As a way of further controlling the amount of cash in circulation, the Central Bank of Nigeria, CBN, recently imposed ATM withdrawal limits on bank customers.
The new regulation, according to the apex bank, will not only maintain cash reserves, but it will also provide customer security.
Recently, the CBN redesigned the country’s currencies in a bid to mop up the excess monies said to be in circulation.
It was reported that of the countries ₦3.23 trillion currency in circulation, ₦ 2.73 Trillion was outside the vaults of Commercial Banks across the country as of September 2022.
While the new policy on cash withdrawals
- Automated Teller Machines (ATMs) will no longer load bank notes above ₦200.
- Customers will no longer be able to withdraw more than ₦20,000 per day via the ATM and₦100,000 per week via the same channel.
- The maximum cash withdrawal via the point of sale (POS) terminal will be ₦20,000 daily.
- Over-the-counter withdrawals will be ₦100,000 for individuals, with a 5 per cent processing fee for amounts above the cap.
- Over-the-counter withdrawals for corporate organisations will be limited to ₦500,000 and 10 per cent charge for amounts above the limit.
The new regulatory directives take effect nationwide from January 9, 2023.
Why the new policy?
According to the CBN, the new cash policy was introduced for a number of key reasons.
Some of the reasons the bank gives are listed below:
Modernised payment system
It is believed that the new policy on cash withdrawal will drive the development and modernization of the country’s payment system.
This is in line with Nigeria’s vision 2020 goal of being among the top 20 economies by the year 2020.
The CBN believes that an efficient and modern payment system is positively correlated with economic development and is a key enabler for economic growth.
The new policy also aims to reduce the cost of banking services, including the cost of credit, and drive financial inclusion by providing more efficient transaction options and greater reach.
By effectively reducing the cash in circulation, the CBN hopes to improve the effectiveness of monetary policy in managing inflation and driving economic growth.
Consequently, the cash policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy.
Some of those consequences as listed by the CBN include:
High cost of cash
There is a high cost of cash along the value chain – from the CBN and the banks to corporations and traders; everyone bears the high costs associated with volume cash handling.
High risk of using cash
Carrying physical cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire, flooding or other disasters.
While ATM withdrawal limits may seem like a nuisance, they serve an important purpose in keeping your money safe.
CBN analysis showed that only 10 per cent of daily banking transactions are above 150k, but that figure accounts for the majority of the high-value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10 per cent incur in terms of high cash usage.
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 and corruption
High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.
Also not listed but often spoken of as a benefit of limiting cash withdrawal is the issue of vote buying.
Being that 2023 is an election, some say the policy is timely as it will limit the practice of some politicians moving heavy cash to sway voters.
What to do when you exceed your withdrawal limit
One of the benefits of running a cashless economy is that the banking hall becomes decongested.
While Nigeria is doing all it can to catch up with other parts of the world, there are those who have argued that the new policy by the CBN may be too stringent.
Unfortunately, the policy is fixed, meaning you cannot apply for your limit to be increased.
So, what do you do when you find yourself in need of cash, but you have exceeded your daily or weekly withdrawal limit? Or it could be that you need to make a large purchase that requires more than you can withdraw from an ATM.
The good news is that there are workarounds. Some may sound unconventional, but the important thing is that you are able to complete your transaction.
Visit the bank
Yes, the goal is to decongest the banking hall and yes, cash withdrawal over the counter also has limits, but it also helps when you are in need of physical cash.
Consider cash transfer
One unconventional way to go about your need for cash is to transfer the desired amount to the Point of Sale (POS) vendor who will then give you the needed cash.
This method is dependent on several factors including network availability and how swiftly your bank sends you the debit notification.
Maybe it’s just time for you to adopt online banking. By using your bank’s mobile app, you can carry out several transactions like paying your utility bills, paying for your cable and internet subscriptions and sundry actions.
That way your need for physical cash is reduced.
You can also use it to purchase goods in supermarkets or traditional markets by making a direct transfer to the trader.
In the absence of a mobile app, your ATM card can also be used to sort out some bill payments.
Pay the penalty
Although there is a limit to your daily and weekly cash withdrawals from ATMs and POS, over-the-counter withdrawals have a different story.
Exceeding the limit for over-the-counter withdrawals attracts a five per cent processing fee for amounts above the cap and a 10 per cent charge for corporate organisations.
Instructions for banks
The new CBN policy on cash withdrawals is not just for individuals alone. Financial institutions also have their roles to play.
In executing the policy, the banks are required to:
- Render monthly returns on cash withdrawal transactions above the specified limits to the Banking Supervision Department of the CBN.
- Comply with regulations relating to KYC, ongoing customer due diligence and suspicious transaction reporting in all circumstances.
- Encourage customers to use alternative channels (internet banking, mobile banking apps, USSD, cards/POS, eNaira, etc.) to conduct their banking transactions.
The CBN also notes that aiding and abetting the circumvention of this policy will attract severe sanctions.