Tony Chukwunyem 
Given the key role digitalisation plays in speeding up development, aiding economic growth, bringing people closer and enabling better use of resources, the Central Bank of Nigeria’s (CBN) cashless policy could be the remedy to the nation’s myriad socio-economic challenges, writes Tony Chukwunyem
Despite its great economic potential, abundant resources and policies introduced by different governments since Independence in 1960, aimed at enhancing social welfare and achieving developmental goals, there has clearly been no significant positive change in Nigeria‘s Human Development indicators. However, when in the early 2000s studies started showing a steady decline in the use of cash for purchasing consumption goods in advanced economies, many Less Developed Countries (LDCs) including Nigeria, began to focus on transiting from a cash economy to a cash-less one as part of its efforts to boost development.
Foundation
Thus, in a circular dated April 20, 2011, the Central Bank of Nigeria (CBN) announced its decision to introduce a cashless policy with effect from January 1, 2012, using Lagos as the pilot programme. To enforce the implementation, the apex bank had, in a circular in April 2012, declared: “Commencing from June 1, 2012, a daily cumulative limit of N150,000 and N1,000,000 on free cash withdrawals and lodgements by individuals and corporate customers respectively with deposits money banks shall be imposed.” It prescribed processing fees of three per cent and five per cent on withdrawals by individuals and corporates respectively while deposits/ lodgments are charged two and three per cents also for individuals and corporates respectively. In response to public outcry, however, the apex bank raised the daily cash withdrawal and deposit limit for individuals to N500,000 and from N1,000,000 to N3,000,000 for corporate accounts. The CBN, at the time, gave a number of reasons for introducing the cashless policy. These include: To drive development and modernisation of the country’s payment system in line with the Federal Government’s then Vision 2020 goal of being amongst the top 20 economies in the world by the year 2020; to reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach and to improve the effectiveness of monetary policy in managing inflation and driving economic growth and to curb some of the negative consequences associated with the high usage of physical cash in the economy, such as, high cost of cash, high risk of using cash, high subsidy and inefficiency and corruption. The apex bank also pointed out at the time that the policy was necessary because an efficient and modern payment system is a key enabler for economic growth. Following the successes recorded during the pilot phase in Lagos, the second phase of the programme commenced in Abia, Anambra, Kano, Ogun and Rivers States, as well as the Federal Capital Territory (FCT) Abuja in 2013. However, in 2017, citing the need to allow banks deploy the technology that would allow the policy to operate seamlessly, the CBN suspended the implementation of the programme in the remaining 30 states of the federation. But in a move, which showed that it remained focused on the programme, the apex bank, on September 17, 2019, announced the full implementation of the cashless policy in the FCT and the six states (Lagos, Abia, Anambra, Kano, Ogun and Rivers).
100% cashless target
Indeed, in October 2022, the CBN Governor, Godwin Emefiele, while speaking at the one year anniversary of the bank’s digital currencythe eNaira- stated that the regulator was committed to making Nigeria 100 per cent cashless. According to him, all the infrastructure that is needed to ensure a smooth working cashless system such as the Central Bank Digital Currency (CBDC), online banking, Payment Service Banks (PSBs), agent banking and mobile banking, have since been deployed. “The destination as far as I am concerned is to achieve 100 per cent cashless economy in Nigeria. I know that those who doubt us will say that 100 per cent cashless is unattainable. Yes it is true, but Nigeria must move from being a predominantly cash economy to a predominantly cashless economy,” he stated.
Naira redesign policy
Industry watchers were, however, caught unawares, when barely twenty four hours, after the eNaira one-year anniversary event, Emefiele announced that the CBN had concluded plans and obtained the approval of President Muhammadu Buhari to introduce redesigned banknotes that would replace the current N200, N500, and N1,000 notes. Emefiele said the naira redesign policy, which would take effect from December 15, 2022, was among other reasons, aimed at helping the CBN to tackle hoarding of naira notes by members of the public, as data shows that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.
