Nigeria Plans to Phase Out Cash in Favor of CBDC – Good or Bad?
Central Bank of Nigeria Limits Cash Withdrawals
On December 6, 2021, the Central Bank of Nigeria (CBN) announced a cap on cash withdrawals, either over the counter or via ATMs, in an effort to encourage the adoption of digital currency and move towards a cashless society. The new policy affects more than 200 million people and will take effect from January 9, 2023. It includes a limit of ₦100,000 ($225) per week for individuals and ₦500,000 ($1,123) for businesses, as well as a daily ATM withdrawal cap of ₦20,000 ($45).
The CBN launched the eNaira in October 2021, a Central Bank Digital Currency (CBDC) that uses blockchain technology and is accessible on all bank apps and Unstructured Supplementary Service Data (USSD). The eNaira is intended to help shrink the country’s large pool of the unbanked and boost the economy, as well as to help tax authorities track income and net worth more easily. However, the policy has seen backlashes and slow adoption due to its economy being largely powered by cash transactions.
The new policy has been met with resistance from POS (point of sale) cash point operators, who fear it will compromise their business and affect their livelihood. Moreover, most business sectors in Nigeria are largely cash-driven and do not have digital payment alternatives.
CBN Governor Godwin Emefiele said the policy is reversible and will be reviewed from time to time how they can best implement it. Despite their reassurance, several Nigerian businesses believe that the cashless policy will never work given the country’s financial circumstances. Rise, a digital investment platform based in Nigeria, stated in a subscribers-only blog that the many charges attached to the country’s cashless policy are burdensome, and that the informal economy is not primed for cashless transactions.
Quick Summary
Nigeria’s Central Bank announced a cap on cash withdrawals, with individuals limited to ₦100,000 ($225) per week and businesses limited to ₦500,000 ($1,123).
The eNaira, Nigeria’s central bank digital currency, was launched in October 2021 and uses blockchain technology.
The policy will take effect from January 9, 2023, and will encourage the use of alternative channels such as internet banking, mobile banking apps, USSD, cards/POS, and eNaira.
The policy has been met with some resistance due to its impact on the informal economy and the additional charges attached to the cashless policy.
The policy is intended to promote financial inclusion and increase tax revenue, but trust in government institutions is necessary for its success.
The new policy announced by the Central Bank of Nigeria is a cap on cash withdrawals, with individuals limited to ₦100,000 ($225) per week and businesses limited to ₦500,000 ($1,123). ATM withdrawals will be capped at ₦20,000 ($45) per day.
The eNaira is Nigeria’s central bank digital currency, launched in October 2021. It uses blockchain technology and is accessible on all bank apps and USSD.
The new policy will take effect from January 9, 2023.
The policy is intended to promote financial inclusion and help tax authorities track income and net worth more easily, but trust in government institutions is necessary for its success.
The new policy has been met with some resistance due to the fact that most business sectors in Nigeria are largely cash-driven and do not have digital payment alternatives.
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Filed under: Bitcoin - @ December 19, 2022 8:56 am