James Emejo

Writes that the Central Bank of Nigeria’s resolve to suspend processing charges on cash deposits above approved limits may have brought momentary relief to Nigerians amid the recent cash crunch that jolted the banking sector. However, vigilance is require

The Central Bank of Nigeria (CBN) recently announced the suspension of processing fees of two per cent and three per cent which it previously imposed on all cash deposits above N500,000 for individuals and N3 million for corporates respectively, with immediate effect.

The central bank said the suspension shall remain in effect until April 30, 2024.

The bank announced this in the December 11, 2023, circular, signed by CBN acting Director, Banking Supervision, Dr. Adetona Adedeji, and which was addressed to all banks, Other Financial Institutions (OFIs) and non-bank financial institutions under the apex bank’s regulatory supervision.

Although no reason was given for bank’s decision to suspend the charges, but this may not be unconnected with the cash crunch that has reportedly hit the banks as depositors prefer to keep their money away partly because of the exorbitant charges on deposits, especially those exceeding the approved threshold following the implementation of the cashless policy.

Bank customers have complained of their inability to withdraw cash from their banks because it was scarce.

In effect, Point of Sales (PoS) operators have arbitrarily increased their service charges according to findings by THISDAY.

For instance, most PoS operators in Abuja now charge between N150 and N200 for N5,000 withdrawal instead of the initial N100, blaming the extra fee on the scarcity of naira banknotes from the banks.

Following the suspension of charges, the central bank further ordered the financial institutions under its purview to accept all cash deposits from the public without any charges going forward.

Sources at the apex bank also confided in THISDAY that the scarcity of cash in banks, especially during the yuletide season, had been a major worry to the apex financial regulator.

Some Nigerians see no reason to keep their money in banks any longer given the current difficulty in withdrawing such funds when needed.

The sources alluded to the fact that the Christmas period is a time when people prefer to keep physical cash for spending purposes – part of the reasons given for the current scarcity.

Back in December 2019, in order to further enhance the implementation of the cashless policy, apex bank, introduced the revised “Guide to Charges by Banks, Other Financial Institutions and Non- Bank Financial Institutions”, which had detailed approved charges for banking services.

The document among other things, introduced limits to cash deposits as well as charges for extra deposits above prescribed thresholds.

Essentially, the document provided a basis for the application of charges on various products and services offered by banks and other regulated institutions under its purview.

The Guide which was first released in 2004, was revised in 2013 and 2017 in the light of market developments, such as innovations in products and/or channels and new industry participants.

The bank pointed out that the charges prescribed in the guide were arrived at after extensive consultations with stakeholders, adding that the objectives of the guide was to enhance flexibility, transparency, and competition in the Nigerian banking industry.

Hence, where a charge is stipulated as “negotiable”, financial institutions are required to draw the attention of customers to their rights to negotiate and the two parties are required to mutually agree on the applicable charge via a verifiable means.

Although the guide provided for charges on various products and services of financial institutions, it is not exhaustive, the central bank noted.

Financial institutions are required to present any new product, service, or charge not covered by the document to the CBN for prior written approval.

However, analysts who spoke to THISDAY described the development as a welcoming step by the apex bank.

They argued that the charges on deposits were great discourage for customers who would rather keep their funds at home.

The analysts agreed that the need to reduce cash handling in the economy, adding that this would require a gradual process.

Speaking with THISDAY, Wealth management and business development consultant, Mr. Ibrahim Shelleng, said the previous charges on cash deposits above approved amounts was detrimental to the cashless initiative as it shut out funds from the banking system.

He said the suspension of the charges was “certainly a good idea as it will hopefully encourage more people to deposit into bank accounts amidst the shortage of local currency.”

He said: “The previous punitive measures was in hindsight detrimental to the cashless initiative and left a lot of cash outside the financial system, which has made it more difficult for the CBN’s monetary policy initiatives to be effective.

“The argument has always been that large cash transactions should be discouraged but we must evolve to that point hence the punitive measures were detrimental.”

On his part, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the suspension of charges would end naira scarcity as people hoarding cash might reconsider and patronise the banks.

But he also warned that the deposit of illegal funds might resume without a trace.

He said: “There is presently a cash crunch in the economy and charges on large deposits is one of the major impediments that prevent individuals and corporate organisations from bringing their cash into the banking system.

“This removal of the charges will encourage those holding on to their cash to bring it into the banks at no cost to them.”

Gbolade said: “The major implication of the stoppage of charges on large deposits is that illicit fund deposits that was stopped will now commence and the source might not be easily traced.

“Another implication is that this could lead to the end of Naira scarcity as people hoarding cash might reconsider and patronise the banks.”

The Lagos Chamber of Commerce and Industry (LCCI) had commended the CBN for decision to suspend the charges.

The Director General of LCCI, Dr. Chinyere Almona, in a statement noted that it is a commendable move that will undoubtedly have positive implications for the Nigerian business community.

The statement said: “This policy adjustment will bring several benefits to businesses and the broader economy.

“The chamber recognises that this proactive action will eliminate an additional financial burden on businesses and individuals, contributing to a more conducive business environment.”

It further stated that the move aligned with the government’s commitment to improving Nigeria’s ranking on the global ease of doing business index, and also demonstrated responsiveness to the needs of the business community, fostering trust in the regulatory framework landscape.

“Thus, the chamber commends CBN for its forward-thinking approach to supporting businesses and enhancing economic activities by suspending processing fees on cash deposits.

“We believe this decision will have a farreaching positive impact on businesses, contribute to economic growth, and strengthen the overall business climate in Nigeria,” it added.