It is no longer news that on the 23rd of November, 2022, the Nigerian Legal Tender- the “Naira” particularly the ₦200, ₦500, and ₦1,000 notes were redesigned. This change was announced by the President of the Federal Republic of Nigeria before the Federal Executive Council. Further to this recent development, Sir Haruna Mustafa, Director of Banking Supervision at the Central Bank of Nigeria (CBN), announced that over-the-counter cash withdrawals by individuals and corporate entities weekly, should not exceed ₦100,000 and ₦500,000, respectively.
This change has been received with mixed reactions including a host of concerns over the reason for the change, as well as the economic benefits of this change.
In this overview, we will be highlighting the new policy requirements as well as the reason for the change and its effect on the Nigerian economy.
HIGHLIGHTS OF THE CBN NAIRA RE-DESIGN AND WITHDRAWAL POLICY
The following are highlights of the CBN’s Naira Re-design and withdrawal policy:
- Over-the-counter cash withdrawals by individuals and corporate entities should not exceed ₦100,000 and ₦500,000, respectively, per week. Withdrawals above these limits shall attract processing fees of 5% and 10%, respectively.
- Third-party cheques above ₦50,000 would not be eligible for payment over the counter, while extant limits of ₦10,000,000 on clearing cheques still subsist.
- The maximum cash withdrawal per week via ATM should be ₦100,000 subject to a maximum of ₦20,000 cash withdrawal per day.
- Only denominations of ₦200 and below should be loaded into the Automated Teller Machine (ATM).
- In compelling circumstances, not exceeding once a month, where cash withdrawals above the prescribed limits are required for legitimate purposes, such cash withdrawals shall not exceed ₦5,000,000 and ₦10,000,000 for individuals and corporate organizations, respectively, and shall be subject to the referenced processing fees in (i) above, in addition to enhanced due diligence and further information requirements.
While the above development has been greeted with quite a number of views, I think it pertinent to aver our minds to the major reason why the above policy was issued.
In answering the above, the Nigerian Central Bank held out that the major reason for the issuance and implementation of the policy was to limit the use of cash and bring more people into the banking system, as a majority of Nigerians have no bank accounts and use informal markets where cash is preferred, as well as the need to stamp out the payment of ransoms to armed gangs who kidnap people and demand millions of naira in cash.
Having understood the reason, how does this benefit the Nigerian Economy?
Undoubtedly, the Nigerian Economy has undergone a series of downturns over the years. However, with the CBN proposing a majorly cashless society, it is believed that the following causal effects will occur: