CASHLESS POLICY PRELUDE: CBN DIRECTS BANKS TO CHARGE 2% FOR DEPOSITS AND 3% FOR WITHDRAWALS

The Central Bank of Nigeria on Tuesday issued a directive to all deposit money banks in Nigeria to start charging 2% for deposits and 3% for withdrawals as processing fee for amounts greater and N500,000 for individual accounts, and N3 million for coporate accounts.

The directive which takes immediate effect came from the Payment System Management Department of the Apex Bank and was dated 17th September, 2019.

This is a prelude to the full implementation of the cashless policy which the Apex Bank says will go into full effect from March 31 2020 according to the circular.

For now, the new charges will apply on cash deposits in banks in some pilot states, namely Lagos, Ogun, Kano, Anambra, Abia, Rivers, and Abuja FCT.
From March 31,2020, the policy will be implemented nationwide.

According to the CBN, the cashless policy is aimed at reducing (not eliminating) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)

In effect, the bank also aims to use the policy as a tool in ensuring the effectiveness of monetary policy in managing inflation and driving economic growth. Simply put, it is a measure by the Apex Bank to reduce and control the amount of cash flowing in the system, and encourage more electronic transactions.

The cash-policy applies to all accounts with exception to Government revenue generation account, Primary Mortgage Institutions, Microfinance Banks and Embassies.

Daily Limits
The limits are cumulative daily limits each for withdrawal (e.g. for Individuals, the daily free withdrawal limit is N500,000).
The limits apply to the account so far as it involves cash, irrespective of channel (e.g. over the counter, ATM, 3rd party cheques encashed over the counter, etc) in which cash is withdrawn. For example, if an individual withdraws N450,000 over the counter, and N150,000 from the ATM on the same day, the total amount withdrawn by the customer is N600,000, and the service charge will apply on N100,000 (the amount above the daily free limit).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 cash-in-transit companies, as the CIT company only serves as a means of transportation.

Clearly, this measure is targeted at controlling inflation, and encouraging the growth of electronic banking, leading to the drastic reduction of physical cash in the system.

Finance experts kick, urge reduction in the rates
Some finance experts are kicking against the policy in light of harsh economic realities in the country's economy, with some calling for a downward review of the 2% and 3% charges.

The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, called for a downward review of the charges to 0.5 per cent for individuals and 1.5 per cent for corporate organisations.

He said bank customers were already suffering the burden of various charges from DMBs for carrying out various banking transactions.

He gave some of the charges as card maintenance fee, Automated Teller Machine withdrawal charge, stamp duty, Commission on Turnover and SMS alert.

He says it would be unfair for the apex bank to impose additional charges on cash withdrawals and deposits in a bid to promote cashless economy.

He said, “The move by the CBN to promote cashless policy is commendable because it has some benefits such as reducing the amount spent by the apex bank in cash management.

“However, the Nigerian economy is still fragile and at a time when the CBN is promoting financial inclusion, it would not be fair to impose additional charges on bank customers that are already overburdened with different types of charges from banks.

“The cash deposit and withdrawal fee announced by the CBN is too high. They should reduce it to 0.5 per cent for transactions involving individuals and 1.5 per cent for corporate companies.”

Similarly, a former Director-General, Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu, said the imposition of the charges should be reviewed downwards considering that many Nigerians were still unbanked.

He said, “The policy is aimed at reducing cash transactions and if you reduce cash transactions, it becomes easier for banks and CBN to manage cash.

“Each time cash is moved from one location to another, it involves a lot of costs. So, this cashless policy will help the CBN and the Nigeria Financial Intelligence Unit to track transactions.

“Above all, it may not ultimately reduce the need to withdraw cash. When the benefit of the cash you are going to pay is far above the charges you are going to get, then you will definitely ignore the charges, withdraw the cash and make the payment.

“If they maintain the kind of charges and remove automatically what they call maintenance charges, stamp duty and others, it will help to promote the cashless policy.”