Concerns were expressed by experts on a new policy that the Central Bank of Nigeria unveiled that severely restricts cash withdrawals in an effort to promote a cashless economy.
On Wednesday, experts expressed alarm about a new policy that the Central Bank of Nigeria unveiled that severely restricts cash withdrawals in an effort to promote a cashless society.
Following the introduction of the country’s newly designed currency notes, the monetary policy, which is applicable to ATMs, banks, and cash returned from purchases, aims to restrict the amount of money in circulation.
The weekly over-the-counter cash withdrawal cap set by the central bank is 100,000 naira ($225) for individuals and 500,000 nairas ($1,124) for companies. Additional withdrawals are subject to a processing charge.
When the new policy goes into effect on January 9, ATMs in Nigeria will stop dispensing the high denominations of 1,000 and 500 nairas ($2.25 and $1.10), and daily withdrawals from ATMs and point-of-sale terminals will be capped at 20,000 nairas ($45).
Haruna Mustafa, the bank’s director of banking supervision, stated that “in compelling circumstances, not more than once a month, where cash withdrawals above the prescribed limits are required for legitimate purposes, such cash withdrawals shall not exceed 5,000,000 nairas ($11,236) and 10,000,000 nairas ($22,471) for individuals and corporations, respectively.”
According to policymakers, the central bank’s recent monetary efforts and withdrawal restrictions will increase banking system participation and reduce money hoarding, illegal currency flows, and inflation.
Analysts are concerned that the project may harm routine transactions that individuals and businesses do since digital payments are frequently faulty in Nigeria.
The central bank has stated that they aim to make it difficult and expensive for you to carry cash, therefore the policy is meant to inflict discomfort and force you to become cashless.
“That is good for the CBN because it allows more people to migrate because the more agony they can create,”
In Nigeria, the majority of people work in the unorganized economy, mostly in fields like farming, street and market trading, and public transportation that is not subject to laws or government oversight. This industry contributes significantly to the economy, and because many people don’t have bank accounts, cash is typically preferred for transactions.
According to the World Bank, just 45% of individuals in Nigeria hold accounts with authorized financial institutions. Point-of-sale terminals have become one of the nation’s fastest-growing forms of financial inclusion in the absence of bank accounts. Through the withdrawal limits, the central bank is “directly attacking” such agency banking services, and “people will essentially begin to hoard their money,” said Tunde Ajileye, a partner at Lagos–based SBM Intelligence firm.
“It is not going to drive people to start to try doing electronic transactions. On the contrary, it is going to move people away from the financial institutions,”