The Central Bank of Nigeria (CBN) has announced the suspension of processing fees on substantial cash deposits at financial institutions across the country.
In a circular addressed to all banks, other financial institutions, and non-bank financial institutions, Dr Adetona S. Adedeji, the Acting Director of Banking Supervision at CBN, declared the immediate suspension of charges previously imposed on cash deposits exceeding certain thresholds.
The memo referenced the “Guide to Charges by Banks, Other Financial Institutions, and Non-Bank Financial Institutions” issued on December 20, 2019, which outlined a 2% processing fee for cash deposits above N500,000 for individuals and a 3% fee for corporate deposits exceeding N3,000,000.
The Central Bank of Nigeria hereby suspends the charging of processing fees of 2% and 3% previously charged on all cash deposits above these thresholds with immediate effect.
The CBN circular says:
With immediate effect, the CBN has suspended these processing fees, allowing financial institutions to accept cash deposits from the public without imposing any charges. This directive is set to remain in effect until April 30, 2024.
The directive’s immediate implications suggest potential relief for individuals or entities making large cash deposits, possibly encouraging increased cash inflows into the banking system. However, the long-term consequences of this directive on various sectors of the Nigerian economy raise significant considerations.
What CBN’s latest directive means
The Central Bank of Nigeria’s decision to suspend processing fees on significant cash deposits until April 2024 is poised to trigger multifaceted implications across various sectors. Primarily, this directive is expected to impact banking operations, potentially making cash available for Nigerians at automated teller machines.
Recently, there has been a public outcry in Nigeria regarding the scarcity of naira notes at public ATMs for withdrawal purposes. While the Central Bank of Nigeria has reassured Nigerians that there is enough cash in circulation in the economy, some analysts believe that the move is to encourage Nigerians to deposit more cash amidst the reported cash scarcity.
The removal of processing fees could encourage more cash inflows into banks, which could affect liquidity levels, monetary policies, and inflation rates. For example, institutions that deposit large amounts of money may reduce the amount of cash being hoarded, resulting in an increase in the M1 and making banks more liquid. This, in turn, eliminates a potential cash crunch that might resurface during the holidays.
