On Thursday, April 28, 2011, Central Bank of Nigeria issued a circular titled “Industry Policy on Retail Cash Collection and Lodgement”. According to the Central Bank of Nigeria (CBN), there is no going back on “Industry Policy on Retail Cash Collection and Lodgement” which imposes restrictions on daily cash deposits and withdrawals either by individuals or corporate entities. This is to discourage the use of raw cash in economic transactions in the country; the CBN is taking steps to promote the use of e-payment systems.
The CBN in this circular to all banks, Cash-in-Transit (CIT) operating firms, payments system service providers, as well as money card acquirers, issuers and processors, said that the new policies, including payment of increased penalties for cash transactions by individual and corporate bank account holders, are to help reduce the high usage of cash as well as moderate the cost of cash management among operators in the country’s financial system.
Effective from June 1, 2012, daily cumulative free cash withdrawals and lodgements by individual and corporate customers must not exceed a maximum of N150,000 and N1 million respectively.
The CBN has imposed a penalty of N100 per N1000 on all individual cash transactions in excess of the limit, while corporate customers that go contrary to the new policy are to pay a fee of N200 per N1000 withdrawn above the stipulated cumulative limit.
The circular stated that, “Contravention of this policy shall attract a fine of five (5) times the amount that the bank waives as a first offender, while the bank shall, subsequently, pay ten (10) times the charges waived.”
With effect from June 1,this year, operators of card payment schemes, processors, switching companies, service providers, and banks risk being suspended for a month or licence revoked by the CBN, for not acquiring approved operational agreements/contracts for local currency Point of Sale (POS) card scheme.
The CBN warned that “All financial institutions, including Deposit Money Banks (DMBs), Savings and Loans, Mortgage and Microfinance Banks shall comply accordingly. Compliance with the policy shall be monitored by the Banking Supervision Department and the Other Financial Institutions Supervision Department with appropriate sanction applied to erring institutions,”
This move is expected to reduce the amount of currency outside the banking system and many believe, would help curb incidents of violent robberies which have become common because people move huge volume of cash around.
This new cash withdrawal limit, I think it is a great idea for this country to grow. If faithfully implemented, It is going to enhance transparency and accountability in the banking industry as well as check corruption and money laundry. Government taxation system would be effective and individual income can be verified easily. It will save cost of handling cash and this monetary policy will also promote wider use of alternate payment systems such as electronic money payment system, electronic money transfer, mobile payment system and so on. This new policy would open up a new phase of business culture in Nigeria and this will give a big boost to the software industry in Nigeria as new e-payment systems will emerge.