Nigeria limits cash withdrawals in a bid to boost CBDC adoption

Nigerian central bank introduced limits on cash withdrawal to incentivize CBDC adoption on the way to a fully cashless economy. Nigerians embrace cryptocurrencies but reject government's plan.

Ten Naira note

The Central Bank of Nigeria (CBN) issued an official letter to commercial banks and other financial institutions detailing revised cash withdrawal limits. The new policy imposes severe restrictions on how much money individuals and companies can withdraw from ATMs and over-the-counter (OTC).

The instructions follow the recent launch of redesigned Naira notes and align with the Cashless policy of the bank intended to "drive development and modernization" of the country's payment system.

ATM withdrawal cap: $45 daily

The CBN directive caps the weekly OTC withdrawal amount for individuals and corporate organizations at, respectively, ₦ 100,000 and ₦ 500,000, equivalent to $225 and $1,225. In the case of ATM withdrawals, the maximum amounts are ₦ 100,000 per week and ₦ 20,000 ($45) per day in denominations of ₦ 200 and lower. ₦ 20,000 is also the limit for daily point-of-sale withdrawals.

CBN mercifully allows exceeding the prescribed limits once a month "in compelling circumstances" – albeit within a prescribed limit. Individuals and corporate organizations with a legitimate interest may withdraw no more than ₦ 5,000,000.00 and ₦ 10,000,000.00, respectively.

The "catch" is any withdrawal above the standard limit is charged a fee of 5% or 10% for individuals or organizations. On top of it, a customer is subject to due diligence and enhanced information requirements, including (sic!) "notarized customer declaration of the purpose for the cash withdrawal."

CBN instructs subordinate institutions to inform the Banking Supervision Department about above-the-limit withdrawals and report any suspicious transactions. Then it goes on to advise that customers should be encouraged to use digital means of payment, such as internet banking, mobile banking apps, USSD, cards/POS, and eNaira, the Nigerian central bank digital currency (CBDC).

Nigerians embrace cryptocurrency but reject CBDC

The withdrawal limitations are clearly an effort to stimulate the adoption of the CBN-controlled currency. Nigeria was the first African country and one of the first worldwide to introduce CBDC. Launched in October last year, eNaira failed to attract significant consumer attention. Recent data indicates that only 0.5% of Nigeria's 217 million population uses the CBDC.

The proportion seems very small, considering the fact that Nigerians rank among the most crypto-savvy Africans. The country topped CoinGecko's list of 15 countries most interested in cryptocurrency based on Google Trends search data.

Cryptocurrency interest ranking

Nigerians reject CBDC in favor of non-government cryptocurrencies. According to KuCoin's report released in April 2022, over a third of the country's population aged 18 to 60 (33.4 million) declared owning or having traded cryptocurrency in the previous 6 months, and over 65% of the investors made fiat deposits to cryptocurrencies via peer-to-peer channels.

Nigerian government targets cryptocurrencies as competition to CBDC

The problem is Nigerian government views non-CBDC cryptocurrencies as a threat. CBN has long expressed distrust in crypto on the premise that "coins" are used for terrorism financing and money laundering. In February 2021, the Bank banned crypto transactions and instructed financial institutions to close all accounts involved in dealing with crypto exchange platforms. Nevertheless, owning and using cryptocurrency is not penalized in Nigeria.

However, the authorities' stance on crypto money leaves many citizens confounded. Nigerians have trouble understanding why the government is pushing its own cryptocurrency, simultaneously trying to block all other options from the market. According to a recent Bloomberg report, Nigerian millennials and Generation Z "are suspicious of the central bank's project," viewing the government as hostile and rejecting its inventions.

Nigeria to become 100% cashless

It looks, though, like the authorities are desperate to speed up eNaira adoption with the goal of achieving full control of the money circulation in the country. "The destination, as far as I am concerned, is to achieve a 100% cashless economy in Nigeria," says central bank Governor Godwin Emefiele, quoted by Bloomberg.

To make it happen, the government applies a stick-and-carrot approach. Recently, CBN partnered with three-wheeler taxi operators to offer a 5% discount to drivers and passengers who use eNaira. Lest friendly measures prove unconvincing to Nigerians, there's always the "stick" factor at work, exemplified by the latest withdrawal cap.