How CBN’s Cash Withdrawal Limit Policy is Promoting Acceptance of e-Naira
By Abdulrahman Abdulraheem
Weeks after the Central Bank of Nigeria (CBN) put a limit on the daily and weekly cash withdrawals for individuals and corporate organizations, many Nigerians have expressed the willingness to give the e-Naira option a chance in order to cope with the reality of the policy.
A survey by Economic Confidential shows that more Nigerians have either joined the e-Naira train or have expressed the willingness to do so since the CBN is not yielding to pressure to back down on the cash withdrawal limit policy.
On the 25th of October 2021, President Buhari and Mr Emefiele launched the e-Naira digital currency in Abuja. The launch came with already minted 500 million e-Naira ($1.21 million).
At the launch of the e-Naira, a lot of Nigerians were not enthusiastic about the innovation as they were skeptical about its workability in the country.
The currency was actually developed by the fintech company, Bitt, based in the Caribbean. It is the digital form of the Nigerian physical Naira currently in circulation. It is issued by the CBN in line with Section 19 of the CBN Act. In essence, it is a direct liability of the apex bank. Built on a blockchain open ledger technology that prevents duplication or creation of fake units, each e-Naira note is unique and different.
The e-Naira is simply a digital currency issued and backed by the authority of the federal government and is a legal tender equivalent to physical cash. It is quite unlike Bitcoin and other cryptocurrencies that have no backing from established authorities. The e-Naira is pegged against the traditional Naira and will not fluctuate due to market influence at a different rate from the traditional Naira. The e-Naira basically eases transactions and offers digital stability, thus reducing the need for physical cash.
Unlike conventional digital banking however which involves customers transacting with money maintained by them in a bank, eNaira is actual money earned and maintained by customers in their e-wallets.
The e-Naira has since 2021 complemented our traditional Naira as a less costly, more efficient, generally acceptable, safe and trusted means of payment.
The vision of the Emefiele-led CBN is for e-Naira to facilitate financial inclusion, reduce so-called “leakages” from state budgets due to in-built traceability that uses blockchain technology, enable direct welfare disbursements to citizens, facilitate diaspora remittances, reduce the cost of processing cash, improve the availability and usability of Central Bank money, increase revenue and tax collection, support a resilient payment system, improve the efficiency of cross-border payments and to reduce the high cost of printing the physical currency, which amounted to N307bn between 2014 and 2019.
The Economic magazine gathered from a cross-section of Nigerians, especially traders, artisans, and students, that there is a new wave of enthusiasm and desire to register on the e-Naira platform to aid business transactions in the wake of the limitations the new cash withdrawal policy would impose on them.
The CBN governor, Godwin Emefiele, had pushed for Nigeria to become the first African country to embrace the e-Naira. In accomplishing this feat, he and his surrogates had repeatedly explained that the e-Naira would serve the same purpose as the physical cash but in a more efficient and safer way.
The Director of Information and Technology at the Central Bank of Nigeria (CBN) and the coordinator of the eNaira project, Hajia Rakiya Mohammed Shuaib gave reason for the launch of the eNaira and how it will drive the government’s cashless policy.
According to the IT specialist, eNaira allows user to do transactions peer to peer just like with crypto and cash.
Rakiya said: “eNaira is a legal tender, which means it is backed by law and it is exchanged one to one with the naira, so everything you can do with cash, you can do the same with Naira.
“You can access the eNaira on the phone. With the introduction of the USSD you can dial *997# and conduct your transaction. So, we are bringing in the people who hitherto could only use cash by being physically present where the transaction is happening to an online version, a digital economy space where you are confident the value of that eNaira is still the same as cash,” Rakiya said
The CBN had in a viral circular on December 6 2022 instructed banks and other financial institutions to restrict the daily withdrawal of cash by individuals to N20,00 and N100,000 weekly and N500,000 weekly for corporate organizations. After much pressure from concerned Nigerians, the CBN changed the daily withdrawal limit to N50, 000 for individuals and N500,000 weekly and increased that for corporate organizations to N5,000,000 weekly. For third-party cheques, the Bank decreed that they can’t be withdrawn in cash if it exceeds N100,000.
The apex bank went ahead to impose extra taxes and stringent conditions on any attempt to cross the daily or weekly threshold for cash withdrawals.
“Customers should be encouraged to use alternative channels (internet banking, mobile banking apps, USSD, cards/POS, eNaira, etc.) to conduct their banking transactions,” CBN’s Director of Banking Supervision, Haruna Mustafa, wrote in a December 21 circular.
Taking about alternatives, e-Naira is gradually becoming the darling of most Nigerians due to the limitless opportunities it offers for digital banking.
The Phasing of Old Naira
According to the Economic Confidential survey, another recent CBN policy that is aiding the acceptance of the e-naira is the phasing out of old naira notes and the imposition of new ones as legal tender.
As part of efforts to clean up the economy and save the Naira from the free fall it has experienced in recent years, the CBN also recently announced the introduction of new N200, N500 and N1000 notes. While the new notes were launched by President Buhari on November 22, 2022, the old notes will no longer be legal tender by January 31, 2023. This reality is one of the reasons more Nigerians are embracing the e-Naira.
The Nigeria Financial Intelligence Unit (NFIU) also on January 6 this year announced a total ban on any form of cash withdrawal from government or public accounts at federal, state and local government levels, saying from March 1 this year, it would be a criminal offence for any government official to take any amount from public coffers in cash under any guise.
