The Absurdity of CBN's Cash Withdrawal Limit
Following the redesigning of the naira by the Central Bank of Nigeria, the CBN vide circular/memo dated 6th December, 2022 with reference number BSD/DIR/PUB/LAB/015/069 issued to all financial institutions in Nigeria directed that individuals and corporations (from 9th January, 2023) shall not have liquid access to their funds or deposits save for NGN 100,000 (One Hundred Thousand Naira) and NGN 500,000 (Five Hundred Thousand Naira) respectively per week while withdrawals above this limit shall attract “processing fees†of a whopping 5% and 10% respectively! Note that the directive surreptitiously excludes governments at all levels including their arms or agencies. The document further recommends that in “compelling circumstances†not exceeding once a month, individuals or corporations in Nigeria may make cash withdrawals not exceeding NGN 5,000,000 (Five Million Naira) and NGN 10,000,000 (Ten Million Naira) respectively for “legitimate purposes†subject to “enhanced due diligence.â€
It is interesting to note that the aforementioned circular ostensibly emanates from the Banking Supervision Department of the CBN and same is signed by the director. This point is noteworthy because, by virtue of Section 31(1) and (2) Banks and Other Financial Institutions Act 2004, the aforesaid office is not only statutorily created but the powers and duties of the director are specifically stipulated to the exclusion of imposing cash withdrawal limits on customers of financial institutions.
Nonetheless, a few gray areas are apparent from the poorly thought out policy to wit: there is no definition supplied for “compelling circumstancesâ€, “legitimate purposes†or “enhanced due diligenceâ€. Furthermore, what additional services are being rendered by financial institutions for them to earn or charge “processing fees†on transactions above the weekly limit? In addition, why is government (at all levels) along with the different arms and agencies excluded from the economic policy?
A logical starting place would be the statute creating the CBN itself being the Central Bank of Nigeria (Establishment) Act 2007. Section 2 of the Act lists the principal objects of the Bank as follows:
1. ensuring monetary and price stability;
2. issuing legal tender currency in Nigeria;
3. maintaining external reserves;
4. promoting a sound financial system; and,
5. acting as banker to the Federal Government while providing economic and financial advice to the Federal Government.
Section 42(1) of the Act is also relevant as it provides that the CBN “shall wherever necessary seek the cooperation of and cooperate with other banks in Nigeria to:
1. promote and maintain adequate and reasonable financial service to the public;
2. ensure high standards of conduct and management throughout the banking system; and,
3. further such policies not inconsistent with this Act as shall in the opinion of the Bank be in the national interest.
The question at this juncture is – can the CBN, in light of the foregoing provisions as provided by its enabling Act as well as general economic circumstances or realities in Nigeria, impose such onerous conditions on Nigerians’ access to their hard-earned monies? We dare answer this question in the negative.
A logical justification for the cash withdrawal limitation in national interest is respectfully, inconceivable especially, vis-à -vis ensuring adequate and reasonable financial service to customers of banking/financial institutions. An elementary scenario ought to drive home the point – imagine farmers of tomatoes and pepper from the north finally getting their produce to the Mile 12 market in Lagos, southwest, Nigeria and after haggling price with the trader desirous of purchasing baskets to resell, the parties have to pause to conduct carry out transfer on their phone as opposed to the usual cash transaction. With the policy and the inflation resulting in prohibitive prices of food and other things, NGN 100,000 (One Hundred Thousand Naira) weekly would be seriously deficient for such transactions and it would be unjust to charge such traders an additional 5% which would be transferred to retail consumers thus, making food even more expensive. This consequence ought to have been considered by the policymakers which would have prevented the imposition of such hardship to everyday Nigerians.
It is therefore hoped that the CBN would reverse the nefarious and onerous policy or otherwise, banks would develop the appropriate temerity to challenge the directive through the courts.
Follow the author, AA Ibironke, Esq. on Twitter @SirMcAwesome247
