By Ise-Oluwa Ige

M any countries of the world are moving towards a cashless society, where cash—paper/ coin currency—is not used for financial transactions, for multiple benefits. In this piece,  Vanguard Law and Human Rrights, locates Nigeria in the global race towards cashless economy, through its implementation of the CBN’s twin-track policy of naira redesign and new limits on cash withdrawal from banks, and argues that though the policy has more benefits than drawbacks, its manner of implementation without regard for the rule of law and the continuous hardship it occasioned on hapless Nigerians, appear to deflate the purported altruistic intention of President Muhammadu Buhari’s administration.

Background

Sometime in 2012, Governor Sanusi Lamido-led Central Bank of Nigeria, CBN, toyed with the idea of introducing cashless policy in the country for more reasons than one.

According to him, the policy, when implemented, would reduce the quantum of physical cash that was being used in the system in an attempt to cut down on cash handling expenses of banks.

He said the policy was also targeted at getting more of the money in circulation into the system as well as track money laundering activities.

He argued that many countries of the world are moving towards the direction of a cashless society, in which all financial transactions are electronic.

A cashless society is one where cash—paper/coin currency—is not used for financial transactions. 

Instead, all transactions are electronic, using debit or credit cards or payment services like PayPal, Zelle, Venmo, and Apple Pay. 

But at the time the policy was introduced, the deposit banks in the country did not have the required infrastructure to ensure a smooth working cashless system.

Although the policy had taken effect in seven states, namely: Lagos, Abia, Anambra, Kano, Ogun, Rivers as well as Abuja while Sanusi was at the helm of affair, yet, the CBN under the leadership of Godwin Emefiele, in August 2015, suspended the policy to allow banks deploy the technology that would allow the policy to operate seamlessly.

Why CBN suspended 

implementation of 

cashless policy in 

2015—Emefiele

Since 2015, technological advancement in the Nigerian banking industry has grown exponentially to become one of the best in the world.

The policy was re-introduced in 2019 and by October 2022, the CBN Governor, Godwin Emefiele stated that the apex bank is committed to making Nigeria 100 per cent cashless.

According to him, all infrastructure that is needed to ensure a smooth working cashless system such as the CBDC, online banking, Payment System Banks, PSBs, Point of Sale terminals, POS agent banking, mobile banking and ATMs have since been deployed, adding that the destination was to achieve 100 per cent cashless economy in Nigeria. 

Consequently, Emefiele had announced the full implementation of the cashless policy effective Monday, January 9, 2023 through a twin-track policy of naira redesign and new limits on cash withdrawal from banks.

Specifically, the CBN places a stricter cash withdrawal limit compared to the initial limits placed when the policy was introduced in 2012.

According to the new directive which takes effect on January 9, 2023, individual bank customers cannot withdraw more than N100,000 in cash over the counter, through ATMs or POS in a day. This amounts to N500,000 every week or N2 million in a month. For corporate customers, the withdrawal limit was placed at N5 million per week, translating to N20 million per month.

The circular, which was signed by CBN Director of Banking Supervision, Haruna Mustafa, also placed a limit of N100,000 on over-the-counter third party cheques. 

In line with the plan of the CBN to ensure that the higher denominated notes will be used as only a store of value as only more of the lower notes will be in circulation, the apex bank had directed that, as against N1,000 and N500 notes that are dispensed by ATMs across the country, naira denominations of N200 and below only must be loaded into ATMs.

This would mean that N500 and N1,000 notes can only be collected over-the-counter in the banking halls or at POS points.

Whilst the amount of cash that can be withdrawn over-the- counter had been capped at N100,000 in a day, the amount that can be taken from ATMs and Point of Sale was limited to N20,000 in a day.

The apex bank, however, noted that in compelling circumstances where cash withdrawal above the limits is required for legitimate purposes, such requests will be subject to a processing fee of three per cent and five per cent for individuals and corporate organisations, respectively.

CBN announces plan 

to redesign Naira

Vanguard reports that the CBN had earlier announced on October 26, 2022 the plan to redesign the Naira to control money supply and aid security agencies in tackling illicit financial flows.

This is not the first the Nigerian currency would be redesigned.

Over the years, the Nigerian legal tender has been redesigned four times; the first time was in 1965 when Nigeria became a republic, and the main reason why it was redesigned was to reflect that it was now being issued by the Federal Republic of Nigeria. It was redesigned yet again in 1968, following a civil war. 

Nigeria chose to modify the currency notes it printed in 1965 as a war tactic to counteract the misuse of the country’s currency notes during the period. Nigeria implemented a genuine monetary system in decimal form in 1973, replacing the imperial system inherited from the British colonial administration, which resulted in a currency redesign then, as part of the economic reforms implemented in 2007, new banknotes with new designs were reissued.

In 2022, the currency was redesigned while the new notes  – N200, N500 and N1000 — were launched on November 23 of the year.

On December 8, Godwin Emefiele, CBN governor, said banks had received the new notes and “it would go round”, but some commercial banks had a limited supply of the new notes.

For what it called a smooth transition, the CBN directed that the redesigned banknotes should circulate concurrently with the old bank notes till January 31, 2023 before old notes cease to be legal tender.

NGF, BCAN, NASS 

caution CBN on 

implementation of 

cashless policy

But organisations like the Nigeria Governors’ Forum, NGF and Bank Customers Association of Nigeria, BCAN had expressed concerns and appealed to the CBN to extend the date while the House of Representatives and the Senate also urged CBN in separate statements to extend the date.

