By Chinwendu Obienyi

Nigeria remains a cash-based economy, laging several advanced countries that have started exploring other efficient modes of payment with excellent outcomes.

This understanding is predicted on the belief that economic development should be inclusive and that improved access and use of financial services would enlarge payment systems of a nation and better the lot of the citizens.

In such societies, cashless payment channels help reduce cost and enhance the quality of banking service delivery, thus enhancing affordability, penetration and use of banking financial services. 

Strategies of cashless policies promoted by financial technology (Fintech) create avenues and increase the reach of banks and encourage the push for financial inclusion in developing countries.

Financial inclusion which entails access and use of financial services is integral in the buying and selling of funds by financial institutions. This implies that lack of access, due to cost (deposit interest rate and lending interest rate) of financial services impairs the intermediation process and the benefits therein. This hampers capital accumulation, availability of loanable funds and investment.

Cashless transactions broaden pull payments and deposits via point of sales machines, automated machines, mobile applications and other online channels with the aid of plastic cards.

Thus, cashless policies create more avenues to drive financial inclusion as economic agents (households and businesses) in a country interact by means of payments via diverse conduits and instruments.

With this in hindsight, the Central Bank of Nigeria (CBN) under the leadership of Sanusi Lamido, introduced the cashless policy in 2012 to digitise payment channels and instruments, reduce cost of bank financial services to drive inclusive finance and to enhance monetary policy effectiveness and stimulate economic growth. The hallmark of the policy was to accelerate and encourage digital payment systems and minimize the use of currency in facilitating transactions in the country, in order to ensure the flow of funds within the banking superstructure.

The cashless policy, as at then, prescribed processing fees on daily cash withdrawals and cash deposits that exceed N500,000 for individuals and N3 million for corporate bodies. The processing fees prescribed are 3 per cent and 5 per cent on withdrawals by individuals and corporates respectively while deposits/lodgments are charged two and three per cent also for individuals and corporates respectively.

Although the policy had taken effect in seven states, namely; Lagos, Abia, Anambra, Kano, Ogun, Rivers as well as Abuja, the CBN, in August 2015, suspended the policy to allow banks deploy the technology that would allow the policy to operate seamlessly. However, since 2015, technological advancement in the Nigerian banking industry has grown exponentially to become one of the best in the world.

Researchers hold that awareness and the use of cashless payments channels and instruments have improved considerably within the last decade. However, records show that only 0.7 per cent of people with bank accounts utilised post of sales services, 0.8 per cent of financially included economic agents utilised the internet and below 2.5 per cent utilised mobile devices to facilitate financial transactions.

The non-existence or lack of banking presence in rural areas could also mean that a good number of the universe of rural settlers have no access or minimal access to formal banking services and payment channels and instruments.

No doubt, a safe and efficient cashless payment system is seen as the gateway to improved access and usage of bank financial services. However, it is safe to say that a cashless payment system that is unsafe and inefficient could impair penetration, access and use of bank financial services

This is why the CBN’s cashless policy is geared towards safeguarding the interest of Nigerians as represented in the bank’s 5-Year Policy Thrust (2019 – 2024) which was launched by the CBN Governor, Mr. Godwin Emefiele at the inception of his second term in office.

According to him, all infrastructure that is needed to ensure a smooth working cashless system such as the CBDC, online banking, Payment System Banks (PSBs), point of sale terminals (POS) agent banking, mobile banking and ATMs have since been deployed.

“The destination as far as I am concerned is to achieve a 100 per cent cashless economy in Nigeria. I know that those who doubt us will say that 100 per cent cashless is unattainable. Yes it is true, but Nigeria must move from being a predominantly cash economy to a predominantly cashless economy,” he stressed.

