Cash withdrawal limits stand, says Sanusi

The governor of Central Bank of Nigeria, Sanusi Lamido Sanusi, has turned down the request of senators to increase the threshold of free cash withdrawal to be enforced by CBN's latest cash withdrawal policy.

Mr Sanusi, in company of his deputies, could not wait to leave the Senate Hearing Room 1 venue of the Thursday meeting with members of the senate committee on Banking, Insurance and other financial institutions before he declined the senators' request to slack the policy.

"For now, let us leave it at that," he told the senators shortly after they made their views known on the policy.

Mr Sanusi explained that although the variables in the policy are not cast in stone, it is an ambitious target the organisation hopes to achieve. The senators were worried the new policy would scare bank customers and in the long run make doing business in Nigeria more expensive.

Mr Sanusi argued the policy will not scare customers but make banking easier and much convenient as people would be encouraged to use Internet and mobile banking and Point of Sales machines to make bulky payment.

The policy is designed for customers to pay 10 percent of the cash withdrawal above N150,000 per day and Mr Sanusi said it was well researched and thought through. He said the bank understudied world best growing economies - including Brazil, Malaysia and Singapore - before designing it.

The new limitations on cash withdrawals by the Central Bank, as announced in a circular last month, is one part of five total packages by the apex bank aimed at improving the banking system, moving the system away from cash to other channels and increasing automation of the system.

Mr Sanusi said that the continued preference for a cash-based economy is driving the cost of cash management in the country and that the adoption of this new policy will reduce it.

"In 2009 direct cost of cash management, the system spent N114.5 billion in cash management and the projection is that by 2020, we will get to N200 billion in cash management," Mr Sanusi said.

The poor bear the cost

Mr Sanusi also argued that the current arrangement favours the rich whose banking cost is defrayed by the poor masses by up to 70 percent.

He said statistics shows that "45 percent of total cash transaction in Nigeria is within the region of zero to N10,000 and as you go down, you will find that 90 percent of daily cash transaction were less than N100,000. Only 10 percent by number of the transaction that are done in the banking sector are of N100,000 and above.

"The 10 percent of N100,000 and above accounts for 75 percent of the total value of cash, so what is happening is that the 90 percent poor Nigerians who do less than N100,000 a day are subsidizing the 10 percent rich ones. And what we said is that this is not fair.

"Those that do heavy cash transaction, they should pay for it, if you do more than N150,000 you pay a fine. We did not say you cannot do more than N150,000. If you do, you pay a fine so that you are not subsidized by the poor Nigerians," he explained.

Lagos pilot

The policy would be implemented nationwide in June 2012, but Lagos would test run it from the beginning of June this year.

Mr Sanusi said he has mandated his director of Operations to implement the policy and ensure that Lagos is cashless by January next year.

By Emmanuel Ogala