On December 6, 2022, the Central Bank of Nigeria (CBN) issued a new directive to banks and other financial institutions to reduce cash transactions in the country. According to the letter it sent to banks, the new order will reduce withdrawals at ATMs and POS terminals to ₦‎20,000 ($27) daily.

The news sparked several reactions from Nigerians. While some expressed their displeasure, citing the need for more cash transactions as the country lacks digital penetration, others feel limiting cash transactions will help the dying currency.

What Is a Cashless Society?
A cashless society is one where cash—paper and coin currency—isn't used for financial transactions. Instead, all transactions are electronic, using debit or credit cards or payment services like Paystack, Flutterwave, PayPal and Apple Pay.

There are several reasons why CBN cashless policy, and a cashless society more broadly, are a bad idea.

BAD FOR PRIVACY
When you pay cash, there is no middleman; you pay, you receive goods or services — end of story. When a middleman becomes part of the transaction, that middleman often gets to learn about the transaction — and under our weak privacy laws, has a lot of leeway to use that information as it sees fit.

It is important to note that electronic payments aren't as private as cash payments. You might trust the organizations (Banks and online payment services) that handle your data, and you might have nothing to hide. However, the more information you have floating around online, the more likely it is to wind up in malicious hands. Cash allows you to spend money and receive funds anonymously.

HACKING RISKS
Hackers are the bank robbers and muggers of the electronic world. In a cashless society, you're more exposed to hackers. If you are targeted and somebody drains your account, you may not have any alternative ways to spend money. Even if you're protected under the law, it will still be inconvenient to restore your financial standing after a data breach.

BAD FOR BUSINESSES
Business owners pay roughly 2-3% of every transaction to the card companies and banks, which can be a significant “tax,” especially on low-margin businesses. With the POS/online payments processing sector dominated by an oligopoly of 2-3 companies, there is not enough competition to keep these “transaction fees” low. Big companies have the leverage to negotiate lower fees, but small business owners are out of luck, and the amount that they pay to the credit card companies is often greater than their profit. If this CBN cashless policies are allowed to become widespread, that will harm the many small business owners who either discourage or flat-out refuse to accept electronic payments due to these fees.

If in future, society is forced to choose only electronic payment methods, or if one financial app becomes the standard payment app, the companies who develop these services might not offer them for free. Payment processors may cash in on the high volumes by imposing outrageous fees, which would eliminate the savings that should come from less cash handling to businesses.

BAD FOR THE ECONOMY
Participation in a cashless society presumes a level of financial stability and enmeshment in bureaucratic financial systems that many people simply do not possess. Opening a bank account requires an ID, which many people living in rural areas and elderly people lack, as well as other documents such as a utility bill or other proof of address, which the homeless lack, and which generally create bureaucratic barriers to participating in electronic payment networks. Banks also charge fees that can be significant for people living on the economic margins.

Unless special outreach efforts are made, the poor and unbanked will likely have an even harder time in a cashless society. If smartphone purchases and electronic payments become the standard way to transact, for example, those who can't afford smartphones will be left behind.

TECHNOLOGY PROBLEMS
The frequent nationwide outage of electronic payment systems like bank ATMs and online transfers that occurs on weekends leading to many bank customers unable to make purchases — except those who had cash is a reminder that electronic payments systems can mean centralized points of failure — not just technical failures, but also security failures. As mentioned earlier, a cashless society would also leave people more susceptible to economic failure on an individual basis: if a hacker, bureaucratic error, or natural disaster shuts a consumer out of their bank account, the lack of a cash option would leave them with no alternatives.

TEMPTATION TO OVERSPEND
When you spend with cash, you recognize the financial impact by physically taking the cash out of your pocket and giving it to someone else. With electronic payments, it's easy to swipe, tap, or click a button without noticing how much you spend. Consumers may have to rethink the ways they manage their spending and this can cause a negative effect on families.

