Nigeria’s apex bank on Tuesday introduced a new policy targeted at reducing cash in use. The new regulation will see additional charges levied on bank customers making cash deposits and withdrawals, effective from today, September 18, 2019.
In a circular issued to deposits money banks (DMBs), the regulator said withdrawals of five hundred thousand Naira (N500,000) for individual accounts would attract 3 percent processing fees, while a 2 percent processing fee will be charged for lodgments of the same amount.
For corporate accounts, commercial banks would charge 5 percent processing fees for withdrawals and 3 percent processing fee for lodgments of amounts above three million Naira (N3,000,000).
The charges are only applicable in some states for now including Abia, Anambra, Kano, Lagos, Ogun, Rivers and the Federal Capital Territory (FCT). The new policy will take effect nationwide by March 31, 2020, the Central Bank of Nigeria (CBN) said.
The new transaction fees, which are in addition to already existing charges on withdrawals, are in continuation of the CBN’s cashless economy initiative. In June, the central bank announced the takeoff of the third and final phase of the cashless policy in 30 states. The decision followed the successful completion of Phases 1 and 2 in six pilot states and Abuja, it said.
To further promote the cause as well as enhance the collection of applicable government revenues, the bank also issued a circular for a review of the merchant settlement process by bank customers.
On January 1, 2012, Phase 1 of the cashless scheme commenced in Lagos. Back then, the bank introduced the policy on cash-based transactions which mandates a cash handling charge on daily cash withdrawals that exceed N500,000 for Individuals and N3,000,000 for corporate bodies.
Meanwhile, additional states – Abia, Anambra, Kano, Ogun and Rivers States, as well as Abuja – were involved in Phase 2, which commenced in October 2013.
The CBN cash-less policy provides safe and efficient mechanisms for making and receiving payments with minimum risks to the bank, payment service providers and end-users.
Going cashless not eases one’s life but also helps authenticate and formalize transactions carried out, Nairametrics says. Consequently, the authentication and formality in the financial system helps to curb corruption and the flow of black money which results in an increase in economic growth.
The initiative is generally considered beneficial to all stakeholders. Albeit, there have been several criticisms by Nigerian citizens on the strategy the central bank is adopting to ensure compliance and achieve its cash-less objective.
Particularly, social commentators have taken to Twitter to blast the new transaction fees, which most believe puts an additional financial burden on the people. To put their argument into context, with the new policy, if an individual pays N510,000 into a savings account, the bank will charge N10,020 for the transaction.
“Why do I need to pay an extra 2% when I deposit over N500,000 or pay 3% when I withdraw same?” Popular Twitter commentator, Dr Dípò Awójídé (@OgbeniDipo) said. “After paying account maintenance charges monthly, ATM maintenance charge, stamp duty charges and transaction charges when I transfer to other banks? This cashless policy is confusing.”
On the other hand, Political Economy expert, Dr Joe Abah berated the regulator for the sudden imposition of the new policy without prior information or sensitization, a move he says is characteristic of a military government.
“Our Central Bank still thinks we are in the military era. If, for whatever reason, you are going to introduce charges for deposits, will you just issue a circular? No explanation? No justification? No sensitisation? You just issue a circular and call it cashless policy? Na waa o,” Dr Abah tweeted.
Amidst the continued backlash, the CBN has said the new policy on cash-based transactions (withdrawals) in banks, is to reduce and not eliminate, the amount of physical cash (coins and notes) circulating in the economy, thus encouraging more electronic-based transactions such as payments for goods, services, and transfers.