The Central Bank of Nigeria (CBN) has announced the suspension of processing charges on cash deposits by commercial banks nationwide. Effective immediately and extending until April 30, 2024, this directive aims to alleviate the prevailing cash rationing challenges in the banking system.
Previously, banks imposed a 2% processing fee on individual cash deposits exceeding N500,000 and a 3% charge on corporate account deposits over N3 million.
The move follows reports of mounting concerns regarding cash shortages within the banking sector. Commercial banks have resorted to limiting cash disbursement, with some agent bank operators charging exorbitant fees of up to 10% for withdrawals in specific regions.
Despite the Supreme Court’s extension of the validity of old naira banknotes and the CBN’s directive to continue accepting both old and new notes indefinitely, a mild cash scarcity has emerged, affecting cash availability in ATMs and leading to artificial restrictions on over-the-counter withdrawals.
This latest CBN decision marks a reversal of the initial fee structure established in 2019 and aims to address the ongoing cash rationing issue. The suspension of processing fees shifts the financial burden back onto commercial banks, potentially inflating their operational costs depending on depositor response.
While the CBN temporarily suspends its cashless policy, the envisioned Bank Neutral Cash Hubs (BNCH) – proposed to mitigate banks’ cash handling risks – remains inactive despite being proposed two years ago. These hubs, positioned in high cash-centric areas, were designed to facilitate large cash transactions for individuals and businesses at fees determined by the CBN.
The BNCH system aimed to commercialize substantial cash transactions, mitigate banks’ cash handling risks, and establish dedicated cash-handling operators within the financial system, contributing to financial inclusion and enhanced cash management efficiency.
The CBN’s decision to suspend processing charges, albeit temporary, aims to alleviate cash rationing woes while a more robust solution in the form of BNCH remains pending, potentially offering a more sustainable long-term remedy to the cash management challenges facing banks.
