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CBN Governor, Godwin Ifeanyichukwu Emefiele

The Central Bank of Nigeria on Thursday defended the cash withdrawal limits policy, insisting that it was not targeted at vulnerable people.

Defending the policy while appearing before the House of Representatives, the Deputy Governor, Financial System Stability, CBN, Aisha Ahmad, declared that Nigeria could operate a cashless economy, noting that about 94 per cent of cash withdrawals through personal accounts were less than the revised N500,000 per week, while 82 per cent of those via corporate accounts were less than N5m.

Ahmad represented the CBN Governor, Godwin Emefiele, who had twice failed to appear before the lawmakers to defend the policy which had generated a groundswell of opposition from Nigerians.

The apex bank had informed the House that Emefiele would not appear before the House in person, rather, Ahmad would lead the Committee of Governors before the lawmakers.

In her presentation to the House, the CBN deputy governor also noted that while some critics had expressed fears about the lack of commercial bank branches, especially in rural areas, data obtained by the CBN showed that people in remote locations had embraced online banking options.

Ahmad also announced that the CBN ordered 500 million notes of the redesigned N200, N500 and N1,000 denominations through the Nigerian Security Printing and Minting Plc.

Cashless policy

Ahmad, who asked for five minutes to explain the policy to the lawmakers, recalled that the cashless policy was first launched in 2012 based on sections 2(d) and 47 of the CBN Act.

She also recalled that the CBN commenced the pilot test in Lagos State where it introduced limits on transactions of N500,000 and N3m for individuals and corporate customers, respectively, and with charges for any amount above these.

She added, “The pilot was very successful and following that, the policy was extended to six other states – Abia, Anambra, Kano, Ogun and Rivers – in July 2013. Over the years – and it has been 10 years now since we first launched this – the policy had been amended severally due to feedback from stakeholders and also to ensure that we develop the infrastructure and financial access points required to support the policy.

“We suspended processing fees on excess lodgment in the past, in 2014. In 2017 and 2019, we also suspended the nationwide rollout of the cashless policy. Currently, we suspended fully any payments or charges on excess lodgment.”

The CBN deputy governor further noted that the nationwide limits set by the CBN, which was announced on December 5, 2022, was a continuation of the cashless policy initiated 10 years ago, “and it was in recognition of the positive changes that have happened in the financial and payment system since the cashless policy was first launched.”

According to the CBN boss, some of the changes include “a wide proliferation of financial access points. In 2012, thereabouts, we were still talking about bank branches as the only source of access to financial services.”

She stated, “Today, we have a very robust payment system that includes bank branches, branches of micro-finance banks, POS machines, ATMs, agent banking, e-Naira and many other options.

“To be specific, between the bank and the micro-finance banks, we have 6,500 locations, 900,000 POS terminals, 14,000 ATMs across the country and 1.4 million agents nationwide; and every local government area in Nigeria has agents represented. We have also seen a proliferation of electronic transactions.

“Just by way of a quick example, in 2012, we had N48bn in POS transactions. Today, we have N6tn in POS transactions. On electronic transfers, we had N3tn in 2012; today we have N300tn as at October 2022. That is a 7,000 per cent increase.

 “We have also seen an improvement in financial inclusion to 64.1 per cent and lastly, perhaps, more importantly, we have seen the evolution of the Nigerian payment system on the global stage. Nigeria is adjudged 6th in the world for an instant, real payment and we are only behind countries like India, China, Thailand, Brazil and South Korea. We are the only African country in the top 10 and this has been as a result of some of the initiatives that have gone on.’’

Giving more data, Ahmad further stated, “Also, electronic payment and real-time data payments have been estimated to contribute about 0.67 per cent to our GDP.

“Going to the cash withdrawal limits that were issued in response to the feedback from Nigerians; in response to the comments made by this revered chamber, we took those feedbacks on board and we did mention that we would be flexible in the implementation of this policy in response to stakeholders’ sentiments.”

She admitted that the CBN reviewed the policy based on the “sentiments” expressed by the public.

“In response, we have since reviewed the limits significantly from N100,000 that we had per week to N500,000 per week for individuals; from N500,000 per week for corporate to N5m per week for corporate. We have also amended the processing fees from 5 and 10 per cent downward to 3 and 5 per cent (respectively).

“We have clarified the strategic importance of agents as important participants in the financial system because they play a key role in certain under-served segments in the rural areas and in certain market areas, and they as well would be covered by this newly revised rule,” she explained.

The CBN boss stated that it was important to “give some justifications as to why these limits are required now and why it is time for us to get cashless nationwide.”

According to her,  the data available to the apex bank shows that 94 per cent of all cash transactions fall below the N500,000 limit and this includes in areas of the country that are not part of the cashless policy, while 82 per cent of corporate transactions also are below this limit.

“What does this mean? It means that 94 per cent of all individual transactions would not be affected by these fees that we have talked about. I have seen some misconceptions about the fees; that we are charging the fees on the entire amount that wants to be withdrawn. No. The fees are to be charged on any withdrawal above the limit. For example, if you are withdrawing N550,000, the fee will be on the N50,000.

“We also looked at transactions for agents. So, transactions by Nigerians that go to the agent locations and transactions by the agents themselves, the average total cash transactions of agents is N2,184,000, which is clearly within the current limit. The average transaction per individual that walks up to an agent is about N18,000.

