•Senate faults apex bank, fixes debate for Tues •Job losses loom
•SMEs threatened •Good policy, wrong timing, say experts
Business, finance experts and other stakeholders were sharply divided on the implications and timing of the new cash withdrawal limits by the Central Bank of Nigeria (CBN).
They are concerned that the new policy might worsen the tight economic environment.
The Senate has scheduled a debate on the matter for next Tuesday.
Stakeholders are worried about the possibility of implementing hitch-free cash withdrawal limits in communities with blind spots or poor network connectivity.
They said the policy implementation timeline and available infrastructure suggest a difficult time for the public.
The CBN on Tuesday unveiled a revised cash withdrawal limit with a maximum of N100,000 cash withdrawal per week for individuals and N500,000 cash per week for companies.
The revised cash withdrawal limits, which take effect on January 9, 2023, also affect other payment channels, including Automated Teller Machines (ATM), Point of Sale (PoS) and cheque-based transactions.
Also, the maximum cash withdrawal through ATM is set at N100,000 per week, subject to a maximum of N20,000 cash withdrawal per day.
The maximum cash withdrawal through the PoS terminal shall be N20,000 per day; only denominations of N200 and below shall be loaded into the ATMs.
Deputy President, Lagos Chamber of Commerce & lndustry (LCCI), Gabriel ldahosa, said the cash withdrawal limit might be the next stage of the apex bank’s plan to steadily move the country to a cashless economy.
He said the CBN appeared to be taking the benefit of the change of the high denomination currency notes to speed up the cashless process.
He, however, expressed concerns that the policy may have negative consequences and lead to crises.
“It is likely to cause disruptions in the economy, especially in rural areas where bank branches are few and telecommunication networks are very weak.
“Small and medium enterprises (SMEs) that have small working capital tend to hold most of it in cash in order to keep their businesses running,” Idahosa said.
According to him, CBN may be forced to introduce special arrangements for rural areas and SMEs if the disruptions degenerate into crisis situations.
He said the apex bank must prepare for such possibilities, especially in hard-to-reach mountainous and riverine areas.
He noted that there might also be an unintended consequence of people in regular need of cash keeping much more cash than they normally do.
Senate fixes debate
The Senate expressed reservations about the new policy and has scheduled Tuesday for a debate on the new cash withdrawal limits.
Senate President Ahmad Lawan believes the CBN should not approach the policy by jumping into it at once, saying many Nigerians would be affected.
He, however, noted the need to engage the CBN to get more details on the policy and thus directed the Senate Committee on Banking, Insurance and Other Financial Institutions to discuss the matter during the screening of the CBN deputy governors.
“This should be part of the major issues to be raised when they appear for screening. I want us to be properly informed and guided. Most of us, if not all of us, have not had an engagement with that institution.
“My personal opinion is, if we want to be a cashless society, we should take time to be a cashless society and not jump on it at once.
“Most Nigerians will be out of business. But we need to take the opportunity of the screening to be better informed on the policy,” Lawan said.
Senate Minority Leader Phillip Aduda called for caution on the cash withdrawal limit, saying the policy would affect the economy.
“Our commerce, I think, is not ready for this and our economy cannot take this shock. There is a need for us to speak about it because people are suffering and it is a very serious issue,” Aduda said.
Senator Gabriel Suswam urged the Senate to debate the policy immediately for the sake of Nigerians, who, he said, were extremely worried.
“My phone was inundated by calls from constituents, who are outside the formal sector. People are extremely worried. You should have allowed us to discuss this issue for the sake of Nigerians,” Suswam said, underlining the urgency of the situation.
Ezekwesili faults policy as expert hails it
Former Education Minister, Oby Ezekwesili, said the apex bank was punishing innocent Nigerians for the sins they never committed.
She described the policy as disastrous.
“What is with this constancy of disastrous Monetary Policies by the CBN? How did an institution that should model respect for economic evidence in policymaking become experts or agents of suffering in this country?
“You know that a policy entity has completely lost the plot when all sound evidence-based tools are abandoned in preference for policy guidelines with the high administrative cost of enforcement and a nightmare for innocent people.
“Punishing the innocent for the sins of the guilty?” Ezekwesili said.
But, Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said the revised policy was a natural follow-up to the principal objective of the CBN for re-designing the naira, which is to enhance the cashless economy, capture more of the informal economy and improve the effectiveness of the monetary policy.
“The advantages will amongst others include better identification of parties to transactions, which will have an impact on improving security and the fight against corruption. It should also impact the exchange rate positively as it brings the informal market under the control of the authorities.
“Additional benefit will be the encouragement and increase participation in the digital economy as the need for payment services increases exponentially,” Amolegbe, a former president of the Chartered Institute of Stockbrokers (CIS) said.
‘Policy a needless dissipation of energy’
Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the new cash withdrawal policy was a needless dissipation of energy and resources.
