THE CENTRAL BANK OF NIGERIA’S CASHLESS POLICY: WHAT YOU NEED TO KNOW
The Central Bank of Nigeria (CBN) is the main regulator of the Banking and Financial Sectors in Nigeria. The CBN Act, 2007 confers the CBN with the responsibilities of amongst others ensuring monetary and price stability and promoting a sound financial system in Nigeria.
Pursuant to its statutory powers, the CBN recently re-introduced a cashless policy, which is aimed at promoting the development and the modernisation of our payment system, reducing the cost of banking services through the provision of more efficient transaction options; and also serve as means of curbing inflation and boosting economic growth.
MAIN PROVISIONS OF THE CASHLESS POLICY
The Cashless Policy, which was first introduced in 2012, is aimed at cash-based transactions and it stipulates a cash handling charge on daily cash withdrawals that exceed N500,000 for Individuals and N3,000,000 for Corporate Bodies.
For individuals, 3% shall be taken as processing fee for withdrawal and 2% as processing fee for deposits of funds. For companies, 5% as processing fee for withdrawal and 3% as processing fee for deposits. What this provision simply means is that for any deposit or withdrawal of cash that is above the stipulated sum for individuals and corporates respectively, the Deposit Money Bank processing the transaction is entitled to apply the processing fee on only the amount in excess of the stated sum for individuals and companies. For example, ABC Limited deposits N3,200,000 (Three Million Two Hundred Thousand Naira) into its corporate account with XYZ Bank Plc. Given the cashless policy, XYZ Bank Plc is by the provisions of the cashless policy authorised to charge 3% on the additional N200,000 (Two Hundred Thousand Naira) and not the entire N3,200,000 that was deposited by ABC Limited.
On 17 September 2019, CBN released a circular directed to Deposit Money banks, for the implementation of the cashless policy. The Circular states that charges on deposits and withdrawals shall apply to Lagos, Kano, Ogun, Abia, Anambra, Rivers and FCT, Abuja, effective 18 September 2019, while national implementation of the policy will take effect from 31 March 2020.
WHY DO WE NEED A CASHLESS ECONOMY?
For Individuals: Increased convenience and efficiency for both merchants and customers; more service options; reduced risk of cash handling-related crimes; cheaper access to (out-of-branch) banking services and access to credit.
For Corporations: Faster access to capital; reduced revenue leakage; enhanced transaction volumes and turnovers; and reduced cash handling costs.
For Government: Save money through the reduced cost of printing banknotes, control, and monitoring of cash-flow, money-laundering and terrorism financing, greater financial inclusion, increased economic data collection, planning and development.
ARE THERE CHALLENGES TO A CASHLESS ECONOMY?
Potential challenges that may arise from the implementation of the Cashless Policy are the absence of effective technological and infrastructural platform across the country, susceptibility to fraud and hacking etc. Investments in technology would obviate these challenges especially the issue of poor network connectivity associated with online and digital banking and the accessibility of POS machine by merchants and business entities. There are also concerns that the processing fees stated in the the cashless policy may be an additional form of charges or taxation especially taking into account various bank charges, stamp duties and Value Added Tax that is currently paid by customers.
In today's world, a cashless economy is desirable and indispensable, especially in the areas of trade, commerce, and industries. Any identified flaws in this well-thought-out policy can be corrected by the policymaker or lawmaker, so as to achieve its successful implementation and workability.
Mr. Ikemefuna Stephen Nwoye
Principal Chief Counsel -NWOYE (Barristers & Solicitors)
with research support from Miss Eberechukwu Ezeokeke who interned with the Firm.
Disclaimer: This paper should not in any way serve as a substitute for legal advice or opinion. The views expressed are personal to the author and do not necessarily reflect the views of any organisation or person that the author is or might have been affiliated to.