That N10,000 OTC withdrawal limit

The Central Bank of Nigeria (CBN) is presently considering a proposal to limit over the counter (OTC) cash withdrawals by deposit bank customers to N10,000 per day. The proposal was sponsored by the Bankers Committee’s Sub Committee on Payments and Infrastructure. The proposal is informed by its consideration by the banks as a panacea to […]

The Central Bank of Nigeria (CBN) is presently considering a proposal to limit over the counter (OTC) cash withdrawals by deposit bank customers to N10,000 per day. The proposal was sponsored by the Bankers Committee’s Sub Committee on Payments and Infrastructure. The proposal is informed by its consideration by the banks as a panacea to the present challenges faced by the nation’s banking industry, comprising both internal exigencies associated with operations as well as external pressures from the pallid state of the Nigerian economy.
In respect of the internal operations, the proposal is expected to promote an increase in the use of electronic banking processes and thereby reduce congestion in banks nationwide, minimise workforce and increase profit. The advocacy for the OTC restriction also blamed the introduction of the Treasury Single Account (TSA) dispensation for the woes of the banks as it drained the system of government funds, leading to massive loss of profits in both interest and non-interest incomes. Other problems blamed for the development include the incidence of negative output in the Nigerian economy, huge unredeemed debts to government and rising pressure from inflation.
However while the proposal may seem rosy before the sponsors, its mismatch with the realities on ground cannot be wished away, thereby making a revisit of its vaunted merits and assumed implications imperative. A key factor in this regard is the abysmally poor state of the infrastructure for electronic banking both in quantity and quality nationwide. The industry is yet to saturate the country with outlets for electronic banking while the available ones are not insulated from frequent hiccups arising from poor maintenance, power shortages and in some cases vandalism.
In the light of the foregoing, to impose a 10,000 a day withdrawal limit on bank customers will be most problematic as most of them will be denied access to their funds with telling effects. The rate of inflation in our country today is such that N10,000 has a diminished purchasing power that makes it insufficient for regular purchases by the typical individual or family shopper in Nigeria. Then also, most traders that sell foodstuff and daily need items do not as yet use electronic payments. A likely fallout from such a policy is that bank customers may once again be reluctant to place funds in banks or even withdraw what is already in the banking system, especially in areas where electronic banking infrastructure is poor. This will happen if people feel they may not have easy access to their money. This is hardly the intention of the CBN, and it will erode the gains made in recent years by making more and more Nigerians to bank their money.
It is true that a N10,000 OTC restriction may have some benefits. For example, it may assist in redirecting to the banks the huge stock of currency that is outside the banking system. This in turn will aid the success of monetary policy prescriptions since such depend on the quantum of money within the control of the banking system.
It is understandable that the CBN is directing the nation’s banking sector towards conformity with global best fit practices in the area of cashless bank transactions and harmonised payment systems. However, to ensure optimal success in this enterprise the apex bank needs to identify with the peculiarities of the operating environment which is the Nigerian society. In this regard the adoption of policy measures that will inflict pain on a cross section of the populace may not earn for it the desired dividend.
In the place of the largely short-sighted and self-serving proposal for the OTC limit, banks should wake up to the reality of their self-inflicted wounds of over dependence on easy deposits from government funds and explore more sustainable, longer term opportunities offered by the long abandoned real sector of the economy. That is a better option than visiting their woes on unsuspecting customers.