While frowning on the two months’ notice given by the CBN, the House Speaker, Femi Gbajabiamila for instance advised the CBN that even when the policy takes full effect, the apex bank should allow the continuous use of the old notes at the same time until it was completely phased out.

Gbajabiamila said: “All your policies may be of good intentions, but they say the road to hell is sometimes paved with good intentions. 

“We are aware of the Bank of England, we are aware of the US. Just recently, the Bank of England changed their notes to the King Charles notes, and the bank made a publication that it would not come into effect until 2024. In other words, they gave a year notice in a cashless society,” he added.

Tackling the CBN further, Gbajabiamila said: “You said only six per cent of the banking populace are affected adversely by this policy, 94 per cent are not because they withdraw below the limit fixed by the CBN weekly. Now that is in percentage terms. Can you tell us in numerical terms what that percentage means?”  he added.

But rather than heed their calls, Emefiele confirmed in an interview that the old currency notes would be phased out of circulation by the end of January, stressing that the apex bank worked with the National Bureau of Statistics, banks and other financial institutions to generate the data it used in making certain decisions.

“Our decisions are taken based on research, data and it is the work of many teams working together across the different directorates. At no time do we make decisions based on any political consideration and I think it’s important that I state that. 

“We are trying to work with the National Orientation Agency, NOA, local religious leaders and market leaders and people in the local communities,” he added.

CBN bows, extends 

cash swap deadline 

from Dec 31 to Feb 10

However, following systemic and human difficulties encountered during implementation of the cash swap policy, an extension of 10 days was authorised till February 10, 2023.

But even with the extension, Nigerians suffered more hardship as they could not access the new notes while their old bank notes were withdrawn from them.

Indeed, some Nigerians slumped and died while queuing for cash in banks, some undressed themselves in the banking hall to protest their inability to access the cash they surrendered to the banks but which on request, could not be redeemed; some lost their loved ones in hospitals over inability to access cash to pay for services, among others.

In defence, however, the CBN said it ordered 500 million pieces of currency from the Mint and estimates it will be enough for now for the cashless policy, explaining that to release so much cash back into circulation after mopping up the previous excessive cash outside will be counter-productive to the good aims and objectives of the cashless policy.

It was, therefore, not long that a major cash crunch occurred in February 2023 leading to extensive street protests, attacks on banks including the CBN and wanton destruction of ATM machines and deposit  banks’ facilities.

Prior to the street protests, many stakeholders had alleged that the Federal Government deliberately introduced the twin-track policy of naira redesign and new limits on cash withdrawal from banks near election period in order to stop certain politicians from winning the 2023 presidential election.

But Emefiele had argued that contrary to such allegation, the policy implementation was guided by altruistic intention.

Notwithstanding the hardship experienced by innocent Nigerians, all efforts to persuade President Muhammadu Buhari to direct the CBN governor to relax its directive on the continued use of old Naira notes were futile.

What is the law 

on currency 

printing, 

distribution, 

and withdrawal 

in Nigeria?

The Central Bank of Nigeria Act of 2007 stipulates that the Bank shall have powers to print, redesign, destroy, and re-distribute currencies.

Specifically, Section 20(3) of the CBN Act stipulates that: “Notwithstanding subsections (1) & (2) of this Section, the bank shall have power, if directed to do so by the President and after giving reasonable notice in that behalf, to call in any of its notes or coins on payment of the face value thereof and any note or coin with respect to which a notice has been given under this subsection, shall, on the expiration of the notice, cease to be legal tender, but, subject to Section 22 of this Act, shall be redeemed by the bank upon demand.” 

By implication, the Central Bank shall have the powers if and only if it is directed by the President to call in any of its notes or coins on payment of the face value thereof; and that the called-in notes shall be redeemed by the bank upon demand. 

But in the instant case, the CBN had merely directed Nigerians to deposit whatever they had, withdraw from the banking hall and to proceed to an ATM to withdraw or access a miserly sum contrary to what the CBN Act 2007 says.

The learned silk said the interim order made by the Supreme Court to suspend the deadline for phasing out the validity of the old N200, N500, and N1000 banknotes is still subsisting because it was made pending the motion on notice which is yet to be determined. So, the order is still in force. 

“Before you can override the order of the Supreme Court, you have to go to the National Assembly and pass a law. In the absence of that, the order still subsists. 

President’s broadcast, sad for our democracy – Adegboruwa, SAN

In his own view, legal luminary and human rights activist, Mr Ebun-Olu Adegboruwa, SAN, said the broadcast of the president was and remains sad for our democracy, particularly when he already admitted that the matter was subjudice, the President should not have proceeded to vary the order of the Supreme Court.

He argued that the president and indeed the executive should not give the impression that citizens could brazenly disregard lawful orders of any court, saying such would only encourage anarchy and lawlessness.

He said Buhari’s conduct amounted to executive rascality and brazen disregard and contempt of the Supreme Court to have separated the denomination of the old notes for legality. 

“It is not open to the President to choose which portion of the order of the Supreme Court that will be obeyed,” he fumed.

From all indications, the cashless policy of the CBN has more benefits than drawbacks. However, the contemptuous attitude of President Muhammadu Buhari and Godwin Emefiele, to a subsisting order of the Supreme Court on the policy implementation together with the continuous hardship the policy occasioned on hapless Nigerians appear to deflate the purported altruistic intention of President Muhammadu Buhari’s administration to introduce the twin-track policy of naira redesign and new limits on cash withdrawal from banks, at a time the 2023 general elections are near the corner.