NewsCBN Defends Naira Redesign, Cash Withdrawal Limit, Says Policy Will Check Kidnapping,...

CBN Defends Naira Redesign, Cash Withdrawal Limit, Says Policy Will Check Kidnapping, Inflation, Money Laundering, Others

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December 22, (THEWILL) – The Central Bank of Nigeria (CBN) has said the redesigned naira notes along with the cash withdrawal limit will help tackle kidnapping, money laundering, fight inflation and reduce the cost of minting new notes as well as cost of destroying old tenders.

Deputy Governor of the Bank, Financial System Stability, Aisha Ahmad, made this known when she appeared before members of the House of Representatives during the plenary session on Thursday.

THEWILL reports that the apex bank had recently introduced new N200, N500 and N1,000 notes,

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The Bank on Wednesday, had also reviewed its policy on cash withdrawals across all channels by individuals and corporate organisations to N500,000 and N5 million, respectively.

Addressing lawmakers on Thursday, Ahmad said the policy is neither targeted at any segment of the society nor intended to disenfranchise hardworking Nigerian citizens and businesses as insinuated in some quarters.

She said data indicates 94 percent of all cash transactions fall within the new limit of N500,000.

She said 82 percent of corporate cash transactions fall below the new limit indicated for corporate bodies.

The implication, she said, is that about 84 percent of individuals will not be affected by the cash withdrawal limit.

“The Honorable members of the House of Representatives are respectfully invited to refer to the recent pronouncement by the Central Bank of Nigeria (CBN) on October 26, 2022, on the redesign of some denominations of the Naira note (N200, N500 & N1,000) and its circular of December 6, 2022, on the revised cash withdrawal limits and nationwide implementation of the Cashless Policy.

“Following the above policy pronouncement, the CBN has noted with keen interest, the mixed public reaction received.

“While a segment of Nigerians have applauded the policies, others have raised concerns, particularly with respect to the impact of the policies on the underserved and rural communities in Nigeria.

“The CBN wishes to draw the attention of the House to the significant achievements recorded in the Nigerian payments system since the Cashless Policy was first introduced in 2012.

” Nigeria has been adjudged Africa’s undisputed real-time and digital payments leader with over 3.7 billion real-time transactions in 2021.

“Electronic banking adoption has significantly proliferated amongst the Nigerian populace whilst the Cashless Policy has spurred further policy innovation that has expanded the breadth and depth of financial system participants, transaction channels and financial access points.

“The CBN’s latest actions on Naira Redesign and nationwide implementation of the Cashless Policy are intended to further sustain these achievements in a quest to foster a safe, credible and efficient payment system that is the pride of all Nigerians and the envy of the World.

“It is neither targeted at any segment of the society nor intended to disenfranchise hardworking Nigerian citizens and businesses as insinuated in some quarters.

“The Bank shall continue to monitor implementation and be flexible on the limits in response to feedback received.

“We crave the National Assembly’s continued support as the Bank continues its implementation of transformational payments and financial industry initiatives in line with its mandate,” she said

Ahmad said the Naira Bank notes had faced several challenges including:

1. Wholesale hoarding of Naira banknotes by members of the public. She said statistics show that cash outside banks consist of over 80% of Currency in Circulation (CIC).

2. Worsening shortage of fit banknotes in circulation: This, she said portends negative public perception of the Bank and increasing threat to financial system stability.

3. High and increasing cost borne by the Bank.

4. High risk of counterfeiting. This is evidenced by reports from security agencies on the rise of counterfeit-related incidences in some states in Nigeria including the FCT. This has adverse implications for businesses and the economy at large.

5. Non-compliance with international Best Practices in Currency Redesign. She said the current series of Naira banknotes have been in circulation for between 14–21 years, which is inconsistent with global best practices and exposes the notes to the risk of counterfeiting.

Ahmad said the standard practice is that currency in circulation should be redesigned or re-issued after every 5–8 years.

While justifying the redesign of new Bank notes, Ahmad said, the new notes will help:

i. Control inflation as the exercise will help mop up currency outside the banking system, thereby ensuring more reliable data on money supply, which will, in turn, facilitate better monetary policy formulation and effectiveness.

ii. Boost appreciation of the Naira as the higher denomination and the volume of banknotes outside the banking system used to speculate on the currency would reduce.

iii. Fight banditry and terrorism as large volumes of cash used to pay ransom to bandits/terrorists would be reduced.

iv. Assist in the fight against corruption as the exercise would rein in the higher denomination used for this purpose and the movement of such funds from the banking system could be tracked easily.

It is against the backdrop of the foregoing that the CBN in line with its statutory powers as enshrined in Section 2(b) and 19 of the CBN Act 2007, sought and obtained the approval of Mr. President to redesign and issue new series of Naira notes in the N200, N500 and N100 denominations.

On the whole, Ahmad said the cashless policy of the CBN, when fully implemented will build on the successes the bank had recorded:

• Reduction of cost of cash management (processing, movement, security, destruction of old notes), which is often passed on indirectly to Nigerians including eliminating the physical risk of cash robbery, kidnapping, terrorism.

• Promote Nigeria’s positive reputation for fighting money laundering and terrorist financing. Cash limits are recognised in Anti Money Laundering Laws due to its role in advancing these illegal activities.

• Reduction in incidences of crime – armed robbery, kidnapping, terrorism financing, advance fee fraud, graft, ransom payment and extortions. etc

• Deepening the Nigerian payment system through more innovation and cheaper costs

• Financial inclusion – the route to scaling financial inclusion is through electronic channels. Mobile phone penetration in Nigeria is 152m (according to NCC). EFINA survey shows that 81% of Nigerians excluded have mobile phones

• USSD helps to overcome the need for internet connectivity to smartphones.

• Economic opportunities for small businesses & rural communities to facilitate trade and improve livelihoods, thereby boosting economic growth

• More effective transmission of monetary policies

• Overall growth, development and stability of the financial system cash in and cash out (electronic card distribution, wallet/account opening, BVN onboarding, bills payment, etc) will also be enhanced.

“A geospatial map of available financial access points is also being completed and shall be made public to inform all stakeholders of the locations of physical and electronic financial access points where they can process transactions electronically.

“The CBN shall continue to be flexible in its implementation of Cashless Policy and monitor its impact, especially on vulnerable segments of the society but ensure the multiple advantages are achieved,” she concluded.

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