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CBN policy to levy a transaction charge on deposits and withdrawals is wrong

The CBN policy purporting to levy a transaction charge on deposits and withdrawals above a certain threshold is wrong and can be challenged on several fronts. I will highlight only a few

1. The selection of the a few southern states is discriminatory. It is also unclear whether the domicile status of your account precludes you if you made the deposits/withdrawal in Lagos. For instance, your account is domiciled in Kebbi and the deposit/withdrawal occurred in Lagos or vice versa.

2. It can be argued that the CBN directive is contrary to the relationship contract between an account owner and his/her bank and therefore null and void (at least until the bank updates its terms and conditions and expressly seeks consent from the account holders or implied consent is derived).

3. Banks are private sector businesses and to that extent can't be run as an extension of the public sector. While banks run under licensing, the regime does not extend to becoming an appendage of the tax authorities or as "branches" or outposts of the CBN. A cashless society emerges dynamically from the interplay of technology and its adoption. It is not something to legislate about. You simply encourage it. 

4. Most importantly, the Naira is a legal tender in Nigeria and therefore its use or acceptability cannot be restricted, restrained or countermanded unless you change the law. While you can charge fees to use alternative payments methods, naira cannot be charged or taxed in any monetary transactions between a giver and a taker. For instance, I can choose to pay a N10 million debt with one kobo coins if I can source it. It is unlawful for the creditor to refuse the coins. The courts will affirm this character for any legal tender as long as the originating transaction is legitimate. It is for this reason payment service providers charge fees on credit cards but none on debit cards.


What the CBN can do is to specify a lower limit of "vaults cash" that banks are authorised to keep beyond which level the excess must be kept with the CBN. It can then charge banks for depositing into and or withdrawing cash from its own vaults. It is up to the banks to then work out what limit of cash deposits their customers can make on the average to stay within the limit or how to recover the cost of using CBN vaults to it from their own customers who withdraw heavy cash. The indirect method appears legal and legitimate but the direct method is ill-thought out and perhaps unlawful as long as the naira remains a legal tender.



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