The Central Bank of Nigeria has set a limit on cash withdrawals from ATMs and banks to promote the use of e-Naira digital currency. The government is also encouraging consumers to use online banking services or cards when making payments.
The Nigerian central bank has imposed a limit on the amount of cash that can be withdrawn from ATMs and banks across the country in an effort to encourage the use of e-Naira – Nigeria’s central bank issued digital currency (CBDC).
CBDCs are virtual versions of fiat currencies that are deployed on a blockchain ledger. Similar to cryptocurrencies, CBDC transactions can be traced by the issuer which in this case will be the central bank of the issuing country.
The Central Bank of Nigeria (CBN) has issued a directive asking financial institutions including banks and payment services to follow a set of guidelines to push the “cash-less Nigeria” policy. The maximum amount of banknotes that can be withdrawn over the counter (OTC) will be limited to 100,000 naira ($225) for individuals and 500,000 naira ($1,125) for businesses per week. ATMs will only allow daily withdrawals of 20,000 naira ($45) with denominations below 200 naira ($0.50) to be loaded into the machines. The maximum amount that can be withdrawn in cash through point of sale (POS) terminals will be limited to $45 per day.
In cases where individuals and businesses are required to withdraw amounts that exceed CBN’s monthly cap, once a month they will be allowed to withdraw 5,000,000 naira ($11,250) and 10,000,000 naira ($22,500) in cash subject to processing fees of 5% for individuals and 10% for businesses. When doing so, payees are required to provide their ID information and bank verification number (BVN), and drawers, a note declaring the purpose and approval from their bank authorizing the cash withdrawal, to their respective banks. This information is uploaded to the CBN portal for record keeping
Apart from e-Naira, the CBN has asked financial service providers to promote the use of cash alternative channels like internet banking, mobile banking apps, USSD, debit and credit cards, when conducting transactions.
Nigeria first introduced its cash-less policy in 2012, to transition away from physical cash by introducing payment mechanisms like cards and internet banking to improve efficiency of the country’s monetary policy. Last year, Nigeria became one of the first countries in the world to launch a local digital currency. Since its release, the e-Naira digital wallet has been downloaded 840,000 times and has 240,000 monthly active users. In a country with 218 million people, less than 0.5% of the population has been reported to use e-Naira, showing a clear reluctance by consumers to use the CBDC. Since inception, the digital currency has only been used to facilitate 200,000 transactions worth $9.7 million.
In October, CBN announced a second expansion phase for e-Naira which has set a target of reaching 8 million users by the end of next year. The central bank also deployed a USSD (Unstructured Supplementary Service Data) system to e-Naira that will allow users without bank accounts to activate the wallet on their mobile devices by dialing a code. Customers with bank accounts will be able to make interbank transactions within the country using the CBDC.
Due to the high inflation rate of naira to the U.S dollar, many Nigerians are pivoting to using cryptocurrencies as means of payment and store of value. To crack down on the use of digital assets over fiat currencies, the CBN is working with the banks of Ghana, Zimbabwe, Uganda and Kenya to regulate the sector.
According to American think-tank, the Atlantic Council, Nigeria is one of the 11 countries to have fully deployed a CBDC. 15 other countries have launched digital currency pilot programs in retail and wholesale sectors.