The Central Bank of Nigeria launched on the 6th of December, 2022, a new withdrawal limit directive in keeping with its cashless policy objective and the launch of the new Naira notes by the CBN as well.

This policy has been received with some mixed feelings among the Nigerian population, with its urban & upwardly mobile demographic sections hailing it as a smart move while other sections of the population, especially those involved in what many call the “real economic sectors” of Nigeria, see the withdrawal limit policy as one more badly thought out move by the CBN which has been accused by some sections of the country of limitless incompetence.

However, the focus of this article is to look at the literal provisions of this directive and their legal implications as well as  provide a prediction of the regulatory and legal issues that may or may not arise from this policy.

What is the applicability scope of the Naira Withdrawal limit policy?

The CBN policy (set to take effect from January 9,2023) is applicable to all deposit money banks and OFIs (Other Financial Institutions) in Nigeria. 

What exactly are the provisions of the CBN withdrawal limit policy?

The provisions of the CBN Naira Withdrawal limit policy are :-

– Maximum OTC (Over The Counter) cash withdrawals per week of 100,000.00 Naira for individuals and 500,000.00 Naira for Corporate entities.

– Processing fees of 5% for Individuals & 10% for Corporate entities regarding withdrawals above the limits mentioned in the preceding paragraph.

– 3rd party cheques for amounts above 50,000.00 Naira shall not be eligible for OTC payments, though extant limits of 10 Million Naira I’m clearing cheques still exist.

– The maximum cash withdrawal limit per week from Automated Teller Machines or Points of Sale(POS) machines shall be 100,000.00 Naira subject to a maximum limit of 20,000.00 Naira per day.

– Only denominations of 200 Naira and below shall be loaded into Automated Teller Machines.

– In compelling circumstances not exceeding once a month where cash withdrawals above the prescribed limits is required for legitimate purposes, such cash withdrawals shall not exceed 5 Million Naira for individuals and 10 Million Naira for corporate entities respectively and shall be subject to the processing fee percentage mentioned in the first paragraph in addition to enhanced due diligence requirements.

For transactions under this paragraph, customers are required to obtain the following information at the minimum and upload same on the CBN portal created for the same purpose :-

– A valid means of identification.

– The payee’s Bank Verification Number (BVN).

– A notarized customer declaration of the purpose for the cash withdrawal.

– Senior Management approval for the withdrawal by the Managing Director of the drawer where applicable.

– An approval in writing by the Managing Director or Chief Executive Officer of the bank authorizing the withdrawal.

What are the legal & regulatory implications of the CBN withdrawal limit policy?

The withdrawal policy has its legal pros and cons which will be carefully outlined below :-

Pros 

1. The withdrawal limit policy has greatly reduced the ability to safely evacuate the proceeds of financial crime.

2. The New Naira redesign and withdrawal limit comes with even stricter AML/ CFT (Anti-Money Laundering/Combating the Financing of Terrorism) compliance requirements.

3. The withdrawal limit may serve as the single biggest boost given to the use of the E-Naira.

4. The withdrawal limit policy may potentially create in line with the CBN cashless policy drive, a very significant explosion in Fintech service demand while by Fintech awareness penetration into formally underbanked areas as well as the creation of previously unknown service platforms like Digital Bureaux De Change & E-Naira Speed wallet payment option enabling & support. 

Cons

1. The CBN withdrawal limit policy stands as a very big violation of the fundamental right to own and access property (moveable and  immoveable) guaranteed under the 1999 Constitution (as amended).

2. The CBN withdrawal limit policy might have inadvertently created a new shadow industry specializing in racketeering on the huge gap in physical cash supply that might arise from the policy similar to the strong Dollar racketeering allegations that trailed the CBN some years ago.

3. The CBN Guidelines do not apply to other financial entities like Cooperative societies that will simply become more parallel to the CBN by virtue of being closer to the most underbanked sections of the population most affected by this withdrawal limit policy.

4. The CBN might sooner or later be knee-deep in lawsuits for vicarious liability claims arising from the expectedly large number of electronic transaction payment issues that the sheer forced demand for cashless financial services might cause.

