Central Bank of Nigeria to Reduce Cash Handling Risks of Commercial Banks

Concerns have been made by the top bank, experts, and industry players about the rising expense and hazards of cash handling. This resulted in a smorgasbord of policies geared at promoting cashless transactions, with current and former central bankers recognizing that the system must find a method to decrease the cost and risk.

Access to cash at Automated Teller Machines (ATMs) has been difficult, with the issue reaching a crisis point during the recent Yuletide season. According to inside sources, banks are becoming increasingly concerned about the hazards posed to cash in transit (CIT).

Banks are avoiding the job of cash management due to increased risk, resulting in under-servicing cash points, including ATMs, and erecting barriers to over-the-counter withdrawals.

As a result, agent banking operators have developed a service whose primary goal is the financial advantage derived from their high fees. Because the operators have misinterpreted their function as cash disbursement and reception, agent banking has continued to fall short of its goal of extending financial inclusion.

ATMs are deactivated at night in isolated communities and even within the metropolis as purposeful bank security precautions.

Cash withdrawal and lodgment above specific levels are penalized under a cashless policy that has been in effect for a few years. Individuals who withdraw or deposit more over N500, 000 per day face penalties. Corporate firms that deal in excess of N3 million are subject to the same rules.

Aside from legal measures, banks have experimented with internal techniques (including some outright misinterpretations of legislative directions) to deter clients from demanding cash. There has also been strong marketing on digital media, which depositors have criticized as being income-focused. Overall, the cash culture flourishes because large transactions are still conducted in cash, particularly in the informal sector.

Concerned about the risk that the unending habit poses to individual banks, the Central Bank of Nigeria (CBN) has begun the process of licensing dedicated and common cash hub operators, an initiative it is carrying out in collaboration with the Bankers’ Committee, a body made up of CEOs of Deposit Money Banks and chaired by CBN Governor Godwin Emefiele.

The apex bank said the operators, known as bank neutral cash hubs (BNCH), will help “to reduce the risks and costs borne by banks, merchants, and large cash handlers in the course of cash management activities, deepen financial inclusion, and leverage on shared services to enhance cash management efficiency.”