By Francis Ekeh, Abuja
The Central Bank of Nigeria (CBN) on Thursday give reasons it recently introduced the cash withdrawal limits and currency redesign policies which have become subject of controversy in the country.
The CBN deputy governor, financial system stability, Aisha Ahmad, justified the policies when she appeared before the House of Representatives at plenary to address the lawmakers on the developments.
The House had three weeks ago summoned the the CBN governor, Godwin Emefiele to brief it on why the apex bank launched the policies which it described as draconian but he could not showed on account of ill health and official duties outside the country.
Ahmad told the House that cash withdrawal limit policy was based on data available to CBN which showed that 94 percent of all cash transactions falls below the N500,000 limit and that includes in areas in the country that are not part of the cashless policy, saying 82 percent of corporate transactions also are below the limit.
She also said fees are to be charged only on any withdrawal above the limit, stating that if one is withdrawing N550,000, the fee will be on the N50,000.
The deputy governor said: “We also looked at transactions for agents. So, transactions by Nigerians that go to the agent’s location and transactions by the agent’s themselves, the average cash transactions of agents is N2,184,000 which is clearly within the current limit. The average transaction per individual that walks up to an agent is about N18,000.
“What the policy is trying to do is to encourage more people to come into the formal payment system because of the numerous benefits that accrue. It means opening up our rural areas, the underserved areas to economic opportunity, to payment opportunity and connecting them into the formal system,” Ahmad said.
According to her, the CBN has since reviewed the limit significantly from N100,000 that “we had per week to N500,000 per week for individuals; from N500,000 per week for corporate to N5 million per week for corporate.
“We have also amended the processing from 5 and 10 percent downward to 3 and 5 percent. We have clarified the strategic importance of agents as important participants in the financial system because they play a key role in certain underserved segments in the rural areas and in certain markets areas and they as well would be covered by this new revised rule.”
Ahmad said policy was a continuation of the cashless policy that was started 10 years ago and it was in recognition of the positive changes that have happened in the financial and payment system since the cashless policy was first launched.
She said: “Some of these changes included one: a wide proliferation of financial access point. In 2012, thereabouts, we were still talking about bank branches as the only source of access to financial services.
“Today, we have a very robust payment system that includes bank branches, branches of micro-finance banks, POS machines, ATM machines, agent banking, E-Naira and many other options. To be specific, between the bank and the micro-finance banks, we have 6,500 locations, 900,000 POS terminals, 14,000 ATMs across the country and 1.4 million agents nationwide and every single local government in Nigeria has agent represented.
“We also have a proliferation of electronic transactions. Just by way of quick example, in 2012, we had N48 billion in POS transactions. Today, we have N6 trillion in POS transactions.
“On electronic transfers, we had N3 trillion in 2012. Today, we have 300 trillion as at October, 2022. That’s a 7,000 percent increase. We have also seen an improvement in financial inclusion to 54.1 percent and lastly, perhaps, more importantly, we have seen the evolution of the Nigerian payment system on the global stage.
“Nigeria is judged 6th in the world for instant real payment and we are only behind countries like India, china, Thailand,Brazil and South Korea. We are the only African country in the top 10 and this has been as a result of some of the initiatives that have gone on. Also, electronic payment and realtime data payments have been estimated to contribute about 0.67 percent to our GDP.
“During the COVID-19 period, we saw the negative impact of physical cash. No one could go anywhere. We couldn’t go to the banks. People couldn’t leave their homes. It was the electronic banking system that protected and served those below the poverty lines that had their livelihood at risk.”
For the currency redesign Ahmad said from available data, the denominations that are not going to be redesigned, the N100, N50, N10 and N5 are predominantly used in the hinterlands and in the rural areas and those are not going to be affected by the policy.
“Also, you have access to your money. So, there is prohibition in terms of what you want to collect. It is for certain large amount, you need to provide additional information,” she said.
Highlighting the benefits of the cashless policy, Ahmad said it is to reduce cash processing cost, minting cost, the cost of destroying old notes and cost of moving the physical cash from place to place.
“All these costs are passed on typically to the banking public. Getting rid of these costs means that charges will be less on that respect. Also this is an opportunity to promote Nigeria’s positive image from money laundering perspective.
“Even the recently passed anti-money laundering law has limits for cash for a reason because cash is usually the medium by which some of these nefarious activities are done. Suffice it to say that the advantages around protecting people from armed robbery, kidnapping, terrorism financing goes without gainsaying.
“We will continue to be open, engage, listen as we implement this policy in response to the sentiments of Nigerians. It is not intended to disenfranchise anyone particularly those in vulnerable situations, in the rural areas, markets, it is meant to bring everyone into the significant economic opportunity that comes when you are fully included, Ahmad added.
