CBN Governor, Godwin Emefiele, who had twice failed to appear before the lawmakers to defend the policy, claiming he is attending to health issues.

She declared that Nigeria could operate a cashless economy, noting that about 94 per cent of cash withdrawals through personal accounts are less than the revised N500,000 per week, while 82 per cent of those via corporate accounts are less than N5 million.

Ahmad, who asked for five minutes to explain the policy to the lawmakers, recalled that the cashless policy was first launched in 2012 based on sections 2(d) and 47 of the CBN Act.

She also recalled that the CBN commenced the pilot test in Lagos State where it introduced limits on transactions of N500,000 and N3 million for individuals and corporate customers, respectively, and with charges for any amount above these.

“The pilot was very successful and following that, the policy was extended to six other states – Abia, Anambra, Kano, Ogun and Rivers  in July 2013. Over the years – and it has been 10 years now since we first launched this

"The policy had been amended severally due to feedback from stakeholders and also to ensure that we develop the infrastructure and financial access points required to support the policy.

“We suspended processing fees on excess lodgment in the past, in 2014. In 2017 and 2019, we also suspended the nationwide rollout of the cashless policy.

"Currently, we suspended fully any payments or charges on excess lodgment.”

Ahmad further explained that "the nationwide limits set by the CBN, which was announced on December 5, 2022, is a continuation of the cashless policy initiated 10 years ago, and it was in recognition of the positive changes that have happened in the financial and payment system since the cashless policy was first launched.”

According to the CBN boss, some of the changes include “a wide proliferation of financial access points. In 2012, thereabouts, we were still talking about bank branches as the only source of access to financial services.”

“Today, we have a very robust payment system that includes bank branches, branches of micro-finance banks, POS machines, ATMs, agent banking, e-Naira and many other options.

“To be specific, between the bank and the micro-finance banks, we have 6,500 locations, 900,000 POS terminals, 14,000 ATMs across the country and 1.4 million agents nationwide; and every local government area in Nigeria has agents represented.

"We have also seen a proliferation of electronic transactions.

“Just by way of a quick example, in 2012, we had N48 billion in POS transactions.

"Today, we have N6 trillion in POS transactions. On electronic transfers, we had N3 trillion in 2012; today we have N300 trillion as at October 2022. That is a 7,000 per cent increase.

 “We have also seen an improvement in financial inclusion to 64.1 per cent and lastly, perhaps, more importantly, we have seen the evolution of the Nigerian payment system on the global stage.

"Nigeria is adjudged 6th in the world for an instant, real payment and we are only behind countries like India, China, Thailand, Brazil and South Korea.

"We are the only African country in the top 10 and this has been as a result of some of the initiatives that have gone on.’’

Giving more data, Ahmad added, “Also, electronic payment and real-time data payments have been estimated to contribute about 0.67 per cent to our GDP.

"Going to the cash withdrawal limits that were issued in response to the feedback from Nigerians; in response to the comments made by this revered chamber, we took those feedbacks on board and we did mention that we would be flexible in the implementation of this policy in response to stakeholders’ sentiments.”

She admitted that the CBN reviewed the policy based on the “sentiments” expressed by the public.

“In response, we have since reviewed the limits significantly from N100,000 that we had per week to N500,000 per week for individuals; from N500,000 per week for corporate to N5m per week for corporate.

"We have also amended the processing fees from 5 and 10 per cent downward to 3 and 5 per cent (respectively).

“We have clarified the strategic importance of agents as important participants in the financial system because they play a key role in certain under-served segments in the rural areas and in certain market areas, and they as well would be covered by this newly revised rule."

The CBN boss stated that it was important to “give some justifications as to why these limits are required now and why it is time for us to get cashless nationwide.”

According to her, the data available to the apex bank shows that 94 per cent of all cash transactions fall below the N500,000 limit and this includes areas of the country that are not part of the cashless policy, while 82 per cent of corporate transactions also are below this limit.

“What does this mean? It means that 94 per cent of all individual transactions would not be affected by these fees that we have talked about.

"I have seen some misconceptions about the fees; that we are charging the fees on the entire amount that wants to be withdrawn. No.

"The fees are to be charged on any withdrawal above the limit. For example, if you are withdrawing N550,000, the fee will be on the N50,000.

"We also looked at transactions for agents. So, transactions by Nigerians that go to the agent locations and transactions by the agents themselves, the average total cash transactions of agents is N2,184,000, which is clearly within the current limit.

"The average transaction per individual that walks up to an agent is about N18,000.

“This gives you the perspective around what the policy is trying to do; it is to encourage more people to come into the formal payment system because of the numerous benefits that accrue.

"It means opening up our rural areas – the under-served areas – to economic opportunity, to payment opportunity and connecting them to the formal system."

Ahmad recalled that during the COVID-19 pandemic period, the world saw the negative impact on physical cash as no one could go anywhere, stressing that “it was the electronic banking system that protected and served those below the poverty lines that could have had their livelihood at risk.”

Clearing the misconceptions about the policy, Ahmad clarified that the N100, N50, N10 and N5 notes are predominantly used in the hinterlands and the rural areas, and these would not be affected by the policy.

“Finally, we just want to reiterate the overall benefits of the cashless policy. It is to reduce cash processing costs, minting costs, the cost of destroying old notes and the cost of moving the physical cash from place to place; the cost of protecting it.

"All these costs are passed on typically to the banking public. Getting rid of these costs means that charges will be less in that respect.

“Also, this is an opportunity to promote Nigeria’s positive image from a money laundering perspective.

"Even the recently passed anti-money laundering law has limits for cash for a reason because cash is usually the medium by which some of these nefarious activities are done.

"Suffice it to say that the advantages around protecting people from armed robbery, kidnapping, and terrorism financing go without gainsaying.”