Earlier today, Nairametrics reported a new directive from the CBN, the suspension of the 2% and 3% charges on cash deposits above N500,000 for individual accounts and N3 million for corporate accounts.
While the CBN did not release any information about the rationale behind the action, some experts have linked the action to ongoing cash scarcity plaguing parts of the country at the moment.
Dr Muda Yusuf, the Director General of the Centre for the Promotion of Private Enterprise (CPPE), speaking to Nairametrics on the issue, noted,
- “Amidst the persistent reports of cash scarcity, I can deduce that the CBN is trying to ease the bottlenecks for the supply of cash into the system. Essentially, to encourage people who have cash and want to deposit it to do it easily, without any form of penalty.
- “Removing the charge on deposits may encourage more people to deposit their cash. The whole thing is about easing the cash scarcity situation, that’s the whole objective.
- He however noted that the CBN should dig deeper into the root cause of the cash scarcity situation.
- “I think the CBN should do more, they should investigate properly the exact cause of the cash scarcity situation because it’s bizarre. It’s not like there’s a currency redesign or the CBN is deliberately cutting down on the amount of cash in circulation.
- “Something must have been responsible, and I think the CBN needs to do a lot more in terms of investigating where this is coming from.”
The opinion of a banker who craved anonymity was that the directive was to further enhance customers’ savings. He noted,
- “From November to December, it’s quite commonplace for fixed deposit rates to increase, and this measure is normally to encourage savings. It’s like this because consumer spending is increased at this period of the year and savings are reduced to their lowest level in the year.
- “Now, with the cash scarcity at hand, we have quite an issue on our hands. Increasing fixed deposit rates may not cut it alone, there’s a need for other measures. With the removal of these charges on deposits, I think it should help alleviate the situation as customers are incentivized to deposit money in the bank.”
What you should know
While the cash scarcity situation is relatively new in Lagos, it has plagued other parts of Nigeria for a longer time.
Last week, a manager of a bank branch in Osun State speaking to Nairametrics about the cash situation noted,
- “During the March cash scarcity, customers were asked to deposit their old notes in exchange for new notes and though we received new notes from the CBN, it was far insufficient. We were receiving less than 10% of the amount we sent to the CBN, and the situation was dire.
- “After the saga, the deadline for old notes was extended to December 31, but recently the CBN announced that old notes would be in use till further notice. As we draw closer to the December 31 deadline, customers are sceptical that if they bring money to the bank, we will take it out, so they are not bringing cash.”
- “If you enter the market, you will see cash but when you go to the bank, you will not see cash. In fact, people who are bringing cash now are those who are forced to bring cash like fuel stations. Even the fuel stations, the POS guys are going after them.”
It remains to be seen what impact the CBN directive will have on the current situation, as ATMs across Nigeria are seen to be drying up of cash.
