- Nigeria’s Central Bank has put a cap on the daily withdraws for both individuals and corporate to boost online transactions.
- Bitcoin adoption is likely to increase as the nation moves cashless.
The Central Bank of Nigeria (CBN) has restricted the country’s daily and weekly cash withdrawal limits to turn Africa’s most populous nation into a cashless society. The apex bank wants Nigerians to rely on digital alternatives for most transactions.
On Tuesday, the CBN published an official memo revising cash limits for individuals and corporate organizations. According to the memo, Nigerians can withdraw a daily maximum of ₦20,000 ($45), to a ₦100,000 ($224) maximum for individual accounts and ₦500,000 ($1,122) for corporate accounts.
Automated teller machines (ATMs) all over the country will be set to comply with the new directive and also will not dispense naira denominations higher than ₦200. All cash withdrawals above the set threshold will attract fees of 5 percent and 10 percent, respectively.
The new rules are part of a broader government effort to limit cash transactions and reduce the amount of cash in the open market. Last month, the CBN announced plans to redesign high-value naira notes and specified a January 31 deadline for the public to deposit old notes in banks. At the time, CBN Governor Godwin Emefiele said 85 percent of all cash in the country was outside of commercial banks and blamed this for the country’s rising inflation. He also specified that from 2015 to September 2022, cash in circulation doubled to 3.23 trillion nairas ($7.3 billion). According to him:
It is unacceptable and indeed it takes the control of money supply out of the hands of the central bank. No doubt we believe [this directive will]have positive impact on inflation.
Nigeria’s new withdrawal limit will kick in on Jan. 9 and also prevent individuals from cashing any checks above ₦50,000. However, the bank will allow a maximum cash withdrawal of ₦5 million and ₦10 million for individuals and corporates, respectively, in “compelling circumstances not exceeding once a month.”
Implication of New Naira withdrawal Limits
The Nigerian Senate, business experts, and finance stakeholders have faulted the CBN for its new directive. These parties worry that enforcing these rules could make the economic environment more uncomfortable. During a Wednesday plenary, Senate Minority Leader Phillip Aduda warned that the policy would affect small business owners and has asked the Senate to engage the CBN. Consequently, the Senate has invited two CBN deputy governors to defend the policy.
However, crypto usage and adoption may see a silver lining. Nigeria has one of the highest rates of crypto adoption worldwide and is home to more than a third of all crypto holders in Africa. According to a 2021 Triple A crypto ownership ranking, Nigeria’s Bitcoin ownership rating is the fourth largest in the world at 22 million. The USA is at number 1 with 46 million, followed by India and Pakistan with 27 million and 26 million, respectively.
Likely, any attempts to stifle the Nigerian market will only push people towards Bitcoin. Last year, the CBN ordered financial institutions to close crypto-operating accounts. Instead, the country’s Bitcoin usage increased as people switched to peer-to-peer trading on exchanges like Paxful. In fact, they have been holding conferences in the country over the year.
— Paxful (@paxful) January 29, 2022