New withdrawal regime

There had been mixed reactions following the CBN’s introduction of the revised cash withdrawal limits following its recent currency redesign project. While some regard the initiative as a political witch-hunt, others have applauded it as a strategic move towards addressing the endemic issues of corruption in the system, and a step in the right direction in responding to the security challenges bedeviling the country as well as a commendable initiative towards helping the country to achieve its cashless policy targets and formalising the huge informal sector, among other benefits.

According to the new directive, individual bank customers cannot withdraw more than N100,000 in cash over the counter, through ATMs or POS in a day. This amounts to N500,000 every week or N2 million in a month. For corporate customers, the withdrawal limit was placed at N5 million per week, translating to N20 million per month.

The circular, signed by CBN’s director of Banking Supervision, Haruna Mustafa, also placed a limit of N100,000 on over the counter third party cheques.

 “Third party cheques above N100,000 shall not be eligible for payment over the counter, while extant limits of N10,000,000 on clearing cheques still subsist”, it said.

In line with the plan of the CBN to ensure that the higher denominated notes will be used as only a store of value as more of the lower notes will be in circulation, the apex bank had directed that, as against N1,000 and N500 notes that are dispensed by ATMs across the country, the N200 and below only must be loaded into ATMs. This would mean that N500 and N1,000 notes can only be collected over the counter at the banking halls or at POS points.

Whilst the amount of cash that can be withdrawn over the counter had been capped at N100,000 in a day, the amount that can be taken from ATMs and Point of sale was limited to N20,000 in a day.

The apex bank, however, noted that, in compelling circumstances where cash withdrawal above the limits is required for legitimate purposes, such requests will be subject to a processing fee of three per cent and five per cent for individuals and corporate organizations, respectively.

The CBN further noted that monthly reruns on cash withdrawal transactions above the specified limits should be rendered to the Banking Supervision Department while compliance with extant Anti-Money Laundering/CFT regulations relating to KYC, ongoing customer due diligence, and suspicious transaction reporting among others is required in all circumstances.

The bank also encouraged bank customers to use alternative channels including internet banking, mobile banking apps, USSD, cards/POS, eNaira among others to conduct their banking transactions. The CBN also warned the banks and other financial institutions that aiding and abetting the circumvention of the new policy would attract severe sanctions.

Naira redesign

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On October 26, Emefiele announced moves to redesign the Naira in the variation of N200, N500 and N1,000. Emefiele, who pointed out that the change was a sequel to the approval of President Muhammadu Buhari, said circulation of the new banknotes would commence on December 15, 2022.

According to him, the development was also aimed at checking increasing ease and risk of currency counterfeiting evidenced by several security reports, and the increased risk to financial stability as well as the worsening shortage of clean and fit notes, with the attendant negative perception of the CBN.

The CBN governor said there was significant hoarding of naira notes by members of the public, with statistics showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks.

He said as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, describing the development as unacceptable. Although the cessation of the old notes were meant to stop by January 31, 2023, the apex bank at the weekend, extended the deadline for the exchange of old naira notes for new ones from January 31 to February 10, 2023.

Describing President Muhammadu Buhari, as an incorruptible leader for approving the naira redesign programme, Emefiele said the aim of the CBN is mainly to make the nation’s monetary policy decisions more efficacious while adding that it is also supporting the efforts of the security agencies in combating banditry and ransom taking in Nigeria through redesigning programme.

According to Emefiele, the currency in circulation in 2015 was just N1.4 trillion but as of October 2022, the currency in circulation in Nigeria has surged to N3.23 trillion out of which only N500 billion was within the vaults of the banks and about N2.7 trillion still held in people’s homes.

“Ordinarily when CBN releases currency in circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN. So far and since the commencement of this program, we have collected about N1.9 trillion, leaving us with about N900 billion”, he said.

He noted that to achieve effective distribution of the new currency, the CBN embarked on several initiatives while adding that amid reports of breaches by some bank branches, the apex bank will partner with the EFCC and ICPC, by sending their staff to all CBN and DMB branches nationwide to join in monitoring the implementation of these guidelines to ensure compliance with the laid down guidelines.

