All You Need To Know About The Central Bank’s Cashless Policy

Introduction to the cashless policy


The Central Bank of Nigeria (CBN) introduced cashless policy on cash-based transactions which stipulates a ‘cash handling charge’ on daily cash withdrawals or cash deposits that exceed N500, 000 for Individuals and N3, 000,000 for corporate bodies. The new policy on cash-based transactions (withdrawals & deposits) in banks, aims at reducing (NOT ELIMINATING) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)


Why the Cashless Policy?

The new cash policy was introduced for a number of key reasons, including:

  • To drive development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. An efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.


  • To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.


  • To improve the effectiveness of monetary policy in managing inflation and driving economic growth.


The cashless policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including:

  • High cost of cash: There is a high cost of cash along the value chain – from the CBN & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling.
  • High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
  • High subsidy: CBN analysis showed that only 10% of daily banking transactions are above 150k, but the 10% account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10% incur in terms of high cash usage.
  • Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth.
  • Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.


Content of the Cashless Policy

The policy shall apply that:

  • Only licensed CIT (Cash in Transit) companies shall be allowed to provide cash pick-up services. Banks will cease cash in transit lodgement services rendered to merchant-customers, and any Bank that continues to offer cash in transit lodgement services to merchants shall be sanctioned.
  • 3rd party cheques above N150, 000 shall not be eligible for encashment over the counter. Value for such cheques shall be received through the clearing house. Therefore, banks are to encourage their customers to migrate to available electronic channels, and where possible demonstrate the costs that will accrue to those that continue to transact high volumes of cash.
  • In addition, below are some detailed context and pertinent clarifications on the policy:
  • The cash-policy applies to all accounts, including COLLECTION accounts. Banks should therefore work with their corporate customers to arrange for suitable e-collection options.
  • The limits are cumulative daily limits each for withdrawal, and for deposits (e.g. for Individuals, the daily free withdrawal limit is N500,000; while the daily free deposit limit is N500,000)


Expected Benefits of the New Cashless Policy

A variety of benefits are expected to be derived by various stakeholders from an increased utilization of e-payment systems. These include:

  1. For Consumers: Increased convenience; more service options; reduced risk of cash-related crimes; cheaper access to (out-of-branch) banking services and access to credit.
  2. For Corporations: Faster access to capital; reduced revenue leakage; and reduced cash handling costs.
  3. For Government: Increased tax collections; greater financial inclusion; increased economic development.


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