Fallout of Naira Redesign, Analysts Back CBN’s Cash Withdrawal Policy

•Say move will boost monetary policy effectiveness, tax compliance, may strengthen naira

•Urge apex bank to reduce bank charges

•CBN deputy governor-nominees to explain new policy to Senators during screening on Friday

Chuks Okocha, James Emejo, Sunday Aborisade in Abuja and  Nume Ekeghe in Lagos

Analysts yesterday threw their weight behind the latest decision of the Central Bank of Nigeria (CBN) to limit cash withdrawals by individuals and corporate organisations following the currency redesign programme.

This was just as the Senate disclosed that it would on Friday screen the two CBN Deputy Governors who have been nominated for second term, adding that they would use the session to clarify the new cash withdrawal limits to the lawmakers.

They are Mr. Edward Adamu and Mrs. Aisha Ndanusa Ahmad, who were reappointed for a second and final term in office by President Muhammadu Buhari.

The central bank had placed a cap on cash withdrawals under the new dispensation, restricting the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week to N100,000 and N500,000 respectively.

The bank, in a letter dated December 6, 2022, which was addressed to all Deposit Money Banks, and Other Financial Institutions, Payment Service Bank (PSBs), Primary Mortgage Banks (PMBs), and Microfinance Banks (MFBs), also stated that third party cheques above N50,000 shall not be eligible for OTC payment while extant limits of N10 million on clearing cheques still remains.

The new withdrawal regime which may be targeted at curbing vote-buying as the 2023 elections draw closer, among others, further pegged the maximum cash withdrawal per week via Automated teller Machine (ATM) at N100,000 subject to a maximum of N20,000 cash withdrawal per day, adding that only denominations of N200 and below shall be loaded into ATMs while the maximum amount that can be withdrawn via Point of Sale (POS) terminal was limited to N20,000 daily.

It was also meant to discourage hoarding of the local currency in a bid to check inflationary pressures as well as address critical security issues.

However, speaking in separate interviews with THISDAY, analysts said the new CBN policy would support monetary policy transmission.

They said the policy would positively enhance the monetary and fiscal space as well as improve the profitability of the banking sector.

The analysts, however, cautioned that the slow adoption of e-banking, the rise in cybercrime coupled with an election year, and other macroeconomic factors could slow the benefits of the policy.

Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, said the effectiveness of monetary policy hinged on being able to mop up excess liquidity and having the majority of the population included in the financial system.

He said, “Several initiatives by the CBN have tried to encourage both financial inclusion and a cashless society, however, these have been largely ineffective. The new CBN policy will certainly aid in accelerating the monetary policy objectives, whilst also tackling the insecurity challenges and encouraging financial inclusion.

“Though there will undoubtedly be implementation challenges, it is a step in the right direction for sanitizing the economy. The excess liquidity floating around in the economy needs to be mopped as this will also help inflation.”

Also, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said the step taken by CBN in limiting cash withdrawal would not only curb vote buying, and terrorism and encourage digital payments, but also reduce the pressure on foreign currency.

“In other words, the measure would improve the value of the naira against other currencies. It is always a play of demand size against supply size. If there is a scarcity of naira, foreign currencies would become surplus in the market to exchange for scarce naira.

“It will also help CBN to manage the supply of the redesigned currency which may not be very available to cover the demand for it in all states of the federation at the same time,” he said.

Also, an economist, Mr. Tope Fasua, said the policy could address the current exchange rate gaps.

He said, “The policy will also be a good step in strengthening the value of the naira. At this rate, if this is played right and it is sustained, we may see a scenario where the naira/dollar rate comes down and the naira can strengthen a little bit against the dollar when there is not much money flowing after the dollar.”

On his part, Professor of Finance and Capital Markets, Nasarawa State University, Keffi, Prof. Uche Uwaleke, said the cash withdrawal limit was part of the currency redesign package, adding that the two are mutually dependent.

He said, “It goes without saying that cash withdrawal limit is an integral part of currency redesign meant to reduce the amount of currency circulating outside the banking system.

“If the experience of India’s demonetisation exercise is anything to go by, then it’s evident that imposition of cash withdrawal limits by monetary authorities, following a demonetisation exercise, is a norm.

Uwaleke said, “If depositors of old currency notes are able to exchange them for new naira notes which get withdrawn from the banks, then the primary aim of currency redesign is defeated.

“That said, I expect it to give impetus to financial Inclusion as Nigerians become compelled to embrace alternative payment platforms.

“It now behooves the CBN to ensure that bank charges on money transfers and other related charges are reduced to the barest minimum.”

On his part, the Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, described the cash withdrawal limits as a step in the right direction by the CBN, adding that the measure would to a large extent reduce the cash in the economy to an acceptable minimum as stipulated by CBN guidelines.

He added, “The measure will also boost the value of the Naira when there is less of N500 and N1000 naira notes in circulation as it is being done with major currencies in the world like the US Dollar, British Pound Sterling, and the Euro.

“This policy implementation will go a long way to increase the use of other means of transactions like internet banking, USSD, ATMs, and POS to boost the cashless policy of the CBN.”

He said, “We know that our economy has been a cash economy for a long time so these measures will initially cause disruptions in the economy but things will settle in the long run and the economy will be better for it.

