The Central Bank of Nigeria, CBN, in 2012, disclosed its plans to begin a transition to a cashless economy as part of the country’s ambition to become one of the best 20 economies before the year 2020. The objective of the scheme was to reduce the number of naira notes and coins used for business but not to eliminate cash usage in its entirety and seeks to ensure a seamless, inclusive and equitable implementation of the exercise for the overall benefit and growth of Nigerians, the financial system and the economy as a whole.
The apex bank said, “Our economy uses too much cash for transactions for goods and services, especially for buying and selling. This is not how it is done in other progressive countries of the world where there are other payment options like debit and credit cards, bank transfers, bank direct debits, Automated Teller Machines (ATMs), and even mobile phone money.”
Consequently on December 21, 2022, the apex bank announced an upward review of its cash withdrawal policy across all payment channels by individuals and corporate organisations. Effective January 9, 2023, individuals and corporate entities can withdraw a maximum of N500,000 and N5 million respectively on weekly basis compared to N100,000 and N500,000 which was previously announced on December 6, 2022.
The bank said in compelling circumstances where cash withdrawal above the limit is required for legitimate purposes, such request shall be subject to a processing fee of 3 per cent and 5 per cent for individuals and corporate organisations respectively.
The new policy on cash-based transactions seeks to reduce the amount of physical cash circulating in the economy, and not to eliminate it – as well as to encourage more electronic-based transactions in the payments for goods, and services among others.
The bank maintained that an efficient and modern payment system is positively correlated with economic development and is a key elixir for economic growth.
The cashless policy will cut the cost of banking services including the cost of credit and drive financial inclusion by providing more efficient transaction options and greater reach; improve the effectiveness of monetary policy in managing inflation and driving economic
It will also provide increased convenience and more service options for consumers and reduce the risk of cash-related crimes, particularly banditry, ransom taking and terrorism financing as well as provide cheaper access to banking services and access to credit.
Certainly, the policy has helped to control inflation, create faster access to capital, reduce revenue leakage, and cash handling costs while the government will enjoy increased tax collections, greater financial inclusion, and increased economic development. Insecurity and high profile corruption have been drastically reduced.
In a complementary gesture, the Nigerian Financial Intelligence Unit (NFIU) recently unveiled new guidelines aimed at mitigating money laundering, terrorist financing, and proliferation of weapons, among others.
The Enforcement, Guidelines, and Policies for Mitigation of Money Laundering, Terrorist Financing, Proliferation of Weapons and Prevention of Predicate Crimes which became effective on March 1, 2023, restricts cash payments of a sum exceeding N5 million (or its equivalent) for individuals, and N10 million or its equivalent for a body corporate. Section 19 of the MLPPA, 2022 imposes a fine of at least N10 million or imprisonment for a term of at least three years (or both), in the case of individuals; and a fine of N25 million in the case of a body corporate. Section 26 of POCA, 2022 makes provision for the seizure and detention of cash over the prescribed amount under the law.
The framework allowed for the discontinuation of cash withdrawal in Naira and foreign denominations from public accounts at federal, state, and local government levels were in compliance with its statutory responsibility under Section 3(1) a – s and Section 23 (2) a of the NFIU Act, 2018, and other provisions under the MLPPA, 2022.
According to the NFIU, “Civil servants are becoming more and more vulnerable to money laundering and its predicate offences due to their exposure to cash withdrawals from public accounts”.
An analysis spanning 2015 to 2022, showed that the federal, state, and local governments withdrew N225.72 billion, N701.54 billion, and N156.76 billion respectively – all in cash. According to the NFIU chief executive, “The cash withdrawals directly contravene the provisions of the MLPPA, 2022 and the Proceeds of Crime (Recovery and Management) Act, 2022 (POCA, 2022) which provide the legal framework setting limitations on cash transactions and sanctions for infringement of the provisions. We support the CBN circular on cash withdrawal limit which is in harmony with the law, provided in Section 2 of MLPPA, 2022. This guideline will support the efforts of the CBN.”
There is no doubt that the cashless policy remains popular with Nigerians who believe that the initiative would plug leakages in the administration of public resources and well as help to win the fight against corruption which is endemic in the country. The only obstacle to the policy is the privileged and corrupt elite who want to continue to take undue advantage of the system to enrich themselves to the detriment of vulnerable Nigerians.
The vision of a cashless society, while ambitious, does hold the potential to bring about a range of benefits for the country and its people if implemented correctly. These transformations in the financial landscape have significant effects on the government, businesses, and society at large.
As the world becomes increasingly reliant on technology, the traditional way of doing business is no longer feasible. A cashless society offers a more convenient and secure alternative to physical cash. The benefits are numerous, from faster transactions to reduced costs and risks associated with physical currency, such as theft and fraud.
Despite the challenges, the push by the CBN to modernise the country’s financial system to enable individuals and businesses enhance their financial efficiency and security is commendable. This will pave the way for new innovations from digital payment providers and encourage financial inclusion. As Nigeria continues to embrace the shift towards digital payments, it is vital that all stakeholders work together to ensure a seamless transition and maximize the benefits that a cashless society can offer.
It is also imperative that the CBN’s Acting Governor, Folashodun Shonubi, addresses the challenges impeding the full implementation of the cashless policy in the country. The apex bank must improve the technology which occasions incessant transaction failures as well as address the hard-to-reach areas and the nation’s epileptic electricity supply.
Abdullahi writes from Abuja
