The Central Bank of Nigeria has issued a new directive to all banks, other financial institutions, and non-bank financial institutions, suspending the processing charges previously imposed on large cash deposits.
This is coming in the heels of calls by most Nigerians on CBN to release cash into circulation as the present scarcity is choking the low income earners and small entrepreneurs.
They are if the opinion the opinion that the current naira scarcity has arisen due to CBN’s mop-up of cash from the system, while calling on the apex bank to stop it and reverse the trend.
“It should release cash to the public as there is no justification for this round of squeeze.
We have had several rounds of tightening measures this year, including raising the Monetary Policy Rate, currently standing at 18.75 per cent. Yet, inflation has defied all of them and stands at 27.33 per cent currently. And we must note that the economic policies of this government such as petrol subsidy removal and floating of the naira contributed in no small measure to the inflation rate. So, the authorities should address the real factors responsible for inflation, rather than impose further suffering on Nigerians.
We counsel the authorities, therefore, that as the nation looks forward to the new year, all efforts must be channelled towards reflating the economy, rather than continuing with this tightening, hawkish stance. It is choking Nigerians. For now, CBN, release cash to Nigerians,” says an analyst who pleaded anonymity.
However, according to the circular released by CBN on Monday, it stated that This change, referenced under the “Guide to Charges by Banks, Other Financial Institutions, and Non-Bank Financial Institutions” dated December 20, 2019 (FPR/DIR/GEN/CIR/07/042), affects deposits over N500,000 for individual accounts and N3,000,000 for corporate accounts.
Previously, these deposits attracted processing fees of 2% and 3%, respectively.
Effective immediately, the CBN has put a hold on these charges.
This suspension is a significant shift in policy and will remain in effect until the end of April 2024. The move is seen as a response to the evolving financial landscape and the needs of depositors across Nigeria.
The directive mandates all financial institutions regulated by the CBN to comply by not imposing any charges on cash deposits that meet or exceed these thresholds.
This development is expected to encourage more significant cash deposits, enhance liquidity, and possibly impact various sectors positively, including small and large businesses.
In 2019 CBN announced that it would begin to charge bank customers making cash deposits and withdrawals from today, September 19, 2019. In a circular made available to the public, the apex bank disclosed that the new policy of transaction fees was designed to reduce cash in use.
The charges, according to the Central Bank, would attract 3% processing fees for withdrawals and 2% processing fees for lodgments of amounts above N500,000 for individual accounts.
CBN also made known that for corporate accounts, the Deposits Money Banks (DMBs) would charge 5% processing fees for withdrawals and 3% processing fees for lodgments of amounts above N3,000,000.
Also, just over a year ago, the CBN announced a new policy that mandates deposit money banks and other financial institutions to ensure that over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000, respectively, per week.
The revised cash withdrawal limits, contained in a circular was issued on Monday, December 11, 2023 by the apex bank.
The new policy came barely weeks after President Muhammadu Buhari launched the newly redesigned N200, N500, and N1000 banknotes. The naira redesign policy has now been cancelled and banks are now expected to accept both the old and new notes.
But Nigerians are nit taking the current hardship ocassioned by the scarcity lightly.
According to them, what started as a rumour has since become a reality, with the scarcity of naira spreading across the country.
Banks’ customers who wish to withdraw cash with their ATM cards are unable to do so and where they are, are only able to get N5000, in some instances. Already, queues are being at ATM points and bank premises, while baking halls have become ctiwfy and rowdy.
This development is disrupting the lives of ordinary Nigerians who depend on low-volume daily transactions to keep their businesses and families going.
It is also affecting businesses in parts of the country where banks have shut down due to insecurity. There is also the issue of poor networks in some parts of the country, which frustrates mobile transactions.
More worrisome is the fact that no concrete reason has been proffered for this new round of naira scarcity.
This new round of suffering is a sad reminder of an experience that Nigerians are in a hurry to forget. Under a supposed naira redesign programme by the former leadership of the CBN, the monetary authorities unleashed upon the citizens months of anguish as the currency notes, both old and new, disappeared from the banking system.
When this phenomenon appeared in October this year, the CBN blamed it on high volume withdrawals from the its branches by the banks and what it called panic withdrawals by customers from the ATMs.
However, there seems to be a lot wrong with this explanation. “If indeed the deposit money banks were withdrawing high volumes of cash from the regulator, was the cash not meant to be passed on to the banks’ customers? How would that lead to panic withdrawals by the banks’ customers? Also, if the above reasons given by the CBN were truly the cause of the scarcity, why has the regulator not found a solution to it by now?,” most Nigerians seem to be asking.
“It is time for the CBN to come out clean on this issue. If there is a problem with the economy, different from what is generally known, Nigerians have a right to that information. It would be recalled that when a similar issue occurred in the early part of this year, we saw huge queues at bank premises, Nigerians experienced untold hardship and some persons even died because they could not access cash for medical care or to purchase the necessary drugs.
Also, the economy suffered a significant loss during that period, which both the citizens and the country are yet to recover from. It is, therefore, worrisome that this phenomenon has returned.
“Something must be done urgently to address it, especially as we approach the festive period.
It is curious that despite the Supreme Court’s ruling recently that both the new and old naira notes remain legal tenders in the country, we are having this problem.
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If the authorities claim that bank customers are withdrawing large amounts of money, does this also apply to some sections of the northern region, where there are no banks at all, due to the insecurity prevalent in those places?
Or, could it be that the central bank is mopping up currency in circulation as part of its efforts to fight inflation? This is a common refrain that monetary authorities have used over the years, though its effectiveness in curbing inflationary pressures remains debatable. This is a classical, textbook example of managing inflation by reducing money in circulation. In addition, this could also be designed to curb the demand for foreign currencies by reducing the cash availability that drives the demand for such currencies, leading to the depreciation of the naira.
We acknowledge the fact that maintaining a stable price level is a key function of the central bank. Yet, we also advocate that in light of current developments globally and domestically, other policy tools as well as a mix of policies should be applied in tackling inflation. The belief by central banks that mopping up liquidity in the economy is an appropriate tool to fight inflation has serious limitations, especially in an economy like Nigeria’s with all the structural rigidities and other obvious causes of inflationary pressures,” questions most agitated Nigerians are asking, to nobody in particular but, CBN has kept mum.