Nigeria: Banks Begin Selective Implementation of Cash Withdrawal Limits

Six months to the commencement of the cash withdrawal/deposit limit imposed by the CBN, some banks have commenced selective implementation of the policy barring cash transactions by some organisations.

Meanwhile, the organised labour in the banking industry has condemned the recent statement of the Central Bank of Nigeria (CBN) on the financial health of the rescued banks, saying the apex bank is "playing to the gallery." Labour said that it has taken a holistic examination of recent policy pronouncements by the Mallam Sanusi Lamido Sanusi-led management of Central Bank of Nigeria and declared that the policies are anti-Nigerian economy that must be halted before they cripple the economy.

Labour under the umbrella of the Association of Senior Staff of Banks, Insurance and Financial Institutions, ASSBIFI, described Sanusi's statement on CBN's planned liquidation of the rescued banks and its wider implications for the economy as dangerous and self-seeking and will seriously harm the economy and the larger Nigerian population than the few that designed and are pushing the policy through.

Last month, the CBN introduced limits of N150, 000 and N1 million on free cash withdrawal and deposit for individual account holders and corporate bodies respectively.

Consequently, it imposed charges of N100 per N1000 for individuals and N200 per N1000 for corporate bodies for cash transactions above the limits. The limit, according to the CBN, is to reduce the cost of cash processing in the industry.

Although the apex bank said that the policy would commence December with a pilot scheme in Lagos, which would be extended to Port Harcourt, Abuja and Kano by June next year, some banks have started selective implementation of the policy, which also banned banks from offering free cash pick services for customers. Sources said the CBN in a hurry to implement the policy, has encouraged banks to start the implementation as no bank can do such a thing without clearance from the CBN.

M. D Bank of Industry Ms. Evelyn Oputu (r); the Chairman Bank of Industry ,Alhaji AbdulSamad Rabiu and the United Nations Resident Representative in Nigeria Mr. Daouda Toure discussing at the formal Launching/ signing ceremony of Access to Renewable Energy (AtRE) Project between the Bank and the UNDP at the U N Building, Abuja.

Indications to this emerged last week when a bank (name withheld) issued a memo to its BDC customers telling them it would no longer allow cash transactions on their account but bank draft.

The memo titled: No more cash lodgement for BDC transaction, stated: "Please note the following important information on your account with us which we have introduced in order to serve you better. Effective 15th of June, 2011, ONLY Certified Bank Drafts will be acceptable means of payment for BDC purchases. Cash lodgment for BDC transaction will no longer be accepted.

Transfers of cash lodgments from other account types into BDC accounts for the purposes of transacting purchases is also NOT acceptable. This new policy will enable us serve you better and faster.

We assure you of our commitment to ensure a smooth processing of your transactions without disruption or delay to your operations. Thank you for your understanding and co-operation."

A top official of the bank, who pleaded anonymity, told Vanguard that the directive was an internal memo to staff to encourage customers to use alternative means of payment instead of cash and the aim is to reduce cost of cash processing for the bank."

Meanwhile, the Association of Senior Staff of Banks Insurance and Financial Institutions has condemned the policy that limits free cash transactions saying: "It is another policy fraught with danger".

In a statement by Comrades Emeka Ogene and O. P Orere, President and Secretary- General of ASSBIFI affiliated to Nigeria Labour Congress, NLC, lamented that the controversy trailing the recent pronouncement by CBN to limit cash withdrawal in the country, had died down when it threatened to liquidate any of the eight rescued banks it intervened into their management last year unless certain options are urgently taken before 30th September, 2011.

According to the association, "We are not averse to the recapitalisation of any technically insolvent bank, because the nation needs healthy banks for sustainable economic growth. But, the first question that comes to mind is, were the banks given these options in the first place to recapitalise after the reported forensic examination of their books in 2009? It is also important to know if the apex bank followed due process before sacking the then directors of these banks. We are aware the results of the examinations were not laid before the then boards of these banks, in line with BOFIA, before they were sacked.

The essence of this would have been to give them the opportunity to defend their actions and take steps to correct all observed errors within a statutory period, failing which the apex bank would have requested a competent court to order an extra-ordinary general meeting where the Central Bank would have advised the shareholders to replace them (the erring directors). You will recall that the reports with which CBN took the decisions on these banks were leaked to the Press before they were made public in August, 2009, that led to a serious runs on the banks which they are yet to recover from.

"The recent pronouncement has further created fear in the minds of the banking public, especially the undiscerning, thereby putting the banks in more precarious financial positions.

The many utterances of the leadership of the Central Bank on the state of these banks has become embarrassing and made us wonder if there was no preconceived intention to actually liquidate these banks irrespective of their financial health. Such sensitive statements were not made against some favoured banks which were given more than three years to recapitalise. What was the reason for the change in tactics? Could it be because these banks were principally owned by regional Governments and peoples while the so-called rescued banks are owned by some powerless individuals? If these rescued banks must remain in business, the Central Bank must desist from openly calling the banks' customers to withdraw their patronage.

This calls to question the professionalism of the CBN management. No business is too big to fail, but some of these banks really had no problems in the first place to warrant any CBN intervention.

The records available to us clearly show that one of these banks was declared illiquid because of facilities to three customers, two of which were sovereign debts.

We wonder why a bank should be declared illiquid for financing government-guaranteed projects. Before the intervention of the lender of last resort, this bank had been meeting its obligations and about 58% (N70bn) of the intervention fund given to it by the apex bank was invested in Government bonds while it used the balance to offset its inter-bank debts."

The body said it was very surprised that the CBN was bragging about the fund it sunk into these banks in the name of bailout.
Nigerian Banks Implement Withdrawal Limits

It said; "As a lender of last resort, the CBN owes it as a duty to any bank to assist it financially when in need. We therefore do not see the reason for all the noise about the apex bank doing its job. This happens all over the world. But the question still remains: Did all the banks need the bailout fund? In our opinion, and in view of the recent revelations, some of these banks did not need any intervention, financially or otherwise. This is just giving a dog a bad name in order to hang it. The ousted management teams of the eight banks were accused of lacking in corporate governance, among other charges.

There may, undoubtedly, be some truth in the allegations because of our human nature. But, is the situation better now? In an advertorial in a national newspaper of Friday, June 10th, 2011, the Central Bank boasted that it replaced the then Chief Executive and Executive Directors of the eight banks with 'competent managers with experience and integrity.' Nigerians, especially members of the Press, are in a very good position to confirm or challenge this claim. Nigerians must have all read the expositions in some Newspapers in the last three weeks of the shady transactions being carried out in some of the rescued banks by the 'competent managers with experience and integrity' appointed by the Central Bank.