“We are happy that so far, the exercise has achieved a success rate of over 75 per cent of the N2.7 trillion held outside the banking system. Nigerians in the rural areas, villages, the aged and vulnerable have had the opportunity to swap their old notes; leveraging the Agent Naira Swap initiative as well as the CBN Senior staff nationwide sensitization team exercise.

Aside from those holding illicit/ stolen Naira in their homes for speculative purposes, we do aim to give all Nigerians that have Naira legitimately earned and trapped, the opportunity to deposit their legitimately trapped monies at the CBN for exchange. Based on the foregoing, we sought and obtained the approval of the President for the following; A 10-day extension of the deadline from January 31, 2023 to February 10, 2023 to allow collection of old notes legitimately held by Nigerians and a 7-day grace period beginning on February 10 -17, 2023 in compliance with sections 20 (3) and 22 of the CBN’s act allowing Nigerians to deposit their old notes at the CBN after the February deadline for the cessation of the notes as legal tender”, the CBN governor said.

CBN’s objectives

It is essential to point out that the CBN’s cashless policy initiatives is an ambition that the apex bank had been nursing for years – and not just because of the 2023 general elections which some uninformed persons had alluded to as reasons why the bank was introducing measures to witch-hunt politicians.

Secondly, this is an aim to foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians thereby raising the financial inclusion rate in the country and lastly, to continue to work with the Deposit Money Banks (DMBs) to improve access to credit for not only smallholder farmers and MSMEs but also consumer credit and mortgage facilities for bank customers.

There had been concerns that the common man living in the remote parts of the country may be left behind by the CBN’s cashless policy. But as attested to by President Muhammadu Buhari recently at the Financial Inclusion conference in Abuja, the digital innovation, spearheaded by the apex bank had also facilitated access to credit and payment for rural dwellers and enabled them to conduct their businesses without the need to travel far in search of the nearest bank branch.

Financial inclusion stakeholders had been at the forefront of providing innovative solutions for addressing some of the pressing issues which Nigerians face as a people.

Buhari said, “For instance, to increase financial services access points in underserved locations in the country, the CBN issued the Payment Service Bank regulatory framework.”

 Furthermore, through the Shared Agent Network Expansion Facility (SANEF), the number of agent banking locations in the country is now over 1.4 million from 86,000 in 2018”.

The development is a further reassurance that the cashless policy will not leave anyone behind.

Experts react

The cash withdrawal limit as well as the naira redesign has continued to enjoy the support of well-meaning Nigerians including analysts who said the move by the CBN was long-overdue, adding that the measure will boost monetary policy effectiveness, tax compliance and strengthen the Naira.

Speaking to Daily Sun via a telephone chat, Head of Research at FSL Securities, Chiazor Victor, said, he was pleased to see that the apex bank is doing all it can to maintain monetary and price stability amongst other functions.

“Redesigning the Naira comes with some advantages as it is going to help the CBN manage excess liquidity that has been outside its control which when achieved should slightly slow the surge in inflation”, Chiazor said.

For his part, Professor of Finance and Capital Markets, Nasarawa State University, Keffi, Prof. Uche Uwaleke, said the CBN’s moves will give impetus to financial inclusion as Nigerians become compelled to embrace alternative payment platforms.

Uwaleke said, “It now behooves the CBN to ensure that bank charges on money transfers and other related charges are reduced to the barest minimum.”


From N48 billion in POS transactions in 2012, we have N6 trillion today. Similarly, electronic transfer has also grown from N3 trillion in 2012 to N300 trillion as at October 2022 – a 7,000 per cent increase. The cashless policy is further complemented by mobile phone penetration in Nigeria which stands at 152 million, according to the Nigerian Communications Commission (NCC).

Hence, it is safe that there have been early successes of the CBN intervention as the monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) recently affirmed that the various policy interventions of the bank had led to a reduction in inflation after months of an uptick in the headline index.