NEGATIVE INTEREST RATES
When all money is electronic, negative interest rates could have a more direct effect on consumers.

According to the International Monetary Fund, negative interest rates reduce bank profitability, and banks could be tempted to hike fees on customers to make up that deficit. Banks are limited in their ability to pass on those costs because customers can simply withdraw their cash from the bank if they don't like the fees. In the future, if customers can't withdraw cash from the bank, they will have no way to guard against additional bank fees and predatory policies (Financial Prison).

THE ARGUMENT
Proponents of non-cash payment systems point to one of the biggest downsides of cash: the risk of loss or theft. I agree that security risk of cash is real, and we're certainly not going to tell anybody they should always use cash, especially for large purchases. That said, the security considerations of cash are not one-sided. The harms that can result from electronic payments like privacy invasions (abuses, profiling, embarrassment, financial losses, etc.) should also be included in the concept of “financial security,” properly conceived. Electronic payment networks have security risks that cash does not; ask anybody who has experienced identity theft and was forced to wrangle with a nightmare mix of credit card companies, debt collectors, credit scoring agencies, and others.

CONCLUSION
The bottom line is that the technocratic “dream” of a cashless society is a vision in which we discard what is left of the anonymity that has characterized urban life since the dawn of modernity, and our freedom from the power of centralized companies like banks. Doing without cash may be convenient at times, but if in future we lose cash as an option, we’re going to regret it.

Here is link to CBN new cashless directive https://www.vanguardngr.com/2022/12/breaking-cbn-reduces-cash-withdrawals-to-n100k-n500k-per-week-for-individuals-companies/

It is obvious that many Nigerians are yet to come to terms with the negative implication of CBN cashless policy as senate fails to summon Emefiele -
https://punchng.com/cash-withdrawal-senate-fails-to-grill-cbn-chiefs

Nigerians need to reject this evil policy and pressure national assembly as a matter of urgency to reverse it.

Latest update see https://www.premiumtimesng.com/news/headlines/570507-senate-asks-cbn-to-reconsider-cash-withdrawal-policy.html

National assembly should stop beating around the bush and reverse the CBN policy. Nigerians need to wake up to the fact that Emefiele is an APC member (https://punchng.com/apc-chairman-confirms-emefieles-membership-says-cbn-gov-registered-feb-2021/) and doesn't have interest of the masses. If nothing is done to stop this, then we are witnessing the gradual removal of our rights and dignity.

Latest update - CBN governor snubs legislators over new cashless policy see https://punchng.com/just-in-again-emefiele-shuns-reps-summons-lawmakers-kick/

In an ideal situation, Emefiele should've been removed as CBN governor based on the revelation that he registered as an APC member in 2021 and allegedly bought APC presidential nomination form. The level of impunity, brigandage and lawlessness exhibited by Buhari and members of his cabinet is appalling. The house of reps and senate should initiate the immediate reversal of the cash withdrawal limits imposed by CBN.....

Bebigiby:
On December 6, 2022, the Central Bank of Nigeria (CBN) issued a new directive to banks and other financial institutions to reduce cash transactions in the country. According to the letter it sent to banks, the new order will reduce withdrawals at ATMs and POS terminals to ₦‎20,000 ($27) daily.

The news sparked several reactions from Nigerians. While some expressed their displeasure, citing the need for more cash transactions as the country lacks digital penetration, others feel limiting cash transactions will help the dying currency.

What Is a Cashless Society?
A cashless society is one where cash—paper and coin currency—isn't used for financial transactions. Instead, all transactions are electronic, using debit or credit cards or payment services like Paystack, Flutterwave, PayPal and Apple Pay.

There are several reasons why CBN cashless policy, and a cashless society more broadly, are a bad idea.

BAD FOR PRIVACY
When you pay cash, there is no middleman; you pay, you receive goods or services — end of story. When a middleman becomes part of the transaction, that middleman often gets to learn about the transaction — and under our weak privacy laws, has a lot of leeway to use that information as it sees fit.

