ON Tuesday, last week, the Central Bank of Nigeria, CBN, introduced a policy that limits over-the-counter cash withdrawals from commercial banks to N100,000 for individuals & N200,000 for businesses per week.
The CBN has a long history of attempting to manage the demand and supply of the naira in an attempt to control its value. This looks like another one of those policies. This announcement has stirred an uproar, with questions like: “What are the reasons behind this new policy?” and “Is this to aid financial inclusion or target politicians?”
The CBN explained that the revised naira withdrawal policy is to complement the launch of the newly redesigned naira notes, which is in line with its cashless policy and financial inclusion mandate.
The withdrawal restriction seeks to encourage people to use more digital platforms and the e-Naira for transactions rather than cash. A more “cashless” economy gives the CBN better control over the supply and flow of money.
According to Stears, an intelligence company providing subscription-based data source of information for global finance and policy professionals; “This constraint on their access to cash will limit their business activities, reduce spending and create unemployment, as seen in India. Rural areas, which are the target of the financial inclusion objectives, rely heavily on agent banking operators for cash withdrawals and financial services. The media platform wrote: “this withdrawal policy can be tied to a wider CBN objective of ‘strengthening the naira’ ”.
In its final submission, Stears concluded: “The unmistakable solution to inflation and exchange rate stability is increased economic productivity.”
Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers, PwC, said, “The new cash withdrawals limit will have tax implications especially for individuals and MSMEs. As many people will be forced to carry out transactions using electronic payments, small businesses that currently operate mostly on cash will become visible to the tax authorities.
Oyedele, who is also the Chairman of the COVID-19 intervention committee for PwC West Africa, told Nigerians, “If you’re a small business owner, you need to take some steps now: Register with the relevant tax authorities: FIRS and the state Internal Revenue Service where you operate; Open a separate bank account for your business (or dedicate one for that purpose if you already have a business account) and don’t mix business with personal transactions.
“Government on its part needs to sensitise the general public especially small business owners, and the CBN should ensure a proper handshake with the fiscal authorities. For instance, the conditions for excess cash withdrawals could include Tax Identification Number,” Oyedele concluded.
To Adewale Adeoye, journalist and expert on Industrial Relations and Environment issues, who described the new CBN policy as the ‘Talibanisation of the political economy,’ said: “I’m for a cashless society, but the right conditions must be put in place first.
“In Nigeria we seem not to conduct effective survey before coming up with policies that have good motives but poor implementation processes. The new CBN rule is one of such good policies, but put in place without clearing the landmines and may end up being counter productive.
“The policy will suffocate the children, Nigerians, to death. Imagine, you are asked to make deposit of N50k for emergency operation in an hospital, while on the sick bed, you need to give N20k to someone to buy you medicine from pharmacy and the person needs to transport himself in a taxi driven by someone without PoS.
“Most Nigerians see the banks as high risk vendors. They see the banks as collaborators in crime.
“Many Nigerians hate their banks. Yet, interests on savings is about 1.5 percent. It means it does not make any sense to save money in Nigerian banks,” he concluded.
