Understanding the Central Bank of Nigeria (CBN) Cashless Policy

CBN, Nigeria financial policy
When I read briefly on my mobile phone about the CBN decision to commence penalizing people engaging in cash transaction by charging some percentage on such money, I felt unconcern, since for long I personally have being discouraging such act where substantial amount is involved in any transaction I am part of. But the need to further get full details came up when people who are ignorant and are not aware of the rules and regulations behind it nor the benefits of such policy are taking it to be a way of frustrating the masses, which is not so.

There is need for a lot of education and awareness about the important and benefit of this policy for individuals and for the nation at large. It is because of the masses ignorant that prompt the authority to delay implementing the policy. We all know it is difficult to achieve a set goals and plan of development within our community and household without the support of the members, so also the nation. Many of the government policy to develop the nation are fruitless as a result of the citizens not given support willingly or out of ignorant.

Firstly, you should be aware that the CBN cashless policy is not affecting all cash transaction. It is on any deposit or withdrawal above N500,000 (Five hundred thousand naira) for individuals and N3,000,000 (Three million naira) for corporate bodies. The tables below highlight the new charges, the policy commencement dates and the applicable States in which the new charges will be applied:

Applicable Rate on Daily Withdrawals
Applicable Rate on Daily Deposits
Less than or equal to N500,000
No Charges
No Charges
Above N500,000 – N1m
Above N1m – N5m
Above N5m
Less than or equal to N3,000,000
No charges
No charges
Above N3m – N10m
Above N10m -N40m
Above N40m

1st April, 2017
Lagos, Ogun, Kano, Abia, Anambra, Rivers and the FCT

1st May, 2017
Bauchi, Bayelsa, Delta, Enugu, Gombe, Imo, Kaduna, Ondo, Osun and Plateau

1st August, 2017
Edo, Katsina, Jigawa, Niger, Oyo, Adamawa, Akwa-Ibom, Ebonyi, Taraba, Nasarawa

1st October, 2017
Borno, Benue, Ekiti, Cross-River, Kebbi, Kogi, Kwara, Yobe, Sokoto and Zamfara

As gathered on the CBN website, the cashless policy is in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. An efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth. Other reasons for the cashless policy include;
  • To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
  • To improve the effectiveness of monetary policy in managing inflation and driving economic growth.

In addition, the cashless policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including:
  • High cost of cash: There is a high cost of cash along the value chain - from the CBN & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling.
  • High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
  • High subsidy: CBN analysis showed that only 10percent of daily banking transactions are above 150k, but the 10percent account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10percent incur in terms of high cash usage.
  • Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth.
  • Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.

Expected Benefits of the New Cash Policy
A variety of benefits are expected to be derived by various stakeholders from an increased utilization of e-payment systems. These include:
  • For Consumers: Increased convenience; more service options; reduced risk of cash-related crimes; cheaper access to (out-of-branch) banking services, access to credit and financial inclusion.
  • For Corporations: Faster access to capital; reduced revenue leakage; and reduced cash handling costs.
  • For Government: Increased tax collections; greater financial inclusion; increased economic development. Increased tax collections; greater financial inclusion; increased economic development.

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