Nigeria has a goal of being amongst the top 20 economies by the year 2020. In a bid to realise this vision, the Central Bank of Nigeria (CBN) in 2012 introduced a new policy on cash-based transactions which stipulates a cash handling charge on daily cash withdrawals that exceed N500,000 for Individuals and N3,000,000 for Corporate bodies.

The policy as at 2012 aimed at reducing the amount of physical cash circulating in the economy, and also encourage more electronic-based transactions (payments for goods, services, transfers, etc.) by fixing charges on cash withdrawals above 500,000 for Individuals and 3,000,000 for corporate entities. The limits apply to the account so far as it involves cash, irrespective of channel, (such as over the counter, ATM, 3rd party cheques encashed over the counter, etc) in which cash is withdrawn.

Some of the reasons for the introduction of the policy are:
To drive development and modernization of payment system in Nigeria upon the advent of financial technological innovations.
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 curb some of the negative consequences associated with the high usage of or access to physical cash in the economy, including financial loss in cases of robbery, accidents, fire and flood incidents, and other cash-related crimes money laundering and cash-related fraudulent activities.
Simply put, the cashless policy encourages a reduction in the amount of physical cash (coins and notes) circulating in the economy and encourages more electronic-based transactions.

Since the introduction of the policy and the advent of technological innovations in financial transactions, it can be said that CBN’s vision on cashless economy has succeeded to a great extent.

The Payment System Management Department of the CBN again on September 17, 2019 revisited the cashless policy to include charges on cash deposits by both individual and corporate entities for over NGN 500,000 and NGN3,000,000 lodgment respectively in addition to already existing charges on withdrawals at a rate of 2% for individual and 3% for corporate Cash deposit transactions.

Just like the introduction of the charges on cash withdrawal, the pilot was run in Lagos State from January 2012 while the policy took effect in Rivers, Anambra, Abia, Kano, Ogun and the Federal Capital Territory (FCT) on the 1st July, 2013 and implemented nationwide on July 1st, 2014. The latest implementation is to take effect in Lagos, Ogun, Kano, Abia, Anambra, Rivers State and the F.C.T. on September 18, 2019 and to take effect nationwide on March 31, 2019. Of note is the fact that the charges on deposit is on daily cash transactions over the stipulated amounts( 500,000 and 3,000,000) and not all cash transactions.

The Federal government in promoting ease of doing business in Nigeria in July 2016, inaugurated the Presidential Enabling Business Environment Council (PEBEC) as the administration’s flagship initiative to reform the business environment. This agency was amongst other reasons established to promote policies to make business easier for micro, small and medium based enterprises to do business, grow and contribute to sustainable economic activity.

As much as the imposition of charges on deposit transactions above the free limit may curb illegal moving of cash and transaction, it may however defeat the core of Cashless policy on reducing circulation of physical cash in the economy by imposition of fines for Cash deposit in the Bank. Nigeria today even with the advent of banks and innovations in financial technology still have some good number of the citizens unbanked, the introduction of charges on transaction will discourage the yet to be banked to reconsider whether or not to be banked or embrace financial innovations thereby encouraging the use of physical cash by these unbanked members of the public.

Placing charges on deposit transaction also contradicts the ease of doing business in Nigeria. These are issues that beg for answers by the CBN to business owners. For instance, corporate entities will now be charged 3% on all daily Cash deposits once transaction is above the free limit. Business entities with multiple outlets across the nation having a corporate account will now be charged for cash deposit of income made nationwide once it exceeds 3,000,000 thereby leaving them at a dilemma of having to be charged a good sum from their profit or, reduce their sales or stagger deposits to the next day leaving them at a risk of losing such money while holding on to same.

The present Nigerian economy generates a good percentage from businesses especially from taxation, business registration fee, and fees on both pre and post-registration compliance. Charging such businesses again for their daily remittances to bank does more harm than good. For the purposes of taxation especially, are such transactions charges deductible allowances under the respective tax laws? Can it be said to be incidental expenses to the cost of running a business and as such allowed to be deducted from taxable income?

While the CBN encourages the use of alternative channels, the CBN should put into consideration the daily transaction limit of some of the alternate channels which are capped at 100,000 for ATM withdrawals which still requires the need to visit a banking hall for transactions above the ATM limit, the cost of the use of the channels including but not limited to operational charges, maintenance, intra and inter bank transaction charges incurred on the use of these channels should be looked into, network glitches resulting to debit from payer and non credit of receivers account and accompanied complaints on reversal policies for failed transactions are factors that discourages users at times from maximizing these channel.

While CBN address the above concern, business owners and managers are advised to encourage clients and customers to maximize the use of alternative electronic channels for cash transactions to avoid the stipulated penalty fees such as
Point-Of-Sale Terminals
Mobile Payments
Multi-functional ATMs for Withdrawal, Cash-deposit, Bill payments, FundsTransfer
Internet Banking
Electronic Funds Transfer
Direct Debits: Automated Direct Debit option available in Banks and some Billers.