- The CBN recently announced a reduction in the maximum cash withdrawal over the counter by individuals and corporate organisations
- Since the announcement, the new directive has generated mixed reactions from Nigerians in different sectors of the economy
- Highlighting the benefits of the new directive, experts have insisted that the move is indeed in the right direction
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The latest cash withdrawal limit policy of the Central Bank of Nigeria has come as a shock to many Nigerians, but experts believe that it will be for good at the end of the day.
On Tuesday, December 6, 2022, the CBN announced a restriction on the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week to N100,000 and N500,000, respectively. Withdrawals above these limits shall attract 5% and 10% processing fees, respectively.
CBN Says N900bn Still Outside the Banking System as it extends deadline for cash swap, return of old notes
According to the regulation, which will go into effect on January 9, 2023, the sum of N20,000 has been set as the daily withdrawal limit at POS terminals. Subject to a maximum of N20,000 cash withdrawal per day, the maximum cash withdrawal via Automated Teller Machine (ATM) should be N100,000 weekly.
Why the CBN reduced the cash withdrawal limit
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The recent moves by the CBN point to an effort to curb vote buying ahead of the 2023 general elections and check and reduce the amount of cash in circulation. It is also aimed at containing the ease by which the Nigerian currency has been counterfeited by criminal gangs.
Most importantly, these policies would help the apex bank regain control of excess cash floating in the economy, thereby upscaling the value of the naira and curbing inflation.
The CBN Governor, Godwin Emefiele, had revealed in October that out of N3.23 trillion naira in circulation, N2.73 trillion was lying outside Nigeria's banking system. This figure which represents about 85%, is what the CBN is trying to mop up back into the system to be able to control the money supply.
What experts are saying about the new cash withdrawal limit
Speaking to Legit.ng in an exclusive interview, Olumide Adesina, a financial analyst said, commended the CBN for the initiative, which he says is positive. He added that fintech platforms and payment services are set to benefit from the new policy.
The CBN directive on cash withdrawals limits favours Nigerian fintechs like Flutterwave, Paystack, Interswitch, Paga and others, as more transactions will be done online. With the telcos like MTN's MoMo, Airtel's Smartcash and Glo's Moneymaster entering the payment space, it will further accelerate e-transactions in rural areas, thereby expanding the goal of financial inclusion in Nigeria.
Adesina also stated that the government and banks would gain from the policy in the sense that it would reduce the cost of holding large amounts of cash, capture more e-transactions and e-revenue for the institutions.
The government stands to gain too, in the area of more Tax revenue capture, reducing the loopholes for money laundering and informal transactions mostly done in cash.
Also touching on the subject, Kalu Aja, a financial literacy expert based in the United States, commended the policy, saying:
Cash is king, but it's expensive and unsafe. Time to move to non-cash. Get with the program. The CBN hopes that making the naira scarce will increase its value. If you need more naira to do a transaction; 1. Write a check 2. Transfer 3. Mobile Banking
(The) point is these options are trackable. Why do you need N100m cash that can't be tracked?
Naira Redesign: CBN Receives N165 Billion Old Notes
The CBN, in October 2022, stated that N165 billion of the old N200, N500 and N1000 notes had been returned to bank vaults. This follows the apex bank's announcement of redesigning the aforementioned banknotes and the call for the old notes to be returned to the banks.
Rasheed Adam, the apex bank's Director of Currency, made the disclosure during the post-MPC meeting in Abuja, as he commended the handful of Nigerians who have complied with the CBN's directive.
The CBN expects the remaining N2.56 trillion to come into the banking system before January 31, 2023, deadline.