Full implementation of cashless policy
Again, reactions were still trailing the naira redesign announcement when the CBN announced that full implementation of the cashless policy nationwide would commence on January 9, 2023, with new cash withdrawal limits. Specifically, under the revised cashless policy, individual bank customers would not be able to withdraw more than N100,000 in cash over the counter, through ATMs or POS in a day. This amounts to N500,000 every week or N2 million in a month. For corporate customers, the withdrawal limit was placed at N5 million per week, translating to N20 million per month. The apex bank also placed a limit of N100,000 limit on over the counter third party cheques. “Third party cheques above N100,000 shall not be eligible for payment over the counter, while extant limits of N10,000,000 on clearing cheques still subsist,” it said. The CBN, however, stated that, in compelling circumstances where cash withdrawal above the limits is required for legitimate purposes, such requests will be subject to a processing fee of three per cent and five per cent for individuals and corporate organisations, respectively. In addition, for a customer to be able to exceed the limit, the apex bank said financial institutions are to “obtain the following information from the customer, at the minimum, and upload same on the CBN portal created for the purpose: Valid means of identification of the payee (National ID, International Passport, or Driver’s License), Bank Verification Number (BVN) of the payee, Tax Identification Number (TIN) of both the payee and the payer and Approval in writing by the MD/CEO of the financial institution authorizing the withdrawal.” Achievements of cashless policy Expectedly, reactions to both the naira redesign policy and the revised cashless policy have been mixed. Some members of the National Assembly, who expressed concerns over the policies, however, summoned the CBN Governor to appear before them. With the Emefiele outside the country on official assignment, he was represented by the Deputy Governor, Financial System Stability Directorate, Mrs. Aishah Ahmad, who, in her presentation to the legislators, on December 23, shed more light on why the regulator was focused on ensuring that Nigeria becomes a cashless economy. According to her, “the implementation of the cashless policy was a critical element that catalyzed the transformation being witnessed in the Nigerian financial and payments system.’’ She listed some of the key achievements of the policy to include: Expansion in financial access points (ATM, PoS, Agents and mCash); proliferation of e-payment platforms; growth in electronic channels adoption; enhancement financial inclusion; international recognition of Nigeria’s payment system and growth in vibrant fintech ecosystem; positive impact on GDP; and financial resilience of citizens during COVID-19. On concerns over the cash withdrawal limits, she explained that the CBN carried out in-depth analysis of over-the-counter intra-bank cash transactions over 12 months (November 2021- October 2022) to assess the impact of the policy on the generality of citizens. Ahmad disclosed that the outcome showed that a significant value of cash transactions was below the maximum thresholds indicated under the current cashless policy and was thus not subject to the cash processing charges. It also showed that 94.04 per cent and 62.63 per cent respectively of volume and value of cash transactions by individuals were below the threshold while 82.36 per cent and 39.38 per cent of the volume and value of cash transactions by corporates was below the threshold. The CBN Deputy Governor also stated that the proliferation of financial access touch points and epayment channels across urban and rural areas, which present citizens with ample alternative for financial transactions, such as 1.4million agent locations, 900,000 POS and 14,000 ATMs, also support the nationwide implementation of the cashless policy. In a recent statement, the Association of Corporate Affairs Managers of Banks (ACAMB) disclosed that Nigerian lenders have invested an estimated total sum in excess of N100 billion in setting up and maintaining modern electronic channels over the past few years. The association said: “These commitments by Deposit Money Banks (DMBs) have seen Nigeria rising steadily and recognised as having arguably Africa’s most advanced digital financial services industry and one of the world’s top 10 realtime payment markets.”
Conclusion
As financial experts pointed out over the weekend, apart from helping to transform the country’s payment system, a cashless economy will undoubtedly help in curbing the high rate of criminal activities , such as, armed robbery, kidnapping, terrorism financing, advance fee fraud, graft, ransom payment and extortions, that appear to have reached epidemic proportions in these parts.
