That CBN Policy On Cash Withdrawal

Recently, the Central Bank of Nigeria (CBN) came out with a new policy pegging daily cash withdrawal and lodgement by individual at N150,000 and corporate organizations at N1million. According to the apex bank, implementation of the policy would kick off in June, 2012. The aims, the CBN says are to reduce the dominance of cash in the economy, the cost of cash management to the banking industry, security problem and money laundering.

Since the announcement of this policy, there have been scores of protest and contrast views by many Nigerians, whose lives and investments would be affected when this policy comes into effect. Even the die-hard optimists in the nation’s suffocating investment environment, are worried that the policy is coming at an embryonic stage of the economy.

While some investors argue that there is a drop in both internal and external revenue, others add that most small and medium scale entrepreneurs, including majority of the purchasing public in the country’s business environment, still prefer cash transactions as a means of payment for goods and services. They even insist that the Automatic Teller Machine (ATM) has a limit on cash withdrawal that lowers their ability to meet urgent financial needs. In fact, the bottom line of the argument is that the Nigerian society has not developed to the level of operating a cashless economy as it is practiced in most western countries. For them, the CBN is trying to make the economy run when it should be crawling.

However, it was to allay these fears that CBN Deputy Governor, Tunde Lemo, clarified that the limit to withdrawal is not absolute as those who wished to withdraw more than the stipulated amount could do so but with a fee. He said the CBN has already put in place measures to match the ATM by deploying over 10,000 sales points by 2012. According to him, by 2015, Nigeria would be where Brazil is by deploying additional 350,000 ATM terminals.

The deputy governor further said that CBN was also making biometric withdrawal possible so that everyone, including those who cannot read or write, will be covered by the new policy. According to him, the needed infrastructure would be put in place to facilitate smooth take off while a committee had been set up to ensure error free, end-to-end e-payment transaction. He also said that implementation of the new policy would begin in Lagos, the Federal Capital Territory (FCT), Port Harcourt, Kano and Aba, which account for 80 per cent of the volume of cash in the country.

The Tide believes that this CBN policy framework is a welcome development for a growing economy like ours that is striving to drive the Sub-Saharan economic landscape. There is no doubt that if the new policy is successfully implemented, it would bring lots of economic gains to the country. Although we fear that given the poor state of infrastructure and the level of illiteracy in the country, the policy may not get near the anticipated economic breakthrough that would drive the country’s Vision 20-2020, aimed at putting Nigeria in the ranks of the world’s 20 biggest economies in the next nine years.

The Tide notes that the policy is coming at a time when the nation is just recovering from the threat of global recession, and the value of the Naira against other major currencies is greatly undermining the purchasing power of many Nigerians.

Perhaps, it may be apt to draw attention to the fact that Nigeria lacks enough commercial banks to manage their daily financial transactions for several years. Out of about 89 banks before the CBN policy on capitalization in 2004/2005, only about 25 banks are now operational. Even the recent CBN reforms have exposed the vulnerability and liquidity status of some banks, triggering questions of confidence problems in the banking system.

For this new cash withdrawal policy to be effective, therefore, The Tide commends adequate public enlightenment of the banking publics. Besides, the CBN should proceed with the strategic medium and long-term goals in order to achieve the desired results. We say this because in the past, CBN had initiated policies on coins as means of business transactions which suffered setbacks due mainly to the inconveniences of conveying large coins instead of its equivalent denominations in currency notes.

We think that the success of the new policy depends largely on consistency and continuity of implementation and enforcement by the apex bank. We urge the CBN to avoid a flurry of policy changes that may compromise the gains already made. The Tide insists that the CBN should stick to its June, 2012 deadline for the take off of the new cash withdrawal policy in order not to encourage corruption. We say so because previous CBN deadlines, especially that on capitalization of banks, updating of accounts, bank reforms, among others, failed to guarantee sustainable confidence in the banking system.

The Tide, therefore, urges the CBN to adequately address the challenges of the new cash policy, and work to ensure that the Nigerian economy drives national development in such a way that every citizen is confident that their money is not only safe and secure but can guarantee them value for their sweat and hard work.