POS owners tell Neusroom how the CBN cash withdrawal policy will affect their business
On December 6, 2022, the Central Bank of Nigeria announced its decision to revise the cash withdrawal limit in line with its Naira Redesigned Policy, unveiled by President Muhammadu Buhari on November 23, 2022. The move generated mixed reactions among Nigerians, as small-scale businesses that rely on cash transactions weigh the likely impact the decision will have on their enterprises.
The new policy will take effect from January 9, 2023.
There has been a long call for a cashless Nigeria, where transactions would be performed electronically. However, it is not the first time the CBN is introducing a limit on cash withdrawals in furtherance of the cashless economy initiative.
Like Nigeria, India operated in a cash-economy system until 2016, when it abruptly announced the demonetisation of Rs 1,000 and 500, a project that mandated the withdrawal of the country’s two highest currency notes. Part of India’s aim was to checkmate corruption. It was believed that politicians, tax invaders and money launderers stashed away bundles of cash. By 2018, 99.3 per cent of the demonetised notes were returned to the banks, according to the Reserve Bank of India (RBI), which shows that they (corrupt politicians and tax invaders) likely held their money in real estate, gold, and Swiss bank accounts. A report by PricewaterhouseCoopers (PwC) said that “assumptions proved to be far from reality.”
While India might have achieved admirable progress with its cashless economy pursuit, reduced poverty and ease of doing business, Nigeria is yet to witness an economic turnaround despite initiating a cash withdrawal policy eight years ago. 38.1 million Nigerians are still without a bank account as of 2020.
In 2014, in line with the CBN’s goal of making Nigeria “amongst the top 20 economies by 2020,” the apex bank introduced a new cash withdrawal policy where ₦500,000 and ₦3,000,000 became the limit for individuals and corporations, respectively. The move aimed at helping the naira appreciate against the dollar. However, many believe that Nigeria’s economy was not bettered by the policy. According to Hanke Currency Watchlist, the naira is one of the worst-performing currencies in the world and has depreciated against the USD by 48.87% since January 2020.
While some speculate that the policy will mitigate vote buying ahead of the 2023 general election, others believe that ambitious politicians, who are bent on rigging their way into public office, will exceed the withdrawing limits and pay the attached 5 per cent and 10 per cent processing fee for individuals and corporate bodies, respectively.
One area this new policy is expected to impact severely is the Point of Sale (POS) business whose owners are providing financial services to millions of Nigerians. Between 2017 to April 2022, POS terminals in the country increased from 155,000 to 1.1 million, according to Nigeria Interbank Settlement System (NIBSS). Many young Nigerians have taken to this business as a means out of the unemployment in the country which rose to 33 per cent in 2022.
Speaking with Enyinna Chigbndu, an agent for Baxi POS, he said that the policy will not only impact the number of sales he makes in a day but could also discourage more people from getting the machine.
“Before I started exams last month, I had 20 POS machines. I sold 14 but needed to concentrate on my exam. With this new policy, I wonder if people will be interested in the business,” he told a Neusroom correspondent on December 8, 2022.
Chigbundu, a Computer Science student at Abia State University, Uturu, supports his education through the POS business. For a withdrawal of ₦1000 to ₦5000, he charges ₦100 but charges between ₦200 and ₦300 for a transaction of ₦20,000 and above, depending on his familiarity with the customer.
Between January and September 2022, POS volumes rose by 24.3 per cent to 878.4 million, according to NIBSS. Chigbndu says his customers rely on POS for their withdrawals due to the stress of queuing in front of an ATM or going to banks.
“The policy will definitely reduce patronage in many locations,” he said.
“In places where people always withdraw in bulk, it might be difficult for the POS owners to survive in such locations.”
Adaze, a recent graduate of Alvan Ikoku Federal College of Education, Owerri, who runs a POS business in Port Harcourt, Rivers State, said that in some days, 10 persons withdraw up to ₦50,000 and above.
“Most people that come to my shop withdraw up to ₦50,000. Sometimes people withdraw up to ₦150,000 per day. Making ₦20,000 naira as the minimum is going to affect my business negatively.”
Chigbndu told Neusroom it cost ₦20,000 to procure a Baxi POS machine.
“With ₦50,000, you can start the business and can make above ₦50,000 in a month, depending on your location.” Baxi charges a withdrawal fee of ₦4.5 of ₦1000, and for ₦20,000 and above, it charges ₦82.
Ezinne, who runs her POS business alongside her foodstuff shop in Umuahia Abia State, believes that the policy will be reversed by the National Assembly.
“It will affect the profit I make in a day. Some of my customers use the POS up to five times daily.”
Ezinne’s business is located about 10 km from a bank and enjoys a considerable good number of patronisation from people around who spend about ₦200 to go to the nearest bank.
“Especially on Sundays, people make withdrawals of ₦20,000 often. Some even withdraw up to ₦100,000. And the higher the money, the higher my profit.”
“The legislatures can not allow this to stand. There are people like students whose livelihood depends on this business. Unless they want to close down POS business,” Ezinne said.
Vincent Nwala, a Forex Trader, while acknowledging that the policy will have a negative impact on small businesses, said that the policy might help the naira appreciate in value in the Forex market.
“Except that Bureau De Change will rely on e-transaction, they won’t have enough naira to trade on, if CBN won’t print more naira. This means that there will be a scarcity of naira, and it can make the naira stronger,” he said.