It is important to note that electronic payments aren't as private as cash payments. You might trust the organizations (Banks and online payment services) that handle your data, and you might have nothing to hide. However, the more information you have floating around online, the more likely it is to wind up in malicious hands. Cash allows you to spend money and receive funds anonymously.

HACKING RISKS
Hackers are the bank robbers and muggers of the electronic world. In a cashless society, you're more exposed to hackers. If you are targeted and somebody drains your account, you may not have any alternative ways to spend money. Even if you're protected under the law, it will still be inconvenient to restore your financial standing after a data breach.

BAD FOR BUSINESSES
Business owners pay roughly 2-3% of every transaction to the card companies and banks, which can be a significant “tax,” especially on low-margin businesses. With the POS/online payments processing sector dominated by an oligopoly of 2-3 companies, there is not enough competition to keep these “transaction fees” low. Big companies have the leverage to negotiate lower fees, but small business owners are out of luck, and the amount that they pay to the credit card companies is often greater than their profit. If this CBN cashless policies are allowed to become widespread, that will harm the many small business owners who either discourage or flat-out refuse to accept electronic payments due to these fees.

If in future, society is forced to choose only electronic payment methods, or if one financial app becomes the standard payment app, the companies who develop these services might not offer them for free. Payment processors may cash in on the high volumes by imposing outrageous fees, which would eliminate the savings that should come from less cash handling to businesses.

BAD FOR THE ECONOMY
Participation in a cashless society presumes a level of financial stability and enmeshment in bureaucratic financial systems that many people simply do not possess. Opening a bank account requires an ID, which many people living in rural areas and elderly people lack, as well as other documents such as a utility bill or other proof of address, which the homeless lack, and which generally create bureaucratic barriers to participating in electronic payment networks. Banks also charge fees that can be significant for people living on the economic margins.

Unless special outreach efforts are made, the poor and unbanked will likely have an even harder time in a cashless society. If smartphone purchases and electronic payments become the standard way to transact, for example, those who can't afford smartphones will be left behind.

TECHNOLOGY PROBLEMS
The frequent nationwide outage of electronic payment systems like bank ATMs and online transfers that occurs on weekends leading to many bank customers unable to make purchases — except those who had cash is a reminder that electronic payments systems can mean centralized points of failure — not just technical failures, but also security failures. As mentioned earlier, a cashless society would also leave people more susceptible to economic failure on an individual basis: if a hacker, bureaucratic error, or natural disaster shuts a consumer out of their bank account, the lack of a cash option would leave them with no alternatives.

TEMPTATION TO OVERSPEND
When you spend with cash, you recognize the financial impact by physically taking the cash out of your pocket and giving it to someone else. With electronic payments, it's easy to swipe, tap, or click a button without noticing how much you spend. Consumers may have to rethink the ways they manage their spending and this can cause a negative effect on families.

NEGATIVE INTEREST RATES
When all money is electronic, negative interest rates could have a more direct effect on consumers.

According to the International Monetary Fund, negative interest rates reduce bank profitability, and banks could be tempted to hike fees on customers to make up that deficit. Banks are limited in their ability to pass on those costs because customers can simply withdraw their cash from the bank if they don't like the fees. In the future, if customers can't withdraw cash from the bank, they will have no way to guard against additional bank fees and predatory policies (Financial Prison).

THE ARGUMENT
Proponents of non-cash payment systems point to one of the biggest downsides of cash: the risk of loss or theft. I agree that security risk of cash is real, and we're certainly not going to tell anybody they should always use cash, especially for large purchases. That said, the security considerations of cash are not one-sided. The harms that can result from electronic payments like privacy invasions (abuses, profiling, embarrassment, financial losses, etc.) should also be included in the concept of “financial security,” properly conceived. Electronic payment networks have security risks that cash does not; ask anybody who has experienced identity theft and was forced to wrangle with a nightmare mix of credit card companies, debt collectors, credit scoring agencies, and others.

