Nigeria Sets a Limit on Cash Withdrawals, Pushes Its CBDC
The Central Bank of Nigeria issued a directive that will limit how much cash individuals and corporations can withdraw from their bank accounts.
On December 6, the Central Bank of Nigeria issued a directive that will limit how much cash individuals and corporations can withdraw from their bank accounts. The new directive takes effect January 9, and Nigeria hopes the withdrawal limits will increase adoption of digital banking in Nigeria, including its own centralized crypto, the eNaira.
The eNaira is Nigeria's central bank digital currency, or CBDC. The idea is that instead of a nation's treasury issuing paper money, it instead mints and distributes its own crypto. Obviously, using a crypto in place of cash will give the government more control over how people use money. This is why some countries with cash-based economies are turning to CBDCs as a way to control larger portions of the economy and extract more tax income.
The eNaira is very unpopular. After its first year of existence, only .5% of Nigerians claim to have used the token. In Nigeria, the majority of workers are part of an informal cash economy where they work for cash and buy goods and services with cash. According to the World Bank, only 45% of Nigerian adults have bank accounts. So you can see why Nigeria's Central Bank would consider turning to the eNaira as a means of capturing the tax income.
The limits on cash withdrawals are low: individuals will only be allowed to withdraw 20k Naira ($45) per day and 100k Naira ($225) per week from PoS systems and ATMs. If they go over the limit, there's a 5% penalty. Corporations will be allowed to withdraw 500k Naira ($1.1k) per week with a 10% penalty for going over the limit. For special circumstances, individuals can take out 5M Naira ($11.2k) and corporations can take out 10M Naira ($22.4k). Remember, these are limits on how much cash Nigerians can withdraw from their own bank accounts--it's supposed to be their money!
It’s tough to get accurate data, but the median monthly wage in Nigeria is said to be around 340k Naira ($765). Under this policy, almost half of Nigerian workers paid through a banking system won’t be allowed to withdraw their entire paychecks to cash.
With insane economic policies coming from the nation's leadership and a deeply-rooted cash economy already in place, it's easy to see why Nigeria was one of the world's top nations for crypto adoption before its government stepped in to limit its use. Nigeria's Central Bank claims that cash hoarding by its citizens is a major problem that harms the economy, but with people like this in charge, I'd be stuffing my couch with Naira too.