The CBN cashless policy is one of those thoughtout policies to drive financial inclusion, meaning it would ensure that banking services get to everybody and offer all platforms for empowerment that will change the way people transact businesses and living generally. It is even hoped that by the time the policy goes full blast, the Nigerian huge informal economy which is driven by small scale farmers, traders, craftsmen and other types of small and medium-sized businesses and eventually integrate it into the nation’s formal economy. The policy will also enhance the integration of the Nigerian economy as presently 78.8 percent of the country’s rural populations are largely unbanked. To ensure effective Implementation, the CBN has mandated a 3 percent ‘cash handling charge’ on daily cash withdrawals (irrespective of the channel) in excess of N500,000 for individuals and 5 percent charge on excess of N3,000,000 for Corporate bodies. Also, a 3rd party cheque above N150,000 was disallowed from being cashed over the counter nationwide, effective June 1, 2013.
The limits apply to the account so far as it involves cash, irrespective of channel (e.g. over the counter, ATM, a 3rd party cheques cashed over the counter, etc) in which cash is withdrawn. This meant that if an individual withdraws N450,000 over the counter, and N150,000 from the ATM on the same day, the total amount withdrawn by the customer is N600,000, and the service charge will apply on N100,000 – the amount above the daily free limit). The limit also applies to cash brought through CIT companies, as the CIT companies only serve as a means of transportation. This however, applies to all accounts with exception to government revenue generation account, primary mortgage institutions, microfinance banks and embassies.
Taking off in Lagos State from January 2012 as a pilot phase, the cashless policy is hinged on Nigeria’s larger vision of becoming one of the twenty largest global economies by year 2020 (vision 20:2020) as articulated during the Olusegun Obasanjo administration. But even after the commencement in January 2012, service charge could not take effect till March same year in Lagos. This was to give people time to migrate to electronic channels and experience the infrastructure that had been put in place. Banks were to use this grace period to encourage their customers to migrate to available electronic channels, and where possible, demonstrate the costs that will accrue to those that continue to transact high volumes of cash from March 30th, 2012 in Lagos State.
After a successful pilot phase, the policy took effect in Rivers, Anambra, Abia, Kano, Ogun and the Federal Capital Territory (FCT) on July 1, 2013 for the second phase and went nationwide on July 1, 2014. In a bid to also give people ample time to understand the policy and migrate to electronic channels that had been deployed, the CBN also announced a one year waiver on the withdrawal charges in the latest implementing 30 states. The advantages of a cashless economy in any jurisdiction are enormous; cost of transportation and the danger of carrying large sums of money about will obviously reduce. But the CBN says it introduced the new cash policy for a number of key reasons – apart from using it to develop and modernise the Nigerian payment system in line with its Vision 2020 goal, the policy will also help to improve the effectiveness of monetary policy in managing inflation and driving economic growth.
It is also seen as a veritable tool to curb some of the negative consequences associated with the high usage of physical cash in the economy like the high cost of cash management along the value chain – from the CBN and the banks, to corporations and traders, all of which bear the high costs associated with volume cash handling. Another reason is to also cut down the high risk of using cash, which encourages robberies and other cashrelated crimes that often lead to financial loss in the case of fire and flooding incidents. Another cost is the huge cash subsidy by the CBN. Analysis at the commencement of the cashless policy showed that only 10 percent of daily banking transactions are above N150,000 but the 10 percent account for majority of the high value transactions.
This suggests that the entire banking population subsidises the costs that the tiny minority 10 percent incurs in terms of high cash usage. Besides, high cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth. High cash usage, as it implies also enables corruption, leakages and money laundering, amongst other cashrelated fraudulent activities. The CBN says as it continues to successfully implement the cashless policy across the country, various benefits continues to accrue to the various stakeholders.
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