“This gives you the perspective around what the policy is trying to do; it is to encourage more people to come into the formal payment system because of the numerous benefits that accrue. It means opening up our rural areas – the under-served areas – to economic opportunity, to payment opportunity and connecting them to the formal system,” the deputy CBN governor said.

Ahmad recalled that during the COVID-19 pandemic period, the world saw the negative impact on physical cash as no one could go anywhere, stressing that “it was the electronic banking system that protected and served those below the poverty lines that could have had their livelihood at risk.”

 Clearing the misconceptions about policy, Ahmad clarified that the  N100, N50, N10 and N5 notes are predominantly used in the hinterlands and the rural areas, and these would not be affected by the policy.

The CBN boss stated, “Finally, we just want to reiterate the overall benefits of the cashless policy. It is to reduce cash processing costs, minting costs, the cost of destroying old notes and the cost of moving the physical cash from place to place; the cost of protecting it. All these costs are passed on typically to the banking public. Getting rid of these costs means that charges will be less in that respect.

“Also, this is an opportunity to promote Nigeria’s positive image from a money laundering perspective. Even the recently passed anti-money laundering law has limits for cash for a reason because cash is usually the medium by which some of these nefarious activities are done. Suffice it to say that the advantages around protecting people from armed robbery, kidnapping, and terrorism financing go without gainsaying.”

Lawmakers pick holes

Notwithstanding Ahmad’s clarifications, several members of the House, expressed their concerns about the policy, while criticising the CBN for failing to engage all relevant stakeholders before its announcement and its speedy implementation.

A member from Yobe State, Ali Shettima raised the issue of the inability of rural dwellers to differentiate between the newly designed naira notes and fake ones.

Chinedu Benjamin from Anambra State asked if the limits set for cash withdrawal were not a ploy by the ruling All Progressives Congress against opposition parties ahead of the 2023 general elections.

Also, Isiaka Ibrahim asked if the CBN got data from the National Bureau of Statistics and other relevant government agencies.

Another member from Katsina, Sada Soli, said, “The CBN must not restrict people’s choices through coercion of a policy for their own good. Can the CBN tell Nigerians how much was printed out of this currency? Because today if you go into the bank and you want to withdraw money, the money is not available.

“The most successful countries that succeed in a cashless economy are Sweden, Finland and Denmark; their population is not up to Lagos State. We must consider three sectors: the banking sector we know does not have the infrastructure, the power sector and telecoms to make this policy successful.

“The CBN should be retrospective. They should slow down. You know the role cash plays in the economy of this country. The trading that takes place is basically a cash transaction. CBN should have this policy with a human face.”

From Oyo State, Tolulope Akande-Sadipe disclosed that the Association of Mobile Money and Bank Agents of Nigeria had petitioned the House, reading out some of the issues raised by the vendors.

Responding to some of the questions, Ahmad noted that there are two ways of monitoring financial activities in local markets at the grassroots.

She noted that those in rural communities tend to use money agents who are linked up to an electronic system that is managed by a super agent.

“We are able to see the flow of transactions: the average size of the transaction and the total transactions and we are able to understand what they spend it on,” she added.

Ahmad also noted that the CBN conducts monthly household surveys which cover household spending and behaviour in the markets.

Reacting to concerns on the possibility of fraudsters exploring ways to scam Nigerians through the new policies, Ahmad said, “You talk of fear of online banking and the issue around fake alerts. The truth is that for any initiative, there will be challenges. What matters is that the benefits must outweigh the risks. The CBN has an active consumer protection department that is looking at issues of fraud, issues of cyber security and issues of bank conduct in terms of how they charge customers and every time we hold the banks to account when they flout those rules.

“We just want to say that we will continue to be open, engage, and listen as we implement this policy in response to the sentiments of Nigerians. It is not intended to disenfranchise (sic) anyone particularly those in vulnerable situations, in the rural areas, markets; it is meant to bring everyone into the significant economic opportunity that comes when you are fully included.”

Reps fault Emefiele

In his remarks, the Speaker, the House of Representatives, Hakeem Gbajabiamila said, “We have taken your brief under consideration. The House would meet and deliberate.”

The Speaker restated the point earlier made by a member, Mark Gbillah, that the CBN under Emefiele’s governorship had not been complying with the CBN Act regarding periodic engagements with and approvals from the National Assembly on monetary policies.

 He said, “It was not optional; it is obligatory of the CBN under Section 8 of the CBN Act to brief this House on your monetary policies. There is a reason that provision is in the law. That was not done. It took the prompting of the House, not once, not twice but three times to have the CBN come for this briefing that we are not even asking for. It is an obligatory briefing under the CBN Act, Section 8.

“Two, I want to address the issue of – although you may say the horse has left the stable – the redesigning of the naira. All your policies may be of good intentions, but they say the road to hell is sometimes paved with good intentions.

“We are aware of the Bank of England, we are aware of the US. Just recently, the Bank of England changed their notes to the King Charles notes, and the bank made a publication that it would not come into effect until 2024. In other words, they gave a year’s notice in a cashless society.

 “How then can we rationalise two, three months’ notice in a ‘cashfull’ society? And not only do they give that kind of notice, in the United States, and in other places, even when the law or the policy takes effect, you are allowed to continue to use the old notes at the same time until it is completely phased out. So, these are questions that are begging for answers.”