He described CBN’s claim that there was too much cash outside the banking system as “erroneous, “ noting that currency as a percentage of Gross Domestic Product (GDP) in Nigeria was 1.8 per cent, whereas, in the United States, it was about 10 per cent.
“We are more cashless than many advanced economies,” Yusuf said.
He noted that currency in circulation in Nigeria as at October 2022 was N3.3 trillion, out of which N2.8 trillion was outside the banking vaults, pointing out that there was nothing abnormal about this as currency in circulation is meant for cash transactions and is a mode of payment.
“It is a contradiction to expect the currency to be largely kept in the vault of banks, rather than outside the banks.
“Currency notes are printed primarily to facilitate payments in the economy by segments of the population that needs them. There is a difference between money supply and currency in circulation,” Yusuf, a former director general of LCCI, said.
He pointed out that the total money supply as of October 2022 was N50.6 trillion while the total currency in the economy was just N3.3 trillion.
“Currency as a percentage of GDP is a mere 1.8 per cent. Even in advanced economies, the percentages are much higher. The implication is that the Nigerian economy is already substantially cashless. It is, therefore, quite curious that so much energy and resources are being dissipated in this direction,” Yusuf said.
He said the new policy will negatively impact the informal sector of the economy, which is a significant part of the economy accounting for over 80 per cent of trade and commerce and a substantial component of job creation.
“Many of them in the informal sector are in very remote locations where there are no bank branches. They transact business largely in cash. The distributive trade accounted for N23.3 trillion of the country’s GDP in 2021.
“This was about 15 per cent of GDP. This restrictive policy will pose a major risk to this very critical sector of the economy. The policy would also negate the financial inclusion objective of the CBN.
“Some of the informal sector operators may begin to avoid the banking system entirely. This could also be an infringement on the fundamental rights of the unbanked Nigerians. The CBN needs to think through this policy properly to avoid creating more problems than it sets out to solve,” Yusuf said.
Tax implications for small businesses
Fiscal Policy Partner and Africa Tax Leader, PwC, Mr. Taiwo Oyedele, said the new cash withdrawal limits will have tax implications, especially for individuals and micro, small and medium enterprises (MSMEs).
“As many people will be forced to carry out transactions using electronic payments, small businesses that currently operate mostly on cash will become visible to the tax authorities,”
According to him, the policy will trigger various tax obligations including income tax, Value Added Tax (VAT) and Pay As You Earn (PAYE).
He said: “If a business is registered as a company, it may be liable to company income tax (CIT) depending on annual turnover.
“There is no CIT if the company’s turnover is below N25 million but it will pay 20 per cent of its turnover is between N25 to N100 million, 30 per cent of its turnover is more than N100 million in addition to Education Tax at 2.5 per cent.
“But if the business is not registered as a company then it will be liable to personal income tax based on graduated taxable income bands between seven per cent and 24 per cent.
“Also, all businesses are required to register for VAT and charge 7.5 per cent on their goods and services except those with annual turnover below N25 million.
“All employees earning more than N30,000 per month are liable to PAYE which must be deducted and paid to the tax authority by the employer on a monthly basis. You may also be liable for other statutory contributions such as pension depending on your staff strength.
“The more transactions you make electronically the more the tax authorities will get the intelligence to track your income and net worth making it easier to fish you out if you are a tax evader,” Oyedele stated.
He advised small business owners to take some immediate steps, including registering with the relevant tax authorities-Federal Inland Revenue Service (FIRS) and State Internal Revenue Service as well as opening a separate bank account for the business or dedicate one for that purpose in order not to mix business with personal transactions.
He urged the government to sensitise the general public especially small business owners, while the CBN should ensure a proper handshake with the fiscal authorities. For instance, the conditions for excess cash withdrawals could include Tax Identification Number (TIN).
Managing Director, Afrinvest West Africa Limited, Ike Chioke, said people in smaller cities may find it difficult during the early implementation days.
He said that in blind spots where the PoS or internet banking will not, there will be no other alternative than to move cash around.
He said limiting cash in such areas will present a major challenge for the businesses and communities.
“I hope the monetary authorities have also put into planning, measures to make sure that Nigerians are not overly impoverished by the system,” Chioke said.
POS operators lament
Point of Sale (PoS) operators have also lamented the negative impact the policy will have on their business.
Speaking yesterday at Eleko Market in Ibeju-Lekki, Lagos, a PoS operator, Moses Adigun, said any policy that drastically makes cash unavailable is a minus for their business.
“I pay out over N300,000 daily and limiting cash withdrawal to N100,000 weekly means that my business will suffer. The same way I do not have access to cash, is also how my customers will lack access to cash,” Adigun said.
According to him, less than 10 per cent of his customers ask for transfers and 90 per cent demand cash.
“It means we will serve a smaller customer base when this policy takes off,” Adigun said.
Another PoS operator, Nkemdilim Michael said she will look for another business because the business thrives on cash.
