CBN’s Approach on Cashless Policy; An Albatross to the Growth of Banking – Qudus Alalafia.


As part of its efforts to promote the cashless policy in Nigeria, the Central Bank of Nigeria has re-introduced charges on cash deposits over N500,000 which was made effective from Wednesday, September 18th 2019. This comes as an addition to the already existing charges on withdrawals.

This policy stipulates a processing fee of 3 percent on charges for withdrawals and 2 per cent charges for deposits on cash withdrawals that exceed N500,000 for Individuals; 5 per cent and 3 percent respectively for cash withdrawals that exceed N3,000,000 for Corporate bodies.

It behest on this writer to look into purposely to avoid being blind to the ideological cynosure of this policy, reasons behind its introduction which includes;

  1. Driving development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.
  1. An efficient and modern payment system which breeds positive correlation with economic development and being a key enabler for economic growth.
  1. To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
  1. To improve the effectiveness of monetary policy in managing inflation and driving economic growth.
  1. The cash policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including;
  • High cost of cash: There is a high cost of cash along the value chain – from the CBN & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling.
  • High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
  • High subsidy: CBN analysis 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 subsidizes the costs that the tiny minority 10 percent incur in terms of high cash usage.
  • Informal Economy: 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.
  • Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.
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However, it’s hereby stated that a good intent, dream and potential goal without a robust plan is deemed abandoned, jettisoned and mismanaged because a credible and efficient plan is the main wheel upon which such intent, dream and potential goal is to ride and anything fall short of it, is an effort in futility.

Adams Smith posited Convenience as one of the four basic Cardinals of Taxation as to where its final burden lies. While this writer lauds the vision of the apex bank in respect of this policy, the approach and manner adopted falls short of any modicum of convenience as espoused by Smith.

It’s on record that the banking spirit of Nigerians is low and effort is being made to encourage majority to have a safe with Banks rather than traditional methods of saving money. Perhaps it’s pertinent to put on record that the arguments of many Nigerians who are allergic to saving money in banks revolve around the tedious protocols of savings and charges made on same. Therefore, it’s counter productive to use same ground for non savings in Banks to compelling Nigerians to key into this policy.

While bank customers were already suffering the burden of various charges for carrying out various banking transactions which includes charges on card maintenance fee, Automated Teller Machine withdrawal charge, stamp duty, Commission on Turnover and Short Message Service (SMS) alert, it’s most inhumane for the apex bank to impose additional charges on cash withdrawal.

The writer of this piece therefore suggests as follows;

  • That robust policy awareness should be made before the commencement.
  • Serious attention placed on the number of Illiterates who far outweighs the number of Literates during this policy awareness and an extension should be made to literates who still nurse the phobia of online transactions due to the herculean protocols associated with resolving complaints on online transactions.
  • In the spirit of fairness and convenience, the charges imposed are to be reduced to the barest minimum in such a manner that it entices all and sundry to key into.
  • Additional incentives should be made available if the charges on corporate entities are to stand to avoid capital flight else, charges on same should be reduced to encourage influx of more corporate bodies.
  • The red tapism associated with banking should be expunged while services are greatly improved upon.
  • Efficient mechanism should be put in place to address customers’ complaints made on online transactions which is to be solved no matter how clumsy within 48 hours. This will go a long way to alleys the fears of many in respect of online banking.
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This writer believes that these are the conditional precedents the Central Bank of Nigeria ought to have taken before this step as failure to do this amounts to using the biggest sledge hammer as a punishing tool on bank customers when opportunities are very much available to make use of lesser mechanism to enforce this cash policy.

Sincerely, a good policy without appropriate steps will only leads to nowhere.


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