CONCLUSION
The bottom line is that the technocratic “dream” of a cashless society is a vision in which we discard what is left of the anonymity that has characterized urban life since the dawn of modernity, and our freedom from the power of centralized companies like banks. Doing without cash may be convenient at times, but if in future we lose cash as an option, we’re going to regret it.

complain! Complain!! Complain!!! Everywhere. If others have achieved success with the cashless economy, why can we? Must we continue to live in the old stone age just because of some discomfort that is for but a period? Whatever you feel or think is the problem, it will not last forever. What will be a major and serious problem is for us not to start at all. We have to take that first step for us to succeed

Misterone:
complain! Complain!! Complain!!! Everywhere. If others have achieved success with the cashless economy, why can we? Must we continue to live in the old stone age just because of some discomfort that is for but a period? Whatever you feel or think is the problem, it will not last forever. What will be a major and serious problem is for us not to start at all. We have to take that first step for us to succeed

I am not complaining but only stating the obvious, you see the main issue here is choice. People should be allowed to choose between cash and electronic means of payment.

The deliberate effort by CBN to remove cash and force electronic payment as the only means of payment is wrong and must be rejected if we are to maintain a free society.

Both means of payment have disadvantages so one can't replace the other. The new cash withdrawal policy will violate our right to earn and spend. This policy is bad for the economy as it is been forced on Nigerians.

Also, you can see overtime how Emefiele's bad policies have damaged the value of the naira so we deserve better as a nation. The new cashless policy is bad.

Bebigiby:


I am not complaining but only stating the obvious, you see the main issue here is choice. People should be allowed to choose between cash and electronic means of payment.

The deliberate effort by CBN to remove cash and force electronic payment as the only means of payment is wrong and must be rejected if we are to maintain a free society.

Both means of payment have disadvantages so one can't replace the other. The new cash withdrawal policy will violate our right to earn and spend. This policy is bad for the economy as it is been forced on Nigerians.

Also, you can see overtime how Emefiele's bad policies have damaged the value of the naira so we deserve better as a nation. The new cashless policy is bad.

if over 200 million persons are allowed to make a choice, then nothing will work out. We are in a democracy. We have elected leaders who take decisions on our behalf. They have decided for us.. Governance is not about taking populist decisions but taking hard and fast decisions for the betterment of the country. Also, you lack knowledge of macro economic analysis for you to say Emefiele's policies damaged the value of the naira. For one, every import must be backed by dollars. Now, if the inflow of dollar is restricted due to global economic meltdown while our insatiable lust for imported goods increase daily, what do you think will happen?

Bebigiby:
Here is link to CBN new cashless directive https://www.vanguardngr.com/2022/12/breaking-cbn-reduces-cash-withdrawals-to-n100k-n500k-per-week-for-individuals-companies/

After election we change am back ...no worry yourself

mrvitalis:

After election we change am back ...no worry yourself

Who will curb the inflation that would have happened by then??
Everyone will start adding bank charges to price.
Some will insist you go an find cash
I have been having issues with my ATM card for about 2wks now, I thought it was case specific that I had to call CC, I was told it's network, I refused to accept, not until I tried it at a mall and the attendant started laughing immediately I brought out my card, she said it won't go through that I should not bother, 2different terminals, transaction declined.
I got embarrassed at a fuel station on Saturday, bought fuel, pay with card, it's not going through, can I do transfer, they don't take transfer (MRS in VI ooo)
How do you want this situations to be managed considering that reversal system is even worse

Misterone:
if over 200 million persons are allowed to make a choice, then nothing will work out. We are in a democracy. We have elected leaders who take decisions on our behalf. They have decided for us.. Governance is not about taking populist decisions but taking hard and fast decisions for the betterment of the country. Also, you lack knowledge of macro economic analysis for you to say Emefiele's policies damaged the value of the naira. For one, every import must be backed by dollars. Now, if the inflow of dollar is restricted due to global economic meltdown while our insatiable lust for imported goods increase daily, what do you think will happen?