Credit Bureaux are basically corporate entities that specialize in providing lenders & creditors with due diligence-based information on potential borrowers needed to make lending decisions. 

In Nigeria, credit bureaus are licensed businesses operating under a defined regulatory framework.

The focus of this article is the process of getting a a credit bureau registered, with a focus on :-

– The components of the regulatory framework governing credit bureaux in Nigeria.

– Who is eligible to promote and own a credit bureau registered in Nigeria.

– The licensing requirements for a credit bureau in Nigeria.

– The permissible purposes of a credit bureau in Nigeria.

What is the main Regulatory instrument governing credit bureaux in Nigeria?

The main regulation governing credit bureaux in Nigeria is the CBN Credit Bureaux (Licensing, Operations & Regulations) Guidelines 2008.

What is the applicability scope of the CBN Guidelines?

The CBN Guidelines are applicable to all credit bureaux licensed by the CBN in Nigeria.

What is the objective of the CBN Guidelines?

The CBN Guidelines were drafted and passed to define the licensing, operational & regulatory requirements for a privately owned credit bureau under the CBN Act.

Who can legally own and invest in a credit bureau?

– Individuals and corporate entities can invest in a credit bureau subject to CBN approval.

– A bank is not allowed to invest in more than 1(One) credit bureau.

– Investments by a bank and its subsidiaries in a credit bureau shall not exceed 10% of the total paid-up capital of the credit bureau.

What are the licensing requirements for credit bureaux in Nigeria?

Licensing credit bureaux in Nigeria is in 3 stages namely :-

– The Application receipt and appraisal stage.

– The Approval-in-Principle stage.

– The Final Licensing stage.

Application Receipt and Appraisal

This stage involves sending an application to the CBN along with:-

1. A non-refundable application fee of 250,000.00 Naira made payable to the CBN.

2. Evidence of Payment of the minimum capital requirement of 500 Million Naira (refundable) to the CBN.

3. A Certified True Copy CTC of the applicant company’s MEMART Memorandum/Articles of Association.

4. A detailed feasibility report on the proposed credit bureau.

The Approval-in-Principle (AIP) stage

Upon being satisfied with an application, the CBN will grant an AIP lasting 180 days within which the credit bureau must comply with all the conditions specified in the guidelines, otherwise the AIP might be withdrawn by the CBN.

The Final Operating Licensing stage

After the AIP grant has expired and all necessary pre-conditions have been satisfied by the applicant, a final operating license will be granted subject to the following:- 

– The CBN has conducted an on-site verification to ascertain it’s readiness to commence operations.

– A license will automatically expire if a credit bureau has not commenced business within the first 6 months of the issuance of the license.

– All licensed credit bureaus shall be required to add “credit bureau” to their corporate names e.g. ABC LTD(credit bureau).

– Such names as mentioned in the preceding paragraph shall be registered with the Corporate Affairs Commission (CAC).

– No credit bureau shall be registered with a name which includes words like ‘central’, ‘federal’, ‘federation’, ‘national’, ‘Nigeria’, ‘state’, ‘Christian’, ‘Islamic’ or ‘Biblical’.

What are the permissible purposes for accessing credit information from a credit bureau under the CBN Guidelines?

Some of the permissible purposes for accessing any credit information from a credit bureau are:-

1. Applications for credit by borrowers.

2. The review of existing credit facilities.

3. Funds transfers of 1 Million Naira and above.

4. Prospective/Current employee checks. 

5. The acceptance of guarantees.

Where is a credit bureau allowed to collect customer/borrower data from?

Credit Bureaux shall under the Guidelines be allowed to collect data from:-

1. Nigerian banks.

2. The CBN Credit Risk Management System 

3. Insurance companies.

4. Asset management companies.

5. Other licensed credit bureaux.

Are there sanctions for illegal data disclosures by credit bureaux?

Yes, there are. Illegal disclosures by credit bureaux can attract punitive fines of 500 Thousand Naira and subsequent daily fines of 10,000.00 Naira from the CBN.