Update: The Central Bank of Nigeria has finally succumbed to pressure and reviewed their cashless policy directive as follows: The maximum weekly limit for cash withdrawal across all channels by individuals and corporate organisations shall be N500,000.00 and N5,000,000.00 respectively.
On December 6, 2022 the CBN issued a new memo to all banks in Nigeria to impose cash withdrawal limits on individual and business accounts effective from January 9, 2023.
The new directive seems to discourage the use of ATM and POS for cash withdrawals while encouraging digital channels such as bank transfers, eNaira and USSD.
Here’s a summary of the CBN’s new cashless policy:
- Individuals can withdraw cash up to a maximum of 100k per week over-the-counter while businesses can withdraw a maximum of 500k per week.
- In compelling circumstances with legitimate purposes, individuals can withdraw above the limit up to a maximum of 5 million Naira while businesses can withdraw a maximum of 10 million Naira once a month over the counter. This withdrawal will be subject to a processing fee of 5% and 10% respectively. Also, the customer must submit a valid means of identification, their BVN, a notarized declaration of purpose of cash, and approval from the MD of the bank.
- The maximum cash withdrawal from ATM is 20k daily and 100k weekly.
- The maximum cash withdrawal from POS terminal is 20k daily.
With more than 60% of POS businesses in Nigeria recognized as small unregistered businesses, this cashless directive from the CBN might signal the end of what has been a booming business for Nigeria’s struggling SMEs.
So, what should we expect?
Loss of Profit for POS Businesses
With POS operators now limited to 100k cash for individuals and 500k cash for businesses weekly, there is bound to be a limit in transaction frequency.
Also, when you add the limit of 20k Naira daily on the side of the customer, there is a predicted fall in transaction and profit for POS businesses in Nigeria.
Let’s do the maths.
Individual POS Operator
100k cash limit per week.
If he does a minimum of 5k Naira withdrawal for customers, that makes it a total of 20 transactions in a week.
If he charges 200 Naira per transaction, he makes 4,000 Naira per week and 16,000 Naira per month.
Enterprise POS Operator
500k cash limit per week.
If he does a minimum of 5k Naira withdrawal for customers, that makes it a total of 100 transactions in a week.
If he charges 200 Naira per transaction, he makes 20,000 Naira per week and 80,000 Naira per month.
Verdict: This essentially means that POS would no longer be viable for small unregistered businesses run by individuals.
To run a viable POS business in Nigeria going forward, you’ll have to register your business and have an active corporate bank account.
Increase in POS Charges
With this new CBN policy, we are back to the native rhetoric: Cash is King!
Cash is going to sought-after in Nigeria and cash transactions would in turn become expensive.
Remember the law of demand and supply?
Yes, it comes into play here.
POS operators in Nigeria would have to increase their charges in order to survive. If you want cash, you simply pay the price.
Right now, it cost 100 Naira to withdraw 5k Naira but customers could start paying as much as three times to make the same transaction.
I’m guessing that this could have a ripple effect in the value of the Naira going forward. We might see the Naira starting to rally against its counterparts.
But guess who’s going to be paying the price?
Sanitation of the POS Business Ecosystem
If you look at almost every corner of every street in Nigeria, there is always a POS business there.
Many struggling Nigerians are surviving from the small recurring profits of a POS business.
But this is about to change.
With the new CBN limitation of cash withdrawal, many small POS operators would not survive.
Not just from the limit to access to cash, but also from the market competition.
With this new directive, many big players would enter the POS business and difference in operation would be so great that many small POS operators would not be able to compete both in price and cash volume.
This would essentially create a mandatory sanitation of the POS industry where not just anyone can start a POS business.
To start a POS business from 2023 going forward, you’d have to have a registered business, an active corporate bank account and a huge cash balance.
How to Make Money from this Debacle
Like the saying goes forward ever, backward never.
As it stands, POS operators would have to find ways to survive pending after next year’s election when a new government would be installed.
So, what are some ways POS operators can go around this new CBN directive on limitation of cash withdrawal?
Here are a few ideas:
Operate Multiple Bank Accounts
Since bank accounts would be limited to 20k per day via ATM withdrawals, it only makes sense to duplicate the process.
If you have 10 bank accounts with 10 debit cards, then you can withdraw a maximum of 20k which would suffice until a permanent solution is found.
This process might be cumbersome and complicated even if it helps to keep your POS business running.
Create a Debit Card Network
If opening and operating multiple bank accounts seems like too much work for you, then you can create a Debit card network.
This can be done by using the debit cards of others to make withdrawals.
For example if a friend has 2 debit cards, they can provide you with the dormant one where you make a transfer to the dormant account and withdraw the cash via the ATM.
If you can find as many people to offer you their debit card services even for a small fee, then you would be able to access reasonable cash to operate your POS business.
Patronize POS Cash Agents
POS Cash Agents have been operating in Nigeria for a while now but it seems this new CBN directive is about to make these cash agents even more relevant in the POS business ecosystem.
Here’s how a POS Cash Agent work.
You simply register with a cash agent and pay a small fee.
When next you need cash, you simply call the cash agent on the phone. The cash agent comes to your location with the requested cash, you make a bank transfer of the amount request plus charges and receive your cash.
Upgrade your POS Business
If you are not too comfortable with any of the earlier arrangements to get cash for your POS business and you just want to cut the chase and get your POS business running optimally, then you might need to upgrade.
If you are a small POS operator with no registered business, then you need to start from there.
Simply register a business name for your sole proprietorship and then proceed to open a corporate bank account with your Corporate Affairs Documents.
Those two processes might set you back around 50k Naira.
Once you are done with that and have an active corporate bank account, then you’ll have access to a higher cash withdrawal limit.
I really don’t know if this new CBN cash withdrawal limit is a political or economic directive, but it sure is going to have huge economic and political repercussions.
The CBN would surely come under fire as usual from Nigerians for this cashless policy that I personally think is way too strict and rigid.
But if you’re in business, especially in Nigeria, you know that your number one goal is to survive.
And survive you must!