Bank customers have criticised the Central Bank of Nigeria’s new policy on cash withdrawal limit, saying that it is capable of discouraging savings culture in the country.
The apex bank had last week said that effective from June 1, 2012, daily cumulative withdrawals and lodgements in banks by individuals will be limited to a maximum of N150, 000.
It also pegged the daily cumulative withdrawals and lodgments by corporate customers at N1 million effective from the same date.
CBN noted that the policy would increase cash dominance in the economy with its implication for cost of cash management to the banking industry, security and money laundering, amongst others.
However, many bank customers, especially business owners, who reacted to the new directive said that it would have negative impact on banks as it would definitely reduce deposits.
They noted that it would lead to high lending rates in the system, thereby discouraging investment.
Customers also pointed out that the implementation of such policy would go a long way to affect the government’s recent initiative encouraging banks to lend to agricultural and manufacturing sectors at single digit.
Managing director, H.J Trust and Investment, Mr. Harrison Owoh, who doubted the workability of the policy said that under the new directive it would take a corporate organisation five working days to withdraw money that would enable it do business transaction worth about N5 million.
While commending the principle behind the initiative, he said howeer that it would be difficult to transform the nation’s economy overnight from cash to a cashless society since most Nigerians were only retailers.
He said that lack of trust and high rate of fraudulent activities in the country had continued to discourage people from accepting cheque for payments, stressing that it would take a longer time to change the mindset of Nigerians in terms of using electronic payment channels.
The managing director, Jamico Leather Limited, Mr James Osoka, said that the new directive would not work in Nigeria.
He stated that debit cards were efficient in developed countries because of their general acceptability, adding that in Nigeria one could not use debit cards to buy goods because they have not been fully accepted.
According to him, the new withdrawal policy will ultimately defeat the essence of depositing funds in the banks.
He said: “if I have N10 million in the bank, I want to transact business of N5 million and I won’t be able to withdraw N5 million for my business transaction, then what is the essence of depositing money in the bank in the first place?”
He said that this would encourage traders to revert to the old system of keeping money in safes and under pillows.
Osoka noted that reverting to the old system would create more harm as it would lead to increased crime rate in the country, with armed robbers invading homes and burgling shops in search of money.
Corroborating Osoka’s view, Mr. Kenneth Obiora pointed out that daily withdrawals of N150, 000 by individuals would not be enough for one to do business in the country.
He said that the nation’s currency had so depreciated that such amount of money would only be enough to pay children’s school fees and rent a small shop.
Obiora said: “The only way such policy will work is for traders to open multiple savings and current accounts in different banks to enable them withdraw N150, 000 daily from each or by reverting to the old system of keeping money at homes in safe.”
He, however, warned that any attempt to adopt the old system of savings would drastically affect bank deposit, discourage lending and lead to stagnation of the growth of the nation’s economy.
He said, “If banks’ failure to lend funds to the real sector of the economy in the last two years could affect their profitability and growth of the economy, I wonder what will happen if banks were unable to mobilise enough deposit to do their banking business.”
Top lawyers, including senior advocates of Nigerian, at the weekend also joined the league of prominent Nigerians who have come out to denounce the new directive.
The lawyers, including, Chief Niyi Akintola, (SAN), Malam Yusuf Ali, (SAN), Chief Ajibola Aribisala,(SAN) and Mr. Femi Falana, noted that the new policy, like the previous ones, can only be observed in the breach.
It could be recalled that the apex bank, in a circular entitled: “Industry Policy on Retail Cash Collection and Lodgement,” and signed by its director of currency operations, Mr. Muhammad Nda, warned that individuals and corporate organisations that flout the limits would be charged penalty fees of N100 per thousand and N200 per thousand respectively.
CBN pointed out that the policy was adopted to reduce cash flow and moderate the cost of cash management as well as encourage the use of electronic payment channels, stating that it took the decision in collaboration with the Bankers’ Committee.
It threatened to suspend any bank, payments scheme, processor, switching company or service provider that contravenes the policy for a minimum of one month, warning that the licence of such institution might be withdrawn if such contravention was repeated.
The CBN added: “Contravention of this policy shall attract a fine of five times the amount that the bank waives as a first offender. Subsequently, the bank shall pay 10 times the charges waived. Furthermore, third party cheques above N150, 000 shall not be eligible for encashment over the counter. Value for such cheques shall be received through the clearing house.”
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