The combination of the above-named policies is forcing Nigerians to see e-Naira as the last hope. As far as some of the Nigerians we spoke to are concerned, the federal government, through the CBN and the NFIU, is showing a lot of seriousness and determination to push the transition to a cashless economy as seen in the coordinated policies being churned out lately.
According to the CBN, the e-Naira recorded over 700,000 transactions worth N8bn within a year of its launch.
The apex bank said e-Naira recently reached 840,000 downloads, with about 270,000 active wallets comprising more than 252,000 consumer wallets and 17,000 merchant wallets.
N3.00 billion has been successfully minted by the Bank. N2.10 billion has been issued to financial institutions.
About 1.0 million (919,000) customers have been onboarded. 33 banks are fully integrated and live on the platform.
Over 3,305 merchants have successfully registered on the e-Naira platform across the country including Shoprite, Sahad Stores, A.A. Rano fuelling stations, Fraser Suites, and November Cubes, among others.
There are also over 2.5 million daily visits to the eNaira website.
A UK-based Nigerian economist, Mr Elvis Otsemehuno Ogah, told Economic Confidential that the introduction of the e-Naira was a masterstroke in the efforts by the government to control needless cash flows, reduce the cost of printing currency, transit to full cashless economy and stabilise the monetary system in the country.
“The e-Naira was introduced by the Central Bank of Nigeria in 2021 to serve as both a medium of exchange and a store of value. Largely overlooked at the beginning, it has now begun to gain traction in terms of acceptance and usage by the Nigerian public. The reason isn’t far-fetched. In the last quarter of 2022, the country’s apex bank announced a new set of monetary policies, among which was capping daily cash withdrawals. This singular act has driven the public to seek alternative means of making legitimate transactions, and unsurprisingly, the e-Naira which upon its official launch was greeted with scepticism is now the attractive and reliable payment instrument people are turning to.”
Talking about its positive impact on individuals and the system at large, the scholar said: “The e-Naira has helped plug the gap occasioned by the withdrawal limit policy as people can now proceed with even larger transactions using their computers or mobile phones without human or physical contact with the traditional legal tender. From the microeconomic level, many individuals appreciate the fact that transacting with the e-Naira requires no intermediaries, enables seamless transfer of value and makes transaction costs cheaper. Many bank accounts today charge their users a monthly fee for account maintenance. Many of them also drain customers with hidden fees and charges for using your account. But anybody can create a free e-Naira wallet, and nobody charges them any fees. They also make for faster payment, across borders.”
“From the macroeconomic prism, economies that are more cash intensive tend to grow slowly and miss out on significant benefits. Conversely, as research by the global consulting firm, Boston Consulting Group, shows, economies that switch to digital are more successful; the switch can boost annual GDP by as much as 3 percentage points,” he added.
Mr Ogah commended Mr Emefiele for the ‘CBN’s strategic plan to sanitize the cash ecosystem’ which he said no one can fault.
What Nigerians are Saying
Tari Silva, an investment banker based in Port Harcourt, told our correspondent that as someone who should know better, he took the decision to enrol in the e-naira platform immediately it was announced long before the launch. And after the launch, he enrolled immediately and he has learnt how to do business and buy stuff without cash and he is not regretting it at all. He agreed with the belief that the recent coordinated policies of the CBN and others are forcing people to embrace the e-Naira. According to him, at the end of the day they will have no reason to regret doing so.
Still in Port Harcourt, Andrew Biboye, a trader, said he had an encounter with promoters of the e-Naira from CBN and since then he has embraced the concept fully. He added that most of his friends who joined the e-Naira platform recently were motivated by the cash withdrawal limit policy.
Dr Gideon Yakubu, a resident of Kaduna, told our correspondent, at Arewa House in the heart of the city, that he is one of the many Nigerians who had recently embraced the e-Naira option due to the emphasis the federal government has placed on the pursuit of cashless economy in recent months.
“I had to go through the process last week and enrol in it in order to move with the trend. It is obvious that carrying a lot of cash will no longer be fashionable in the coming months and years and all you have to do is to watch the body language of the monetary policy makers in the country. Everyday they keep coming up with new monetary policy in order to emphasise the fact that digital banking has come to stay and we cannot wish it away. And I will call on all Nigerians to consider e-Naira because it is efficient and safe and it helps to solve the problem of too much cash in the system with its attendant consequences,” he said.
Hajiya Aisha Umar, a textile trader at Kantinkwali Market in Kano, said she didnt fully understand the impact of e-naira even though she saw on television that it was launched with pomp and pageantry by President Buhari in 2021. She however confessed that her two daughters who are into similar business with her take advantage of the opportunities e-Naira offers using their smart phones. “My daughters have tried to explain the concept to me but I am yet to get involved. But you know like every new thing that comes, it takes time before all of us will fully embrace it,” she said.
Alhaja Islamiyat Folawiyo, another textile trader in Balogun Market, Lagos, used the opportunity to vent about the hurried manner the CBN forced the cash withdrawal limit policy on Nigerians without taking into consideration the peculiarities of traders like her who deal in heavy cash sales on a daily basis. She however noted that she had had from younger folks that the e-Naira has come to stay and that the country will have to embrace it fully.
Umar Dan Musa, a student of Ahmadu Bello University (ABU), Zaria also confessed to Economic Confidential that he had recently joined the e-Naira train in order to adjust to the cashless reality that the CBN is trying to implement . The final year student who also owns a barbing shop near the Samaru Campus said e-Naira is desirable and credible, adding that he had convinced a lot of his friends to also embrace it.
Abdulrahman Abdulraheem is Managing Editor of Economic Confidential