The latest supreme court ruling reversing the central bank deadline for using the old N1000,
N500, and N200 notes as legal tender may not apply to the central bank’s cash withdrawal
limits.
The Supreme Court of Nigeria on Friday issued a judgement reversing the central bank’s
policy on the introduction of new naira notes. In a unanimous judgement held on Friday, the
apex court of the land chided the president’s approval of the policy as unconstitutional and a
breach of the fundamental rights of Nigerians.
Justice Agim who read the judgement held that the President acted Ulta vires by his glaring
failure to consult with the National Council of States, Federal Executive Council FEC and the
National Economic Council NEC before directing the Central Bank of Nigeria to unlawfully
introduce new Naira notes. He held that the unconstitutional use of powers by Buhari on
Naira Redesigning has breached the fundamental rights of Nigerian citizens in various ways.
The ruling does not affect the cash withdrawal policy
Despite the ruling, the judgement may not affect the apex bank’s policy on cash withdrawal
limits as the matter was deliberated on by the supreme court of the land. Thus, despite
approving the spending of the old notes as legal tenders, it will not stop the central bank from
continuing with its policy of cash withdrawal limits considered the major issue affecting
Nigerians.
The Central Bank of Nigeria (CBN) had in December announced a new policy that
mandates deposit money banks and other financial institutions to ensure that overthecounter cash withdrawals by individuals and corporate entities do not exceed
N100,000 and N500, 000, respectively, per week. The revised cash withdrawal
limits, contained in a circular took effect nationwide on January 9, 2023.
The policy has been mostly chaotic with long queues appearing in banks across
the country and often leading to violence and protests. Nigerians have complained
bitterly about the policy especially when online banking services have also been
fraught with system downtimes.
After several complaints the Central Bank of Nigeria (CBN) in January reviewed
the policy, increasing weekly withdrawals for individuals and corporate
organizations to N500,000 and N5 million, respectively. Despite this, banks still do
not have enough cash to dispense to customers while many ATMs still record long
queues and limited withdrawals
The cash scarcity has only continued to frustrate more Nigerians especially poor
people who rely on cash for their livelihood.
CBN’s reasons
The central bank claims the policy is designed to reduce the amount of money in
circulation with was estimated at about N3 trillion at the time
The CBN mentioned that the policy on revised cash withdrawal limits is in line with
its cashless policy and was to encourage more Nigerians to use alternative
channels such as USSD, debit cards, POS, eNaira to carry out their banking
transactions.
It also said the policy is also part of the apex bank’s plans to protect the newly
redesigned banknotes and guard against their misuse, counterfeiting, and
hoarding.
Since then, a combination of the introduction of new naira notes and the cash
withdrawal limit policy has led to a reduction in currency in circulation, reducing to
about a low of N1.39 trillion in January 2023. This represents the lowest level
since December 2015, or seven years ago.
In addition, currency outside banks, which represents the total currency in the
hands of the public, fell to a record low of N788.92 billion in January 2023
according to data from the Central Bank of Nigeria. The apex bank was also able
to mop up N1.78 trillion from the hands of the public with its monetary policies,
reducing the currency outside the vaults of the banking system from N2.57 trillion
recorded as of December 2022 to N788.92 billion.
Court battle ahead?
While the state government’s aim was the reintroduction of the old naira notes, Nigerians
suffered more from the unavailability of cash whether old or new. The supreme court
judgement is therefore unlikely to make the situation improve except the apex bank agrees to
increase the cash withdrawal limit or jettison the policy in its totality.
The central bank has independence over monetary policies and is within its right to impose
cash withdrawal limits from commercial banks. However, these powers can also be
challenged in court especially if it is viewed as trampling on the fundamental rights of
Nigerians. POS operators had threatened to take the central bank to court over the cash
withdrawal policy.
Should the central bank continue to limit over the counter withdrawal of cash and limit the
amount of cash released to banks, there is the likelihood that more stakeholders may take
the apex bank to court to challenge the decision
Sources:Nairametrics
