The Central Bank of Nigeria (CBN) first introduced a Cash-less Nigeria Policy in 2012 which aimed to reduce – not eliminate – the amount of physical cash circulating in the economy in an attempt to encourage more electronic-based transactions. This policy imposes a cash handling charge on daily cash withdrawals and deposits.
According to the new rules, withdrawals exceeding N500,000 for individual customers will face a processing fee of 3% whereas deposits will incur a 2% fee. For corporates, the fees are respectively 5% and 3% for amounts exceeding N3,000,000.
Nigeria had over 7 billion banknotes in circulation in 2017 for a population of 190 million people. However, only 40% of the population are banked.
Introducing the new cash policy
Cash-less Nigeria was introduced for several reasons, including:
Negative consequences associated with high cash usage
According to the CBN, the cash policy aims to curb the negative consequences associated with the high usage of physical cash in the economy, including:
Not everyone is on board with the transition. Ben Kalu, Chairman of the Committee on Media and Public Affairs, said the House is,“Deeply worried that the implementation of the cashless policy on withdrawals has negative impacts on micro, mini, small and medium enterprises, which are clearly the engines of growth of the economy and employment generation”.
Moreover, the House was concerned that the CBN did not put people first when crafting the policy, contradicting Section 14(2)(b) of the Constitution of the Federal Republic of Nigeria, 1999 (As Altered) which highlights “the security and welfare of the people as the primary purpose of government”.