From Uche Usim, Abuja
The global financial ecosystem runs on a digital template and nations, developing and developed, are investing heavily to domesticate cashless system through digitisation.
It was against this backdrop that the Central Bank of Nigeria (CBN) embarked on a journey to make cashless financial services a way of life for Nigerians in 2012 thus rekindling hope that the country ready to compete in the global space.
At that time, there were obvious underlying foundational challenges like poor Information and Communication Technology (ICT) infrastructure, poor awareness, illiteracy and cultural barriers, addiction to cash transactions, among others.
So, it became imperative to tackle the aforementioned challenges considerably before rekindling conversations on digital banking and cashless policy.
Economic analysts have, overtime reasoned that as a country burdened with terrorism, banditry, kidnappig and several other crimes, it was quite imperative that Nigeria resorts to modern banking practices that makes the regular use of cash usage inappropriate and inconvieniencing considering it could government tackle illicit financial inflows, terror financing and tracking public sector profligacy.
Besides, the CBN, in its examination of the economy, realised that as at December 2022, N2.7 trillion out of N3.2 trillion currency in circulation was outside the banks making most of its monetary policy actions futile.
The bank began its latest reform by redesigning the old naira notes (N200, N500 and N1,000) and unveiled the new ones on December 15, 2022. It went further to peg weekly cash withdrawals by individuals and corporate bodies at N500,000 and N5 million, effective from January 9.
The apex bank said the redesigned naira notes would be rationed to encourage the public, regardless of location and social ranking, to use digital platforms for transactions.
These are; internet banking, mobile banking, domestic card (AFRIGO), USSD, PSBS, POS, eNaira app and 1.4 million mobile banking agents spread across the country to attend to the informal sector and those in far-flung settlements.
This is consistent with the practice in developed and developing countries across the globe.
Analysts note that if the experience of India’s demonetization exercise is anything to go by, then it is evident that imposition of cash withdrawal limits by monetary authorities, following a demonetisation exercise, is a norm.
This makes the cash withdrawal limit an integral part of the currency redesign package as both are mutually dependent.
The move, according to the CBN Governor, Mr Godwin Emefiele, became necessary because of the need to deepen financial inclusion, track spending, smoothen monetary policy implementation, reduce the high cost of cash handling and mop up excess cash outside the banks.
However, about N2 trillion has so far been retrieved, leaving a shortfall of N700 billion still expected to return to bank vaults by February 10 or thereabout.
The huge funds outside the banking system meant that kidnappers, terrorists and other criminals could ply their nefarious businesses without appearing on security agencies’ radars, since cash transactions are harder to track.
On plans to deepen financial inclusion, the Director, Development Finance Department of CBN, Mr Yusuf Yila said Nigeria targets to get 95 percent of the over 200 million population financially included by 2024.
Weighing in on the new initiative, Nigeria’s first professor of capital markets, Prof Uche Uwaleke said that the cash withdrawal limit is an integral part of currency redesign meant to reduce the amount of currency circulating outside the banking system.
He said it will have no negative impact on these businesses given the many alternative payment platforms available to them.
“Rather, the impact will be positive as it reduces the risk associated with carrying huge cash such as armed robbery. The incidence of money laundering is equally likely to reduce.
“In place of cash transactions, these businesses can use more reliable and safer channels such as POS, Debit cards, eNaira and electronic transfers”, he said.
In his view, the former Managing Director/Regional Executive Ecobank Nigeria, Patrick Akinwuntan, expressed confidence that the cashless policy would improve financial security and transparency.
“If you look at the level of theft when people go to buy things in the market, it is cash robbery. It happens when people are coming from the shops, robbers believe that there is money with you. But with this policy, the average Nigerian will know well, maybe this person will not be holding up to N100,000”, Akinwuntan said.
He however urged regulators to monitor and walk with Nigerians on the journey.
“If Nigerians see the support from the regulators, they will fall in line. For instance, we can see that most banks want to be available on Saturday and I actually think some will be available on Sundays also. That process needs to take a lot of feedback. Once the people understand that the regulators are focused on this policy and are supportive in its implementation, I think it has a good opportunity of taking Nigeria to a better monetary environment,” he said.
For analysts, the policy is part of a broader strategy for the CBN to control FX demand.
However, on insinuations that the new naira and the accompanying rules were designed to hurt politicians who have stacked up the old notes for politicking, the CBN Governor, Mr Emefiele, said there was no such motive as CBN interventions are woven around economic exigencies and not the interest of politicians, since the regulatory body remains fully non-partisan.