On December 11, 2023, Nairametrics reported on a significant policy change by the Central Bank of Nigeria (CBN): the suspension of the 2% and 3% charges on cash deposits exceeding N500,000 in individual accounts and N3 million in corporate accounts, respectively.
While the CBN has yet to disclose the specific reasons for this action, several financial experts have speculated that it might be an attempt to mitigate the ongoing cash shortages affecting various parts of the country.
- Dr. Muda Yusuf, Director General of the Centre for the Promotion of Private Enterprise (CPPE), spoke to Nairametrics about the CBN’s decision, noting, “This is likely an attempt by the CBN to alleviate the ongoing cash scarcity by making it easier for people to deposit cash without penalties.”
He stressed, however, that “the CBN should further investigate the root causes of the cash scarcity.”
- Adetola Freeman, Regional Analyst for FBS Africa, shared his insights, stating, “There’s been an influx of old Naira notes in banks, some even mildewed, which might be due to people hoarding cash. The CBN’s move could be a strategy to get this cashback into circulation.”
- He also speculated, “It appears the CBN hasn’t been minting enough new notes, especially with the launch of the redesigned Naira.” Freeman concluded by emphasizing, “Removing the charges on deposits could help, but we need a more comprehensive plan to replace all the bad notes.”
A senior banking official who craved anonymity also linked the directive with cash scarcity, he asserted that there was a likely fear in CBN quarters over the lack of cash in the country.
- He said, “CBN is worried, they think that people are hoarding cash, so by removing this processing fee, it will make cash reappear, however, I don’t think so.”
- “The two biggest cash suppliers in the Nigerian banking industry are fuel stations and supermarkets. And in recent times, those two lines of businesses have embraced the cashless drive, so I don’t know who has that much cash to be hoarded.”
About the directive affecting the cashless policy drive in Nigeria, he noted, “It cannot affect it, we have crossed that bridge” referencing the widespread of mobile banking in the Nigerian banking scene.
- The banker however acknowledged that the cash scarcity problem was strange, stating “Nobody knows why there’s this situation of lack of cash. Banks don’t even have enough cash to put in their ATMs.”
What you should know
While the cash scarcity situation is relatively new in Lagos, it has plagued other parts of Nigeria for a longer time.
Last week, a manager of a bank branch in Osun State speaking to Nairametrics about the cash situation noted,
- “During the March cash scarcity, customers were asked to deposit their old notes in exchange for new notes and though we received new notes from the CBN, it was far insufficient. We were receiving less than 10% of the amount we sent to the CBN, and the situation was dire.”
- “After the saga, the deadline for old notes was extended to December 31, but recently the CBN announced that old notes would be in use till further notice. As we draw closer to the December 31 deadline, customers are sceptical that if they bring money to the bank, we will take it out, so they are not bringing cash.”
- “If you enter the market, you will see cash but when you go to the bank, you will not see cash. In fact, people who are bringing cash now are those who are forced to bring cash like fuel stations. Even the fuel stations, the POS guys are going after them.”
It remains to be seen what impact the CBN directive will have on the current situation, as ATM machines across Nigeria are seen to be drying up of cash.