“Customers come to us for quick cash, which we give them at a fee. Now, both the customer and the operator will be looking for cash. That will make cash very expensive and might lead to higher fees and reduced patronage,” Nkemdilim said.
Many of the market women expressed surges at the policy, saying they do not believe it is true.
“I think the policy may not be as they have told us. How can they say we will only withdraw N100,000 cash weekly? The policy will reduce our business volume unless they make the right infrastructure available before implementation,” Mrs. Beatrice Ajao, a vegetable seller based in Ajah Market, Lagos.
Her colleague, Mrs. Adaobi Nworie, said the CBN should educate the market women on how the policy will work before implementation.
“The policy takeoff timeline is too close. I expect the CBN to visit markets and stores to educate them on the implementation process and assure them on the benefits of a cash-less economy.
“I have friends that do not use Automated Teller Machine (ATM) cards or PoS because of rising cases of e-fraud.
“There are many people in that category that have to be encouraged and assured of the security on the digital payment channels,” Nworie said.
Air travellers condemned the policy noting that it would stifle transactions in the air travel value chain.
While calling on the CBN to review the policy, they said daily cash withdrawal limits will disrupt payment for tickets in places where technical hitches usually pose a huge challenge in different payment platforms.
Speaking in separate interviews at the Lagos Airport, an Abuja – bound passenger who identified himself as Carl Umoru said the daily POS limit set by the CBN would put travellers in an uncomfortable position.
He condemned N200 as the highest denomination to be dispensed by ATM as another development that will create unease for travellers who will have to contend with carrying huge quantities of notes about with little value.
‘Small businesses in for tough times’
President, the Association of Micro Entrepreneurs of Nigeria (AMEN), Prince Saviour Iche, said small business owners are in for tough times following the reduction of cash withdrawal limits announced by the Central Bank of Nigeria (CBN) on Tuesday.
He acknowledged the action revealed the action to drive a cashless economy by placing stiffer restrictions on cash withdrawals.
He noted, however, that the policy was going to affect small businesses which conduct transactions in cash.
According to him, so many impediments exist now that is not supporting the sustenance of the cashless economy infrastructure
with challenges and irritations that people experience when transacting using electronic payments.
He said businesses have experienced unsuccessful electronic payment transactions either due to bad networks, switch failure or even lack of electricity to charge the devices.
He said as a consequence, there could be a lull in economic activities which may slow down business
growth in the short to medium term.
An economist, Kola Ayeye said the policy is not a bad policy but that it is not Nigeria’s biggest problem at the moment.
Speaking on Channels Television Sunrise Daily yesterday, Ayeye said he understood that the CBN wanted to reduce reliance on cash and wanted to accelerate the digitisation of the economy but maintained that the apex bank should not be investing a lot of energy trying to control cash at the moment.
“I think coming shortly after the naira redesign policy it sends a signal to want to reduce reliance on cash and wants to accelerate the digitisation of the economy, so my view about the policy is that in itself I don’t think it’s bad, if individuals can withdraw N100,000 a week it means they can withdraw N400,000 a month.
“In terms of the policy itself maybe there isn’t a problem with it per se, my concern is the focus, do we need to invest as much energy as we are doing in controlling cash? Is that our biggest problem now?
“So I don’t see anything wrong with the policy but I have a problem with the emphasis, I have a problem with the focus, I do not think this is our biggest problem now,” Ayeye said.
He said that rather than waste energy on controlling cash, the CBN should rather be trying to pay the debts the current government has accumulated, which is almost half of the total money supply of the country.
Human Rights Writers Association of Nigeria (HURIWA) criticised the policy saying it would worsen the depreciation of the naira.
National Coordinator of the group, Comrade Emmanuel Onwubiko, in a statement, said the CBN is chasing shadows having crippled Nigeria’s economy with poor fiscal policies in his about 10-year regime at the apex bank.
The group said rather than coming up with experimental and needless policies like the redesigning of the naira, cash withdrawal limits, amongst others, the apex bank and the federal government should cut down foreign loans and reduce Nigeria’s worsening external debt burden which has been said by experts to be the dominant cause of naira depreciation against the United States dollar.
The Conference Of Nigeria Political Parties (CNPP) however said critics of the new policy are missing the key gains of the policy, especially ahead of the 2023 general elections.
In a statement signed by its Secretary General, Chief Willy Ezugwu, the CNPP said: “Nigerians are suffering today because of bad governance and every sacrifice towards getting the right leadership into offices from 2023 is worth it.
“Bad governance is a product of Nigeria’s flawed electoral processes over the years which threw bad and corrupt leaders on the masses. This became the case as a result of highly monetised electoral processes.
“But, any process that will minimise the domination of the Nigerian political space by moneybags and corrupt politicians, is worth whatever sacrifices by the ordinary citizens, who bear the brunt of bad governance the most.”
