Concerns Around Nigeria's Cash Restrictions
Financial analysts and business owners are concerned by the introduction of strict limits on cash withdrawals recently announced by Nigeria’s Central Bank, fearing it will negatively impact small and medium enterprises (SMEs), and most especially those working in the informal economy.
Under the new policy—currently due to take effect on 9 January 2023—personal account holders will be restricted to withdrawing no more than 100,000 naira (around $225 or €210) while business accounts will be limited to 500,000 naira. The stated goals of the policy are to discourage cash hoarding, give authorities tighter control over currency and encourage digital payments.
A report from Voice of America says the Central Bank also intends to ‘help fight crime and tackle vote-trading and corruption’, but quotes Eze Onyekpere, economist and Director of the Centre for Social Justice, who feels it is more likely to harm SMEs than have a positive impact on corruption.
That is not the way to curb vote-buying… These amounts of money are too small, considering the value of the naira, and in terms of small businesses, particularly people in the informal sector… it’s going to cause them a lot of inconvenience, challenges, and may also increase the cost of doing business.
Africa News reports analysts are concerned that digital payments are too unreliable across the nation to fully support daily transactions conducted by people and businesses.
The policy is intended to cause discomfort, to move you from cash to cashless, because they (the Central Bank) have said they want to make it uncomfortable and expensive for you to hold cash.
With only around 45 percent of adult Nigerians having accounts with regulated financial institutions, Africa News adds that ‘point-of-sale terminals have emerged as one of the fastest-growing areas of financial inclusion in the country.’
Tunde Ajileye, a partner at major geopolitical intelligence platform SBM Intelligence, believes the Central Bank’s policy will backfire, with more people encouraged to hoard cash as it becomes harder to access.
It is not going to drive people to start to try doing electronic transactions. On the contrary, it is going to move people away from the financial institutions.
Speaking for SMEs, Eseoghene Eghove, the owner of an Abuje-based bakery, is concerned about how cash restrictions will affect her business.
As a business owner, I go to buy flour, sugar, butter and many other things. How do you pay? It is not reasonable. They’ll just make things more difficult for people.