“The policy will also deter cash hoarders and politicians carrying cash for vote buying, terrorists and kidnappers will also not be getting large sums as ransom with these new measures.”

Similarly, the Head, of Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi said, “In the long run, it is a well thought out policy and is something that would help the economy. However, in the short run, there might actually be some hiccups and can cause some dislocation in the economy.”

According to him, “The cost of printing naira from the CBN’s perspective is going to reduce significantly because the volume of naira that would be printed every year would reduce significantly.”

He said the policy would also enable the federal government to better track MSMEs’ activities going forward and boost tax compliance.

“This policy would also help improve tax remittances and can actually increase compliance with the various tax laws. And it would also help in tracking illicit flows to an extent it would reduce kidnapping and terrorism.”

Olubunmi said the banking sector also stood a chance to benefit from increased transaction charges from using digital payment channels.

“From the banking perspective, it would reduce the cost of operations for banks because most of the bank branches would be closed. And the charges attached to internet banking would increase non-interest income in the banking industry,” he said.

On the downside, he said: “Nigeria is still a cash-based economy. In the last ten years, the pace of adoption of internet banking and digital banking has increased significantly but predominantly, there are still some areas that are still cash-based.

“So, if not properly handled, people might find it difficult to transcend. A lot of the MSMEs would struggle especially in the rural areas to adjust to this directive.”

In his contribution, a former National Publicity Secretary of the PDP, Olisa Metu, argued that the policy could be counter-productive and inconvenience the poor.

In a statement, he signed, Metu said it was inconceivable that in an economy bedeviled with random and multiple bank charges, the central bank would decide to inflict the lowest level of citizens with a mandatory acquisition of PoS machines.

According to Metu, “This exposes the poor to multiple deductions by banks and may be an opportunity to fleece the people.

“How do you expect Nigerians to patronise the banana and fruit sellers? Should we stop buying from petty traders because of network delays in effecting transactions? What of the attendant ceaseless and multiple deductions from the accounts of these petty traders? 

 “What of the security scare of waiting to confirm payments by the roadside?” he asked.

He called on the CBN to mitigate these measures with a freeze on withdrawal charges by banks and introduce policies to ensure that transfers and transactions were not impeded by network problems.

Senate Panel to Screen CBN Deputy Governor-Nominees on Friday

Meanwhile, the Senate will on Friday screen Adamu and Ahmad, who had been reappointed for a second and final term in office by President Muhammadu Buhari.

The President had in a letter read at plenary on Tuesday by Senate President Ahmad Lawan, asked the red chamber to confirm the appointments of the two deputy governors.

Buhari in the letter read by Lawan during plenary, said the request was pursuant to Section 8(1) (2) of the Central Bank of Nigeria (CBN) (Establishment) Act 2007.

The Senate President while ruling on a motion by the Senate Minority Leader, Senator Phillip Aduda, on the issue of the newly announced CBN policy on withdrawal limit, said the two nominees would address the matter during their screening exercise.

Aduda in his motion, asked the Senate to discuss the issue of the planned N100, 000 withdrawal per person per week at plenary.

His position was corroborated by Senator Gabriel Suswan, who urged the Senate President to allow the debate on the matter.

Lawan said debating the matter without much information or fact on the policy could amount to exercise in futility.

The Senate President said, “We have an opportunity to screen two nominees for the position of Deputy Governor of the CBN.

“I think it is after their screening we should take this motion. These people are there in the CBN, why can’t they come tomorrow. “

Suswam, disagreed with Lawan and said, “I think you should have allowed us to discuss this motion for the sake of Nigerians.”

Lawan insisted on his earlier position and said, ” No distinguished there is a misunderstanding here.”

He said, “I told you what my personal opinion is. My personal opinion is this weekend is off but we have an opportunity, the Committee on Banking will be screening two deputy Governors of the CBN.

“This is one major issue they should raise with them. On Tuesday next week we can take a motion but let’s have something solid.”

Aduda had in the aborted motion , sought for debate from all senators on the planned policy before the President of the Senate,  intercepted him and said that it was too early to debate the policy .

The Chairman of the Senate Committee on Banking, Insurance and other Financial Institutions, Senator Uba Sani, confirmed on Wednesday that the nominees would be screened on Friday (Tomorrow)

He said, “They will be screened on Friday. They will get the letters inviting them for the screening on Thursday.”

Ahmad, a Chartered Financial Analyst (CFA) charter-holder was first nominated deputy governor in October 2017. She was confirmed as the first female DG in charge of the Financial System Stability directorate which is responsible for ensuring a safe and sound financial system in Nigeria, a core mandate of the CBN. With over 25 years policy and financial industry experience, she holds an MSc in Finance & Management from Cranfield University UK, MBA (Finance) from University of Lagos and a second class upper Bachelors degree in Accounting from University of Abuja. Ahmad has been credited with bringing dynamism and a strong combination of academic qualifications and private sector experience      to her role as deputy governor FSS.

On the other hand, Adamu, a quantity surveyor by training was nominated to the role of deputy governor, in February 2018. He was later confirmed as DG in charge of the Corporate Services directorate following a 25 year career culminating in his role as HR Director at the CBN. He is a graduate of Ahmadu Bello University, Zaria Kaduna and fellow of the Nigerian Institute of Quantity Surveyors and the Institute of Credit Administration. He began his career with the Unified Public Service in 1983.