Conversations on CBN’s Cash Withdrawal Policy and Youth Employment

It’s a cool Christmas holiday evening, Rema’s song ‘calm down’ playing in the background and friends sipping drinks or eating ‘puff puff’ (a popular Nigerian flour-based snack) around the centre table. I was narrating my experience with long queues at the banks before the December 2022 holiday closure (banks operate for 4 hours only, to be able to close their books) and the unreliable internet the banks referred the slow service to. I visited 3 banks and 2 of them mentioned ‘internet network issues’ as the reason for my over 40 minutes delay in withdrawing cash. So, I decided to ask my buddies what they thought of the new CBN cash withdrawal policy.

Me: Our beloved CBN has ‘decreed’ that Nigerians can withdraw ?500,000 and ?5,000,000 weekly starting in January 2023; for individuals and corporate entities respectively. Glad to see the sharp u-turn from ?100,000 and ?1,000,000 previously announced. It appears to be a bad development for POS operators – and other Nigerians. What do you think?

Emeka: I think the CBN has the legal rights to both redesign the currency and impose cash withdrawal limits. In fact, the body language of the CBN governor shows he had secured the relevant buy-in from the Executive arm of government (recall his pictures with HE President Buhari shortly after the announcement on currency redesign).

Me: Though the bank has the statutory powers doesn’t mean the policy is expedient or fair. While there’s a general push for financial inclusion, this policy (especially because of the tight timelines) will further entrench the belief that the CBN is inconsiderate to unbanked Nigerians.

Emeka: Yes, but the objective of redesign was to first, get rid of money stored privately outside of the banking system, ahead of the elections and second to curb inflation induced by excess money supply (which is common during election season).

Me: I can’t debate the first but what’s the evidence that the real ‘owners of Nigeria’ don’t have a 1st mover advantage in replacing their stacks of currency? Also – the timing seems to put the ruling party ahead of top contenders – as only they would have access to money to share for campaigns. On inflation, I’m a frequent buyer of Ribena (1) and I can tell you the price has moved from ?1,100 in Jan 2022 to ?1,600 in November – that’s around 50% increase in one year. I’d need to observe the price of Ribena in 2023 to see if high school economics works in Nigeria.

Seriously though – my real worry is the impact of this cash withdrawal policy on POS operators.

I hear the CBN said they would work with deposit money banks (DMBs) and other financial intuitions (OFIs); but who really advocates for Nigerians who make a living from these channels?

Zainab: Well, they are businesspeople! And it’s their prerogative to adapt and stay ahead of change – even when it’s not so positive. On the bright side, the policy would stimulate new innovations (which time will reveal). Conversely, it means deposit and withdrawal revenues of POS operators will plummet; while transfer charges (revenue) grows.

Me: I agree that transfer revenues might grow; but historically, do consumers do more cash transactions (deposit and withdrawal) than transfers? If yes, we are assuming fundamental changes in consumer behavior that will protect the income of the POS operators (or a continuation of cash withdrawal trends since customers would rather spend an amount less than the 5% bank charge, above weekly withdrawal limits).

Zainab: Exactly, what I wonder about is how the POS operators in busier locations are to source for cash – given that the limits also apply to them? The real challenge to realizing increased transfer revenue for POS operators would be internet reliability and a more reliable NIBSS (2) (the number of failed transactions should be reduced before continuing this cashless conversation). I’m aware more state governors have waived ‘right of way’ charges for internet service providers but the cost of access is much higher in Nigeria, than in other countries. Surely, we don’t expect to see adoption the way MoMo spread across Eastern Africa; without first building the requisite infrastructure. I even read in an article that Nigeria has at least a few million POS banking agents.

Whatever the true number is, it’s an important decision the CBN has made, and Nigerians must watch how it affects the livelihoods and health of all POS operators.

Me: It would be interesting to see what financial inclusion reports says on ‘the phenomenon of remaining unbanked (3)’. Some folks clearly do not want a bank account because they cannot ‘see’ what government does for them and would avoid any forms of interacting with the government – even if its opening a bank account. Let’s not forget that banks (like hospitals or fuel stations) are not always accessible to people in remote areas.

Zainab: Well, I find it hard to believe there are people who do not have any bank accounts. Even folks I know in the village have accounts.

That’s why the CBN needs to support POS operators as they enable financial access.

I know the CBN’s mandate is not employment, but it certainly needs to be aware of the 2nd and 3rd level outcomes or impact of its policies. CBN initiatives like NIRSAL were aimed at enabling the agriculture sector, so its counter – intuitive that this policy ‘dis – empowers’ another sector.

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Me: I know farmers who have harvest sales in the millions and insist they do not have accounts. If a buyer insists on a transfer, they’d tell the buyer that there’s a cooperative you can pay into, but they have no personal accounts.

Also, southern and northern Nigeria are quite dissimilar in terms of literacy, mobile phone ownership and internet access.

Your village probably looks like my town!!! For emphasis, do you still have mud huts in your village?

Zainab: well, I think the definition of unbanked should be expanded because this your farmer example is a rich person that doesn’t want to pay for even bank SMS alerts.

Me: agreed! I hope we get to a point where an organization can look at these policies closely to ensure that more Nigerians are NOT deliberately pushed into poverty. The government made a promise to lift 100 million Nigerians out of poverty, but the recent ‘Multidimensional Poverty Index 2022’ report shows we need added momentum to hit the mark.

Zainab: If your only concern is the livelihood of POS operators, I can assure you they’d be fine. POS operators need to speak against policies like this. They need the support of advocacy groups and the companies that create the systems (hardware and software) they use.

Nigeria has a lot to look froward to in 2023 (including a general election starting in February) and I know that business always finds a way to win.

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1 – A popular children’s drink. At the time of this posting, a carton of Ribena costs ?2400 at retail

2 – Nigeria Inter-Bank Settlement System Plc

3 – Unbanked is an informal term for adults who do not use banks or banking institutions in any capacity. While often an issue in the developing world, there are also pockets of the unbanked in the developed countries, including the United States of America (Investopedia, 2020)

** All discussions were held in December, 2022; and circumstances could have changed.