• Friday, July 12, 2024
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CBN’s new cash limits seen boosting e-payments, financial inclusion

Now that governors have so much money

Nigeria’s apex bank’s new cash policy that imposes withdrawal limits for individuals and businesses could be a boost for financial inclusion and electronic banking transactions, analysts say.

Johnson Chukwu, CEO at Cowry Asset Management Limited, an investment banking firm said the policy, set to take effect January 9, next year, will strengthen the cashless policy and financial inclusion initiatives of the Central Bank.

“We are going to see a number of people who don’t feel the need to have bank accounts, now open one because they can no longer receive large cash payments,” he said.

This will bring more people into the formal banking system thus improving micro economic management, Chukwu said.

In a letter addressed to all banks and other financial institutions last week, Haruna Mustafa, director of Banking Supervision at the CBN said weekly over-the-counter cash withdrawals by individuals and corporate entities will not exceed N100, 000 and N500, 000, respectively.

This new policy effectively cuts previously allowed cash withdrawals by over 80 percent for individuals and 83 percent for corporations.

The revised cash withdrawal limit followed the launch of the redesigned naira notes by President Muhammadu Buhari on November 23, 2022.

“Cash withdrawals above the stated limit shall attract a processing fee of five percent for individuals and 10 percent for corporates. Third-party cheques above N50, 000 shall not be eligible for payment over the counter, while limits of N10 million on clearing cheques still subsist,” Mustafa wrote in his letter to financial institutions.

The nation’s top bank further directed that the maximum cash withdrawal per week through Automated Teller Machine (ATM) shall be N100, 000 subject to a maximum of N20, 000 cash withdrawal per day. Lower denominations of N200 and below shall be loaded in the cash machines. The maximum cash withdrawal via Point of Sale (PoS) terminal shall be N20, 000 daily.

“However, in compelling circumstances, not exceeding once a month, where cash withdrawals above the prescribed limits is required for legitimate purpose, such cash withdrawal shall not exceed N5 million and N10 million for individuals and corporate organisations, respectively, and shall be subject to the referenced processing fees, in addition to enhanced due diligence and further information requirements,” the CBN said.

Damilola Adewale, a Lagos-based economic analyst said the CBN is trying to reduce the level of currency in circulation especially for high-note denominations, thereby enhancing financial inclusion.

“In a system where financial inclusion is strong, cost of printing and currency management will be minimised,” Adewale said.

He added that the policy might affect remote areas where access to electronic platforms is not popular.

Data from Enhancing Financial Innovation and Access (EFInA) shows in 2020, the country’s financial inclusion rate grew to 64.1 percent from 63.2 percent in 2018.

However, the 2020 figure is below the country’s 80 percent financial inclusion target for the year, thus causing the Federal Government to set another target of 95 percent by 2024.

Read also: Explainer: 6 things to know about Naira redesign and why Nigeria is clamping down on its vast cash economy

It aims to achieve this target through these policy frameworks and initiatives such as Revised National Financial Inclusion Strategy, National Strategy for Leveraging Agent Networks for Women’s Financial Inclusion, National Fintech Strategy, Nigeria Financial Services Maps, and Payment System Vision 2025.

“These five important financial inclusion artefacts will provide direction for financial inclusion in the country in the coming years,” Godwin Emefiele, governor of CBN said.

Over the past few years, more Nigerians have been embracing electronic platforms like mobile transfers, PoS etc. to perform their financial transactions. According to the Nigeria Interbank Settlement System, mobile transfer volumes grew by 24.3 percent to 878.4 million in the first nine months of 2022 from 706.8 million in the same period of 2021.

While PoS transactions rose to 438.3 million, a 132.3 percent increase from what was recorded in the same period of 2021 at 188.7 million.

They are trying to ensure that their new naira notes introduction is successful and in order for them to do that, they need to control the amount of cash that people withdraw from the banks, said Ibrahim Tajudeen, director of research and strategy at Chapel Hill Denham, an investment banking firm

He also said there is a need for the country to move almost completely towards electronic banking. “Alternative channels like mobile banking would gain momentum this time.”