Cash has been in existence as a legal tender long before electronic payment system. How does this apply to your statement "If over 200 million persons are allowed to make a choice, then nothing will work...." I've listed reasons why a pervasive cashless policy like the one CBN is proposing is bad for Nigeria.

You said "Governance is not about taking populist decisions but taking hard and fast decisions for the betterment of the country....". If you think CBN's new cashless policy is good for the country then tell us why.

You said "Also, you lack knowledge of macro economic analysis for you to say Emefiele's policies damaged the value of the naira..." Since the emergence of Buhari's government in 2015, can you count the number of times Emefiele has devalued the naira even after assuring Nigerians that it won't be devalued? Can you count the number of monetary policies introduced by Emefiele only to reverse it due to the negative impact on the economy?

You said "Now, if the inflow of dollar is restricted due to global economic meltdown while our insatiable lust for imported goods increase daily, what do you think will happen...." I am not disputing the fact you made regarding dollar and imported goods. The reason for this thread is not exchange rates or importation but CBN's new cash withdrawal policy which is a violation of our right and bad for our economy. This policy will only benefit the Banks (Charge more transaction fees and implement predatory policies), the ruling party (APC) and Emefiele.

OlujobaSamuel:

Who will curb the inflation that would have happened by then??
Everyone will start adding bank charges to price.
Some will insist you go an find cash
I have been having issues with my ATM card for about 2wks now, I thought it was case specific that I had to call CC, I was told it's network, I refused to accept, not until I tried it at a mall and the attendant started laughing immediately I brought out my card, she said it won't go through that I should not bother, 2different terminals, transaction declined.
I got embarrassed at a fuel station on Saturday, bought fuel, pay with card, it's not going through, can I do transfer, they don't take transfer (MRS in VI ooo)
How do you want this situations to be managed considering that reversal system is even worse

Restriction of withdrawal have many effect on the economy trust me inflation is certainly not one of them

Anything wey they pain politicians well well, checkam well, é go benefit the common man.

There's Pros, there's Cons. The Pros of this new policy outweigh the Cons.
Only supporters of Tinubu and dubious politicians are against it.

The person above me has said it all.

saintopus:
Anything wey they pain politicians well well, checkam well, é go benefit the common man.

Isobug:
There's Pros, there's Cons. The Pros of this new policy outweigh the Cons.
Only supporters of Tinubu and dubious politicians are against it.

The person above me has said it all.

Do you really believe that this policy will affect Tinubu. Does Tinubu or Atiku engage in over-the-counter cash withdrawals like other Nigerians? The answer is no.

The social media propaganda that this policy will affect Tinubu is false. It may affect PDP and other smaller opposition political parties but then is it the job of CBN to forestall vote buying or combat insecurity?

The CBN governor and Buhari's APC government can't be trusted and this policy like many other policies introduced by this government will not benefit you.

In 2019, the EFCC chairman refused to answer any question regarding Tinubu and the bullion van that conveyed millions of cash to his mansion in Lagos.

See https://www.premiumtimesng.com/news/headlines/360566-efcc-chairman-magu-dodges-question-on-tinubus-bullion-van-petition.html

mrvitalis:

Restriction of withdrawal have many effect on the economy trust me inflation is certainly not one of them

If making coins and other small denominations unavailable could cause inflation, don't you think there will be a cost transfer for electronic transaction too?
One of the stores I buy feed from, you pay additional #100 for transfer, same for POS.
What will be the implication of that cost transfer?

OlujobaSamuel:

If making coins and other small denominations unavailable could cause inflation, don't you think there will be a cost transfer for electronic transaction too?
One of the stores I buy feed from, you pay additional #100 for transfer, same for POS.
What will be the implication of that cost transfer?

