The Central Bank of Nigeria has recently implemented a significant policy shift by issuing a directive that directly impacts banks, financial institutions, and non-bank financial entities. This directive, detailed in the “Guide to Charges by Banks, Other Financial Institutions, and Non-Bank Financial Institutions” dated December 20, 2019 (FPR/DIR/GEN/CIR/07/042), entails the suspension of processing charges that were previously levied on substantial cash deposits.

Under this new directive, the suspension of processing charges applies specifically to individual accounts with cash deposits exceeding N500,000 and corporate accounts with deposits surpassing N3,000,000. The measure is expected to alleviate financial burdens on both individuals and corporate entities engaged in significant transactions, fostering a more conducive financial environment.

This strategic move by the Central Bank of Nigeria aligns with the broader objective of promoting financial inclusivity and reducing barriers to transactions. By easing the financial burden associated with processing charges on large cash deposits, the directive aims to stimulate economic activities, enhance liquidity, and contribute to an overall positive financial landscape.

Central Bank of Nigeria Sets New Cash Withdrawal Limits
Image Source: nairametrics

Banks, financial institutions, and non-bank financial entities are urged to promptly adhere to this directive and communicate the changes to their clientele. As the financial landscape continues to evolve, such regulatory adjustments play a crucial role in shaping the dynamics of the banking sector and fostering a more accessible and efficient financial ecosystem.

Central Bank of Nigeria Suspends Processing Charges on Large Deposits

Effective immediately, the Central Bank of Nigeria (CBN) has halted the 2% and 3% processing fees on individual and corporate cash deposits, respectively. This policy shift, in effect until the end of April 2024, responds to the evolving financial landscape and the needs of depositors nationwide.

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Under the directive, all financial institutions regulated by the Central Bank of Nigeria are mandated to comply, refraining from imposing any charges on cash deposits exceeding N500,000 for individual accounts and N3,000,000 for corporate accounts.

This move is poised to stimulate more substantial cash deposits, foster increased liquidity, and potentially yield positive impacts on diverse sectors, notably benefiting small and large businesses alike.

The Central Bank of Nigeria’s decision reflects a strategic response to enhance financial inclusivity and address the changing demands of depositors. The temporary suspension of processing charges aligns with broader efforts to create a more conducive financial environment and promote economic growth.

How CBN Implements Fees on Cash Transactions

In 2019, the Central Bank of Nigeria (CBN) announced a new policy to charge customers for cash deposits and withdrawals. Effective September 19, 2019, the policy aimed to reduce the use of physical currency.

According to the circular released by the Central Bank of Nigeria, individual accounts faced a 3% processing fee for withdrawals and a 2% processing fee for lodgments exceeding N500,000. For corporate accounts, deposit money Banks (DMBs) would impose a 5% processing fee for withdrawals and a 3% processing fee for lodgments exceeding N3,000,000.

CBN Sets New Cash Withdrawal Limits and Processing Fees

A little over a year ago, the Central Bank of Nigeria (CBN) introduced a policy requiring deposit money banks and other financial institutions to ensure that over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000 per week, respectively.

The revised cash withdrawal limits, outlined in a recent circular issued by the apex bank and obtained by Nairametrics, will be implemented nationwide starting January 9, 2023. Following the policy’s implementation, any cash withdrawals surpassing the specified limits will incur processing fees of 5% and 10% for individuals and corporate entities, respectively.

Interestingly, this new policy came shortly after President Muhammadu Buhari launched redesigned N200, N500, and N1000 banknotes. However, the naira redesign policy has been revoked, and banks are now expected to accept both the old and new notes.

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How Does the Central Bank of Nigeria Control Other Banks?

In its effort to diminish the base money within the financial system, the central bank employs various strategies. One such method involves the sale of financial securities to both banks and non-bank entities. By engaging in these transactions, the central bank effectively limits the capacity of deposit money banks to generate new money, contributing to a controlled expansion of the money supply.

Additionally, the central bank possesses the authority to influence the money supply by adjusting the mandatory cash reserve deposits that banks must maintain with the central bank. By increasing these reserve requirements, the central bank further restricts the amount of money circulating within the economy.

These dual approaches, involving the sale of financial securities and adjustments to cash reserve requirements, are integral tools in the central bank’s toolkit for managing and regulating the overall money supply to achieve economic stability.

FAQs

How Much is the Central Bank of Nigeria Cash Deposit Charge?

Transaction Fees for Over-the-Counter Services:

  • Cash Deposit
    • 2% for transactions exceeding N500,000.
    • 3% for transactions surpassing N3,000,000.
  • Cheque Deposit (Own Account)
    • No charges apply
  • Cash Withdrawal
    • 3% on transactions exceeding N500,000.

Why Do Banks Charge Cash Deposit Fees?

Banks impose fees as a means of generating profit, serving as a mechanism to recover operational costs. These fees are essential for financial institutions to sustain their day-to-day operations. Additionally, banks derive income from loans, earning through interest accruals and other associated fees. The combination of fees and loan-related revenue contributes to the overall financial stability and profitability of banks.

What is the Monetary Policy of the Central Bank of Nigeria?

Since 2008, the Central Bank of Nigeria has structured its monetary policy with specific objectives in mind. The primary goals include shaping the growth of the money supply in alignment with the targeted aggregate Gross Domestic Product (GDP) growth rate, fostering financial stability, sustaining a steady and competitive exchange rate for the naira, and attaining positive real interest rates. These strategic measures aim to contribute to the overall economic health and resilience of the country.

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What are the Cash Handling Charges?

Cash handling charges refer to fees levied by financial institutions or businesses to cover the expenses associated with the processing and management of cash transactions.

These charges encompass the costs incurred for manual labor, security measures, infrastructure maintenance, and administrative efforts required to handle and oversee physical cash transactions. Essentially, cash handling charges are instituted to offset the operational overheads incurred in dealing with tangible currency.

What is the Limit of Cash Deposit in Bank?

There is no specified limit on the amount of money you can deposit in a savings bank account or a digital savings bank account. However, it is essential to carefully consider your options, especially when dealing with a substantial amount of funds, to avoid attracting the attention of tax authorities. Evaluating and managing your choices prudently will help ensure compliance with tax regulations and financial transparency.

Does CBN Allow Banks to Trade Freely at Any Rate?

The Central Bank of Nigeria has granted commercial banks the authority to engage in foreign exchange trading without restrictions on the exchange rate. This authorization empowers banks to sell foreign exchange at rates determined by the market, marking a significant shift in the regulatory framework.

Which Nigerian Bank is Good for International Transactions?

Using GTBank’s international money transfer service enables businesses to receive payments directly into their corporate accounts from other businesses located outside Nigeria. This service allows individuals abroad to send payments to your business account from anywhere in the world, facilitating seamless and direct transactions into your GTBank business account.

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