Nigeria: CBN – Laws Ahead of People

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CBN Nigeria

CBN Nigeria

We are under the impression the Central Bank of Nigeria, CBN, makes its policies in the interest of the people. Our shock at the haste towards a cashless economy centres on this impression.

Consequences of the increasing use of cash in transactions on the overall economy, particularly cost of cash management to banks, security, and money laundering are fairly well known. CBN said nothing new when it offered those reasons for limiting daily cash withdraws and deposits to N150,000 (individuals) and N1 million (corporate customers).

A deadline of 1 June 2012 has been set for the implementation of the policy. CBN has concerns about the volume of cash outside the banking system. In February 2011, CBN put currency outside the banking system at over N1.025 trillion.

CBN will impose a penalty of N100 per N1000 on individual cash transactions in excess of the limit, while corporate customers are to pay a fee of N200 per N1000 withdrawn above the stipulated cumulative limit.

Third party cheques by individual customers in excess of the N150,000 limit would go through the clearing house.

“Contravention of this policy shall attract a fine of five times the amount that the bank waives as a first offender, while the bank shall, subsequently, pay 10 times the charges waived,” the CBN circular stated. A bank that pays a third party cheque above the limit, would be made to pay higher than the sanctions between 10 per cent of the face value of the cheque and N100,000 fine.

A cashless economy is desirable, but CBN should have considered the efficiency of the available payment options before launching into this venture. Low infrastructure makes other payment options inefficient. Cheque transactions are hardly trusted.

In a vastly informal economy like ours, cash is the recognised mode of transactions. A lot of money remains outside the banking system because most of rural Nigeria has no banking services. Payments for farm products are mostly in cash.

A cattle costs more than N120,000. How many withdrawals would a businessman make to buy livestock? How does the economy benefit from banks refusing cash deposits because they exceed certain limits?

Reports of ATM frauds are on the rise. CBN is not addressing them, yet ATM is one of the most used of the options it is forcing on Nigerians. There is no effort to educate people on the policy, which could foster transparency and impair money laundering.

Nigerians woke one morning to learn bank account numbers have changed with immediate effects. Banking halls have been jammed since then as account holders try to find out if it is true or some fraudsters sent the messages. CBN made this move without sensitising Nigerians.

The proposed limits on cash transactions if implemented, without weighing its implications for our informal economy, could keep more cash out of the banking system. If you impose limits on daily withdrawals, people will take their money from banks.

CBN should consider the policy thoroughly before throwing the economy into further turbulence. We suggest postponement of the deadline to provide more time to raise infrastructure and integrate the informal economy into cashless payment systems.

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