Pick up an economics text and stop embarrassing yourself

Reductions of volume of cash in circulation is text book 101 way to fight inflation

mrvitalis:

Pick up an economics text and stop embarrassing yourself

Reductions of volume of cash in circulation is text book 101 way to fight inflation

What is inflation in the first place?
What do you call paying more for a commodity due to cost passed on to the consumer?
Is it only excess cash that cause inflation?
Don't you know that according to the same economics text you are referring to, shortage of cash can cause inflation?

OlujobaSamuel:

What is inflation in the first place?
What do you call paying more for a commodity due to cost passed on to the consumer?
Is it only excess cash that cause inflation?
Don't you know that according to the same economics text you are referring to, shortage of cash can cause inflation?

Shortage of cash lead to inflation ? Bro which book a you reading

Inflation is caused by too much money in circulation without a corresponding increase in production ..simple ... assuming production is static if your reduce money in circulation inflation drops yes I know it's not that simple but there's no how reducing cash supply causes inflation

mrvitalis:

Shortage of cash lead to inflation ? Bro which book a you reading

Inflation is caused by too much money in circulation without a corresponding increase in production ..simple ... assuming production is static if your reduce money in circulation inflation drops yes I know it's not that simple but there's no how reducing cash supply causes inflation

You are limiting your argument to Demand pull, have you considered the cost push?

OlujobaSamuel:

You are limiting your argument to Demand pull, have you considered the cost push?

Cost is a direct effect of demand , demand is pushed by availability of cash

Bebigiby:


Cash has been in existence as a legal tender long before electronic payment system. How does this apply to your statement "If over 200 million persons are allowed to make a choice, then nothing will work...." I've listed reasons why a pervasive cashless policy like the one CBN is proposing is bad for Nigeria.

You said "Governance is not about taking populist decisions but taking hard and fast decisions for the betterment of the country....". If you think CBN's new cashless policy is good for the country then tell us why.

You said "Also, you lack knowledge of macro economic analysis for you to say Emefiele's policies damaged the value of the naira..." Since the emergence of Buhari's government in 2015, can you count the number of times Emefiele has devalued the naira even after assuring Nigerians that it won't be devalued? Can you count the number of monetary policies introduced by Emefiele only to reverse it due to the negative impact on the economy?

You said "Now, if the inflow of dollar is restricted due to global economic meltdown while our insatiable lust for imported goods increase daily, what do you think will happen...." I am not disputing the fact you made regarding dollar and imported goods. The reason for this thread is not exchange rates or importation but CBN's new cash withdrawal policy which is a violation of our right and bad for our economy. This policy will only benefit the Banks (Charge more transaction fees and implement predatory policies), the ruling party (APC) and Emefiele.

well, that's your opinion and you have right to it. But one thing you don't have is all the facts. Those that have made this policy have the facts. They must have studied all the scenario before coming to this conclusion.

mrvitalis:

Cost is a direct effect of demand , demand is pushed by availability of cash

Hope you know that cash isn't just about fiat cash?
Idle cash sitting in a bank account is also the same as fiat cash not put to use.
Excess cash in circulation leading to inflation is not the paper money we hold but the unproductive money

Bebigiby:
It is obvious that many Nigerians are yet to come to terms with the negative implication of CBN cashless policy as senate fails to summon Emefiele -
https://punchng.com/cash-withdrawal-senate-fails-to-grill-cbn-chiefs

Nigerians need to reject this evil policy and pressure national assembly as a matter of urgency to reverse it.

Don't worry.After elections, Emefiele can reverse it. How about that?

We know u urchins aren't happy about that but wait after elections,it will be reversed

PureMe01:


Don't worry.After elections, Emefiele can reverse it. How about that?

We know u urchins aren't happy about that but wait after elections,it will be reversed

It will be detrimental to allow this policy even for a week.