According to a new circular issued various financial institutions on the 6th of Dec, the Central Bank Of Nigeria, has imposed revised cash withdrawal limits on individuals and corporate organisations.

In this article we discuss outcomes and implications of this development as there has been mixed emotions since the news was released. To start off, if you have not yet read the document, we’ve put a summary of the salient points below.

Somethings are important to note.

1. Affected touchpoints are ATM, POS, Agent and OTC( Over the counter at the bank branch)
2. Affected transaction type is just cash withdrawal.
3. This does not affect cash deposit, Transfers, Bills payment or purchase.
4. It also doesn’t affect Mobile (App/USSD/QR) or Online/Web touch points.
5. It is effective from the 9th of Jan 2023, so stakeholders have roughly a month to implement and test changes.

As noted earlier, the news has been received with mixed feelings from individuals and organisations in the Ecommerce, Retail, Fintech and Banking ecosystem. Especially as we are entering a season marked by high spending and purchases. These are some of the implications of the policy.

A likely threat to the Agency Banking

1. liquidity management: ATMs and OTC withdrawals help agents manage liquidity for CICO transactions. It’s a known fact that there are more CashOut than CashIn transactions. Agents need cash to fulfil these CashOut requests . It has been noted that Agents could explore transport, large retail and food chain vendors to help with this going forward.

2. Withdrawal limit: This is the biggest blow as transactions on agency banking transactions will reduce. But there is an opportunity for Agency Banking solutions to move from individual-focused transactions to Business-focused transactions. How? Instead of facilitating CashOut for an individual so they use that amount to pay a business, focus on moving that money from the individuals account to the business account, and provide proof. Neat right?

Changes to Business and Individual banking
Most people withdraw large amounts at ATMs or Agent locations to pay businesses, if they are unable to do this, then businesses need to look for digital ways to accept payments or risk losing out of those transactions.
a. Local businesses without accounts will need to open one, which might entail proper business registration.
b. They will need to find effective channels to collect payments that can be adopted by all customer segments. This will imply a mix of Feature phone and Smart phone products. We might see an increase in the adoption of eNaira and Mcash and similar products here. Request for cards will also increase.

c. Another thing to note is that Businesses also need solutions to pay out their vendors and partners since third party cheques will no longer work. Fintechs who have these solutions should make more effort to sensitize the public.
d. Customers who rely on a lot of cash for transactions will need to open accounts . They will also need tokens so they are not cut out of the financial ecosystem .
e. We might also see more interesting forms of credit come up to help cash flow requirements.

Other things to note

1. Implementation details: The change in limits affect how core payment systems track allowable amounts and frequencies. The weekly limit will be a new feature for a lot of systems. A lot of these limits trigger risk profiles and fraud rules so all those need to be managed as well.
2. CBN Portal: This new platform was mentioned in the circular but not much details were given. It will be good to know the duration it takes for a request to be approved.
3. Security : Hopefully we will have less incidences of forced ATM withdrawals by robbers etc.. and if they choose to transfer the money digitally, it can be tracked.
4. Alternative channels. There will be a rush by businesses and Individuals to get access to alternate channels. Financial Insitutions and their service proivders should anticipate this and make it as seamless as possible. Manual is totally out of the question.
5. Cost of cash management which has been a silent challenge for the banks, will reduce. But it’s important to note that ATM-worthy N200 naira notes are not great circulation. This challenge may be solved by the redesign of the naira notes.
6. Monitoring: Will these limits be tracked per account, card or BVN? What stops an individual from getting access to 10 cards, accounts and wallets so they can spread their limits across them?

Overall the payments ecosystem will experience a surge of transactions. All hands should be on deck to provide the best enrolment experience, system uptime, settlements, timely resolution of issues and related concerns so that customer’s confidence will increase.

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