CBN’s new cash withdrawal limits spark divergent views

The reduction of cash withdrawal limits announced by the Central Bank of Nigeria (CBN) on Tuesday has generated different views from financial experts and other Nigerians.

The CBN had in a letter addressed to banks and other financial institutions announced new limits on cash withdrawals over the counter and via Automated Teller Machines (ATM), Point of Sale (PoS) and cheques.

The apex bank set N100,000 and N500,000 as the maximum limits for withdrawal over the counter by individuals and corporates respectively with effect from January 9, 2023.

The new policy has attracted different reactions, consisting of criticism, commendation and recommendations.

Taiwo Oyedele, head of tax and corporate advisory services at PwC, said: “It is clear that the CBN is trying to drive a cashless economy by placing stiffer restrictions on cash withdrawals. However, a more effective strategy could have been to enhance the cashless economy infrastructure to remove or significantly reduce the challenges and irritations that people experience when transacting using electronic payments.

“Each of us regularly experience unsuccessful electronic payment transactions either due to bad network, switch failure or even lack of electricity to charge the devices.”

According to him, a different strategy could have been to make a cashless economy attractive as is the case with Mpesa in East Africa, so people voluntarily embrace it rather than the stick approach, which will unfortunately punish many people for circumstances that are beyond their control, especially the large unbanked population in rural areas.

Oyedele said as a consequence, there could be a lull in economic activities which may slow down GDP growth in the short to medium term.

Read also: CBN slashes individuals cash withdrawal limit by 80%

He, however, said by forcing more transactions to be conducted electronically, there would be less currency outside the banking system which will make monetary policy interventions more effective.

He said this would reduce the size of the black economy and provide more intelligence for the tax authorities to expand the tax net to economic activities which were previously under the radar.

“It is another step to drive the cashless economy agenda of the Central Bank of Nigeria,” Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited, said.

Many Nigerians have taken to social media to react to the latest CBN action.

A Twitter user, @IATaklspace, said, “So according to the CBN’s latest policy, individuals can’t withdraw more than N100k/week without a 5% penalty.

“But worse, your bank gets to decide whether or not your request to withdraw N100k+ is legitimate. It is your money, but you need your bank’s permission to access it.

“And according to the rules, if you desperately need to withdraw N150k emergency funds, you need to explain what you want to use the money for, present your ID card, and obtain an approval in writing from the bank’s CEO.”

David Hundeyin, an Investigative journalist and founder of West Africa Weekly, said: “If the CBN actually believed that it could impose cashlessness on Nigeria, the policy would have simply banned cash withdrawals over a certain threshold, or made them subject to an application.

“Instead all it did was charge individuals 5% and corporates 10 percent to exceed the limit.”