The Nigerian economy has too much cash in circulation as cash is mostly used for transactions for goods and services, especially for buying and selling. In other developing countries in the world, this is not the case, as there are other payment options like; Debit and Credit Cards, Bank Transfers, Bank Direct Debits, POS Machines, and even Mobile Phone Money. We have these options in Nigeria too, thus, the CBN’s aim to move transactions to these options instead of circulating cash.
However, on the 18th of September, as an effort to promote the cashless policy in Nigeria, The Central Bank of Nigeria (CBN) introduced a new policy on cash-based transactions which stipulates a cash handling charge on daily cash withdrawals that exceed ₦500,000 for Individuals and ₦3,000,000 for Corporate bodies.
They have stated the reasons as to why the new cash policy was introduced. A number of key reasons include:
- To drive the development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. An efficient and modern payment system is positively correlated with economic development and is a key enabler for economic growth.
- To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
- To improve the effectiveness of monetary policy in managing inflation and driving economic growth.
In addition, the cash policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including:
- High cost of cash: There is a high cost of cash along the value chain – from the CBN & banks, corporations, and traders; everyone bears the high costs associated with volume cash handling.
- High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
- High subsidy: CBN analysis showed that only 10% of daily banking transactions are above ₦150,000, but the 10% account for the majority of the high-value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10% incur in terms of high cash usage.
- Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth.
- Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.
The charges took effect from Wednesday, September 18, 2019, and will apply in Lagos, Ogun, Kano, Abia, Anambra, and Rivers States as well as the FCT for now. The Central Bank of Nigeria (CBN) also announced that the nationwide implementation of the cashless policy will begin by March 31, 2020.
From Wednesday in the first few states, banks started applying the 3% withdrawal fee, and 2% deposit fee, for payment and withdrawals above ₦500,000. Therefore, if you withdraw ₦500,000 cash, the bank deducts ₦15,000 leaving you with a balance of ₦485,000 and if you deposit ₦500,000 the bank deducts ₦10,000 and credit your account with a balance of ₦490,000. Also, note that the charges are daily not per transaction. You can deposit ₦500,000 daily. When you exceed it, the amount in excess will be charged for that day.
For Instance, you have ₦2,000,000 to deposit; you can deposit ₦500,000 without the extra charge of 2% but if you deposit the ₦2,000,000, you’ll be charged 2% of the amount in excess for the day. Another scenario would be if you deposit ₦1,000,000 in the morning and in the evening of the same day, you deposit ₦1,000,000, your transactions for the day will be summed up and you will be charged for the amount in excess for that day.
However, if you receive payments or make transfers with a POS or through mobile transfer, you will not be charged. The policy applies to over the counter, third party cheques, and ATM transactions, this is to discourage carrying huge amounts of money around.
So how does this affect your Loans with BizNurture? Well, it does not. The cashless policy does not affect your loans with BizNurture.
BizNurture does not give cash or deposit cash in your account after your loan has been approved. BizNurture is a Fin-Tech Company, which implies that loans are disbursed electronically after approval. Hence, no deduction of lodgment fee. You, therefore, do not need to worry about the 3%.
As a business owner or an individual, if you handle huge sum of money daily, you can set up a POS to receive payments. Another option is to transfer and receive payments through mobile apps and other electronic means of payment that do not involve cash.