The recent letter from the Central Bank of Nigeria (CBN) addressed to Deposit Money Banks (DBNs) on the implementation of the Cashless policy has generated a lot of reactions from the public. Most of the commentators on the revised CBN policy especially on the social media have not displayed a clear understanding of the charges.
The CBN in a letter dated 17 September 2019, signed by the Director of Payment System Management, Sam C. Okojere advised DMBs that new charges of 2% and 3% will apply as processing fee for cash lodgement of amount above N500,000 and N3,000,000 on individual and corporate accounts.
In addition to the revised 3% and 5% processing fee for withdrawal on individual and corporate accounts above N500,000 and N3,000,000 respectively will apply from 18 September 2019 in Lagos, Ogun, Abia, Anambra, Rivers State and the FCT while nationwide implementation will commence from 31 March 2020.
Some of the comments are a misrepresentation of the issue especially the calculation of charges involved:
The Fact is that the policy is meant to discourage cash usage and encourage electronics banking channels like Bank transfers, PoS, ATM, Online Banking, Mobile Banking, USSD banking and the rest of them. Among other aims of the policy.
Charges will only be paid on the excess cash deposit and withdrawal above the limit set by the CBN.
For instance, a cash withdrawal of N1,000,000.00 by an individual from his bank account will attract charges of N15,000 while cash deposit of same amount will attract N10,000 being 3% and 2% Withdrawal and Deposit charges on the excess of N500,000. But no charges will apply if the transaction were not cash base or it is below N500,000.
For corporates, a cash withdrawal of N6,000,000.00 by a company from its bank account will attract charges of N150,000 while cash deposit of same amount will attract N90,000 being 5% and 3% Withdrawal and Deposit charges on the excess of N3,000,000. But no charges will apply if the transaction were not cash base or below N3,000,000.
Cashless Policy came Into effect in January 2012 with the pilot implementation is Lagos. It was subsequently implemented in Rivers, Anambra, Abia, Kano, Ogun and FCT in July 2013. The policy was supposed to have been implemented in all other states in Nigeria by July 2014 before it was jettisoned and restricted to the 6 states and FCT. Charges on bank deposit was also dropped in the policy implementation.
The main aim of the policy among others are:
1. Reduction in the amount of physical cash in circulation thereby reducing the high cost of cash management by CBN, banks, corporations and traders and the risk associated with it. High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.
2. Encourage more electronic based transactions for payment for good and services and also transfers thereby drive the development and modernization of the Nigerian payment system.
3. Improve the effectiveness of monetary policy in managing inflation and driving economic growth. High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy.
Revenue generating accounts of federal, states and local government were however exempted from charges in associated with the cashless Policy. Embassies, diplomatic missions, multilateral and donor agencies were also exempted.
The Bankers Committee at its 493rd meeting held on the 8th of February 2017 reviewed the policy and decided to extend it to the rest of the 30 states of the country. They also reintroduced the charges on deposit and reviewed new rates.
These are the details of the new rates as approved by the bakers committee in February 2017.
- No charges for cash deposit and withdrawals of less than N500,000 for individual and N3 Million for corporate
Charges on bank deposit for Individual account type:
- For cash transaction of N500,000 to N1m, the charges are 1.5% for withdrawal and 2% for deposit
- N1m to N5m, the customer will be charged 2% for withdrawal and 3% for deposits
- Above N5m the charges is 3% for withdrawal and 7.5% for deposit
Charges on bank deposit for Corporate account type:
- For cash transactions of N3m to N10m, the charges are 2% for withdrawal and 5% for deposit.
- N10m to N40m, 3% for withdrawal and 7.5% for deposits.
- Above N40m, 5% will be charged for withdrawal and 10% for cash deposit.
The new charges on bank deposit and the implementation of the policy were to be in phases:
- The 6 states where the policy is currently been implemented are to start the new cash deposit charges in April 2017.
- The full policy will start in the following states in May 2017: Bauchi, Bayelsa, Delta, Enugu, Gombe, Imo, Kaduna, Ondo, Osun, and Plateau state.
- States like Edo, Katsina, Jigawa, Niger, Oyo, Adamawa, Awka Ibom, Eboyin, Taraba, and Nasarawa will wait till August 2017 before the policy can get to them.
- It will get to Borno, Benue, Ekiti, Cross River, Kebbi, Kogi, Kwara, Yobe, Sokoto, and Zamfara in October 2017.