Answering avalanche of questions from lawmakers concerning the new policies, she said the decisions were not political as the bank as an independent institutions operate on research and data results.
Ahmad disclosed that the CBN had ordered the printing of 500 million pieces of currency from the Minting company and it will be working with the National Orientation Agency and other stakeholders to sensitise the public on the new notes to tame the spread of fake notes.
She also said CBN works with the National Bureau of Statistics, banks and other financial institutions to generate the data used for making certain decisions, adding that banking infrastructure was beyond deposit banks and include all payment platforms which surged recently.
“We have to make it very clear that the CBN is an independent institution. Our decisions are taken base on research, data and it is the work of many teams working together across the different directorates. At no time, do we make decisions based on any political consideration and I think it’s important that I state that.
“We are trying to work with the National Orientation Agency (NOA), local religious leaders and market leaders and people in the local communities.
“Our data and whether we work with National Bureau of statistics, we do joint surveys but a lot of these data is also from the financial system. The reason why we’re able to provide this data is that it is electronic and the data is available to us from banks and other financial institutions.
“From CBN perspective is through encouragement (Not coercion) and providing the right benefit that will encourage people to change behaviour and like I said, the populace has been very resilient. If you look at electronic transfer adoption between 2012 and now, it’s like night and day 7000% growth. That shows resilience and responsiveness. So we are ready for this because from the data that we have even in states that don’t have cashless today are not affected by the fees.
“Banking sector infrastructure, it’s important that we take it as the financial sector infrastructure. We do ourselves disservice when we say banking is just about deposit money bank we have other financial institutions today. We have microfinance banks, we have a lot of Fintech companies and a lot of channels.
“For me, the infrastructure from what we see has grown significantly from mobile connectivity to using new channels like USSD which actually allows people that do not have smart phones to also transact, we have the e-naira which was launched recently which is another option, POS machines.
“In the past it was about the cost of the POS machine, today you don’t actually need a physical machine to receive money you can use your mobile phone and it turns into a POS machine. So the discussion about infrastructure is much wider than we heard.
“Cashless is going to enable more trading because you don’t need to physically take cash from one part of the country to the other what you can do instantly through transfer.
“Petition from mobile money agents – I believe that the reversed limit that we have actually takes the agents into consideration and from the data that we received from the agents themselves, in terms of transaction size is less N2.5 million so they will not be affected.
“The reasons why we have agents today is due to policies of the CBN around cashless because that was what spurred the innovation and the investment in that channel and that is what has created the livelihood for the 1.4 million agents that we have today,” Ahmad stated.
In his comments speaker of the House, Femi Gbajabiamila said it was obligatory of the CBN under Section 8 of its Act to brief the House on monetary policies and there is a reason that provision but that was not done.
Gbajabiamila said it took the prompting of the House, not once, not twice, but three times to have the CBN come for the briefing, stressing that, it was an obligatory briefing under the CBN Act Section 8.
“The reason why the House needed to be briefed under the contemplation of the law was because this House represents the people out there. So by briefing the House, we can now go back, assuming we agree with your policy to our constituents and let them know what is going on and why it is going on.
“We could have worked with you if we agreed with you. So the question remains how come the CBN did not brief the House and moving forward, that should never happen again. That is number one.
“All your policies may be of good intentions, but they say the road to hell is sometimes paved with good intentions. We are aware of the bank of England, we are aware of the US. Just recently the Bank of England changed their notes to the King Charles notes, and the bank made a publication that it would not come into effect until 2024. In other words, they gave a year’s notice in a cashless society.
“How come then can we rationalise two, three months notice in a cashful society. And not only do they give that kind of notice, in the United States, in other places, even when the law or the policy takes effect, you are allowed to continue to use the old notes at the same time until it is completely phased out. So these are questions that are begging for answers, he stated.
Gbajabiamlila told the CBN deputy governor that 94 percent of the banking population she said was not affected by the withdrawal limit policy is dependent on the 6 percent adversely affected.
“You said only six percent of the banking populace are affected adversely by this policy. 94 percent are not because they withdraw below that limit weekly. Now that is in percentage terms. Can you tell us in numerical terms what that percentage means.
“In other words, how many people are in the banking sector, how many citizens are captured. I think I heard you say earlier that they were 60 or 70 million Nigerian or thereabouts. So six percent of that figure comes to how many people?
“Now if it runs into millions, are you aware that even if that may be insignificant too, in terms of trickle down economics, there is a relationship between the people at the top of the pyramid, the six percent and the 94 percent. The 94 percent cannot cycle their business without the six percent. So you cannot isolate the six percent and say they operate on their own, and goodluck to them.
“The 94 percent is dependent on the six percent. So these are things that if you had consulted with us, we would have brought these perspectives to you to look at and examine and reexamine until we come to a good meeting place,” he said.