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 Re-designing 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 over-the-counter 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.
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.