The Implications of the CBN's Directives on the New Notes, Cash Withdrawal Limits and Cash Swap Program
- Introduction
On 26th October 2022, the President of the Federal Republic of Nigeria directed[1] the Central Bank of Nigeria (“CBN”) to redesign the N200.00, N500.00 and N1000.00 bank notes.[2] In explaining the directive, the CBN Governor stated that the policy was aimed at controlling the money in circulation within the country, as well as curb inflation. The CBN Governor indicated that through data collated by the apex bank, N2.73 trillion out of the N3.23 trillion in circulation was outside the vault of commercial banks across the country and supposedly held by members of the public. This disproportionate amount of cash in private hands aids the movement of illicit funds, facilitates insecurity, acts of terror, and serves as a breeding ground for hyper-inflation.[3]
- Background
In line with the redesign policy, the CBN issued a circular to all Deposit Money Banks (DMBs), Payment Service Banks (PSBs), Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs) on the 6th of December 2022, stating that the maximum withdrawal threshold for Over The Counter “OTC” withdrawals was N100,000.00 and N500,000.00 for individuals and corporate entities, respectively and pegged maximum weekly cash withdrawals on ATMs at N100,000.00. In the same circular, the apex bank encouraged customers to embrace its cashless policy and utilize alternative channels such as internet banking, mobile banking apps, USSD codes and debit cards to carry out transactions.[4]
As soon as the policy came into effect it was met with complaints, as the citizenry and businesses which require cash immediately faced untold hardships. In response, the CBN issued a revised circular on the Naira Redesign Policy via a Revised Cash Withdrawal Limit, which increased the limits and pegged individual and corporate cash withdrawals at N500,000.00 and N5,000,000.00,[5] respectively. The revised policy reduced the uproar in the polity as it assured citizens that the effects of the currency redesign would not be significant. However, by January 2023, the situation was quite different from what was promised.[6]
- Implications
By the new policy, Banks are mandated not to issue old naira notes to customers both at OTC and ATMs; yet the quantity of new notes issued was quite limited. This resulted in customers all over the country trooping in to banking halls to secure funds for legitimate business transactions.[7]
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