Following the recent introduction of a policy by the Central Bank of Nigeria (CBN), that restricts over-the-counter withdrawals in commercial banks to N100,000 and N200,000 for individuals and businesses per week, respectively, this has caused a great deal of controversy, with many people asking questions such as the reasons for such, and whether it was to promote financial inclusion or to attack politicians. In an effort to maintain a stable exchange rate, the Central Bank of Nigeria (CBN) has always attempted to regulate the naira’s supply and demand. This appears to be yet another of its regulations.
In keeping with its cashless agenda as well as financial inclusion goal, the CBN has clarified that the modified Naira withdrawal policy would synchronize with the release of the latest redesigned naira notes. The withdrawal limit is intended to encourage individuals to conduct more transactions using digital services as well as the e-Naira in place of cash by reducing withdrawals. If the countries move toward a more “cashless” economy, the CBN will have a greater ability to manage both the supply and movement of cash.
The withdrawal limit policy also has tax implications.
According to PricewaterhouseCoopers’ Fiscal Policy Partner and Africa Tax Leader, Taiwo Oyedele, this new cash withdrawing restriction would get tax consequences, in particular, for individuals and MSMEs that rely heavily on cash, will be more transparent to tax authorities as more people are forced to use electronic payments. The government’s part is to raise awareness, particularly amongst entrepreneurs, while the central bank’s role is to ensure collaboration with tax authorities. He added that a Tax Identification Number might be one of the requirements for withdrawals of surplus cash.
Furthermore, Oyedele, who also serves as the Chairman of PwC West Africa’s COVID-19 intervention committee, advised Nigerians to adopt the following activities if they were small business owners: The first is to register with the appropriate tax authorities, including the FIRS as well as the state Internal Revenue Service wherever their business is; create a different bank account for business (or designate one for this use if they have a business bank account already); and avoid mixing personal and business transactions.
Nigerians will suffer the policy aftermath if care is not taken – Adewale.
Journalist and specialist on Industrial Relations and Environment concern Adewale Adeoye has called the new CBN strategy the “Talibanisation of the political economy”. However, he declared that he is in support of a cashless economy but that the necessary conditions first need to be met. Policy proposals in Nigeria often have good intentions but are poorly thought out and executed. He added that the new CBN policy is a type of good policy, but if implemented without first removing the obstacles, it could have unintended negative consequences.
Adewale stated that the strategy would squeeze Nigerians and children to death. Assuming someone Is requested to deposit N50k to perform an emergency operation in a hospital, even when on a sick bed, one has to transfer N20k to a person to purchase medicine from a drugstore and transport himself inside a taxi driven by a person without PoS. He added that most Nigerians see the banks as high-risk businesses and criminal accomplices. Still, the interest rate on savings is around 1.5%. He concluded that saving in Nigerian banks is pointless.
Exchange rates and inflation be stabilized through economic productivity.
On the same, Stears, an intelligence organization that provides subscription-based information for global financial and policy experts, said this cash restriction would constrain their business operations, reduce expenditures, and increase unemployment, as witnessed in India. Agent banking operators are essential for withdrawing cash and financial services in remote regions, which are among the financial inclusion goals. According to the media organization, the CBN’s goal of “strengthening the Naira” can be linked to this withdrawal policy. Stears concluded that the only way to stabilize exchange and inflation rates is to boost economic growth.
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