Mallam Sanusi, CBN Governor
Mixed reactions have continued to trail the proposal by the Central Bank of Nigeria (CBN) and the bankers’ committee to limit the cumulative daily cash withdrawals and lodgements in the country from June next year
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While some experts and operators from different sectors of the economy welcomed the move by the banking sector regulator, others argued that due to the pallid state of infrastructure in Nigeria, the country was not ripe for such a policy.
The CBN had in view of the increasing dominance of cash in the Nigerian economy, pegged the daily cumulative withdrawals and lodgements in banks by individuals effective from June 1, 2012 at N150,000 and also restricted the daily cumulative withdrawals and lodgements by corporate customers from same period at N1,000,000.
The CBN had in view of the increasing dominance of cash in the Nigerian economy, pegged the daily cumulative withdrawals and lodgements in banks by individuals effective from June 1, 2012 at N150,000 and also restricted the daily cumulative withdrawals and lodgements by corporate customers from same period at N1,000,000.
The banking regulatory authority had also warned that individuals and corporate organisations that flout the limits would be charged penalty fees of N100 per thousand and N200 per thousand respectively.
Managing Director and Chief Executive Officer of Fidelity Bank, Mr. Reginald Ihejiahi, said the policy was part of the move by the apex bank to smoothen the country’s payment system.
Managing Director and Chief Executive Officer of Fidelity Bank, Mr. Reginald Ihejiahi, said the policy was part of the move by the apex bank to smoothen the country’s payment system.
Ihejiahi said: “It is part of a package of modernising ideas to smoothen our payment system. The other reforms will help make it easier to implement. We cannot have a modern economy where the settlement of transactions is overwhelming by cash, anonymous and not easy to track.”
However, the Managing Director of Financial Derivatives Company Limited (FDC), Mr Bismark Rewane, argued that the objective of the policy was good but cautioned that if rushed, could be counterproductive.
According to him: “The transformation from a cash-centric economy to a plastic one will need more than one year. In fact, there should be a gradual introduction of the system. The fundamental structure needs to be put in place first.”
Rewane, who maintained that the cash economy was analogue, advised the CBN on the need to have a public hearing on the policy for all the people that transact with cash including the market traders, amongst other retailers and wholesalers, to sample their opinions, with a view to addressing their concerns. If this step, amongst other necessary steps were not taken, he argued, the policy could be counterproductive.
Rewane, who maintained that the cash economy was analogue, advised the CBN on the need to have a public hearing on the policy for all the people that transact with cash including the market traders, amongst other retailers and wholesalers, to sample their opinions, with a view to addressing their concerns. If this step, amongst other necessary steps were not taken, he argued, the policy could be counterproductive.
The financial and economic expert added that more importantly, an undesired consequence that the policy might result in, would be that people would keep money in the house, which would increase M1 (money outside the banking system) and reduce M2, (money within the banking system) thereby reducing the velocity of circulation.
According to him, cash deposits in the banks would reduce, impacting on the ability of the bank to lend out money, and the money in circulation would slump.
According to him, cash deposits in the banks would reduce, impacting on the ability of the bank to lend out money, and the money in circulation would slump.
On the contrary, the Executive Secretary and Chief Executive Officer, Financial Market Dealers Association (FMDA), Mr Wale Abe, said the proposed policy would help to develop other payment instruments, other than cash.
According him, because of the penalty attached to the carrying of cash; people would be persuaded to use other payment instruments.
“To make this policy effective, I think the law on the use of dud cheques must be strengthened. Those who are fond of issuing dud cheques should be tried. It is going to be a tough one, but I know that with time, people would be used to it. I strongly feel it is a step in the right direction,” Abe added.
According him, because of the penalty attached to the carrying of cash; people would be persuaded to use other payment instruments.
“To make this policy effective, I think the law on the use of dud cheques must be strengthened. Those who are fond of issuing dud cheques should be tried. It is going to be a tough one, but I know that with time, people would be used to it. I strongly feel it is a step in the right direction,” Abe added.
He urged the CBN to ensure that the policy was properly enforced, suggesting the use of moral suasion to drive it.
But some operators, who pleaded anonymity, also frowned on the policy, saying that with the low level of the banking population in the country, the move would further discourage financial inclusion.
But some operators, who pleaded anonymity, also frowned on the policy, saying that with the low level of the banking population in the country, the move would further discourage financial inclusion.
A freight forwarder, Mr Chukwudi Eleko, held the view that for the policy to be realistic, the regulator must address the porous e-payment system of the country, which according to him, had led to the loss of huge sums of money by some bank customers.
To the President, Renaissance Shareholders Association of Nigeria, Mr Olufemi Timothy, due to the high illiteracy level in the country, the policy would not fly. Timothy further argued that the policy would further dampen savings culture in the country.
He said: “There are some transactions you cannot effect without cash. The illiteracy level in the country is so high and what is the banking population of the country that we would want to discourage those that are already in the system? It is a negative and backward policy.”
To the President, Renaissance Shareholders Association of Nigeria, Mr Olufemi Timothy, due to the high illiteracy level in the country, the policy would not fly. Timothy further argued that the policy would further dampen savings culture in the country.
He said: “There are some transactions you cannot effect without cash. The illiteracy level in the country is so high and what is the banking population of the country that we would want to discourage those that are already in the system? It is a negative and backward policy.”
However, the Public Relations Officer, Association of Stockbroking Houses of Nigeria (ASHON), Mr Akin Akerodolu-Ale, insisted that the policy was healthy for the nation’s development, adding that it showed that the country was gradually moving to the next level.
According to him, the policy would make it easy for the regulator, credit rating agencies and other institutions to generate accurate data for decision-making in the country. He faulted the insinuation that the policy would discourage savings culture.
According to him, the policy would make it easy for the regulator, credit rating agencies and other institutions to generate accurate data for decision-making in the country. He faulted the insinuation that the policy would discourage savings culture.
Akeredolu-Ale said: “Another reason why the CBN is coming up with this policy is that the cost at which the CBN maintains cash is so high and with this policy, that will be reduced. The apex bank had also pointed out that the policy was also adopted to encourage the use of electronic payment channels.”
By Kunle Aderinokun and Obinna Chima
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