On Tuesday, 6 December 2022, the Central Bank of Nigeria (CBN) announced fresh cash withdrawal limits on individuals and organisations.
The policy will become effective on January 9, 2023.
The memo showed individuals would be limited to N100,000 per week in withdrawals (through over-the-counter, point-of-sale, or automated teller machines), while businesses will be limited to N500,000 per week.
Since the policy was made public, many Nigerians have shared divergent opinions.
One of the positive outcomes experts are expecting from the new policy is how it will boost federal government revenue.
Nigeria is currently in a debt crisis and low revenue has become a bigger headache.
Nigeria’s main source of revenue, oil, is no longer reliable.
The fear is real, and the National Security Adviser, Major General Babagana Monsuno, on Tuesday estimated that the Federal Government may lose $23bn in 2023 if crude oil theft continues.
World Bank also warned that Nigeria could spend almost 160 percent of revenue on debt service in 2027.
Already data showed the Nigerian government, from January to April, spent 119 per cent of its retained earnings on debt servicing.
This is a sign that the country was approaching a fiscal cliff, as it is the first time the country’s debt-to-revenue ratio would hit or exceed 100 per cent.
CBN looking to help
Tax is one of the sure solutions to Nigeria’s cash crunch problem and electronic transactions bring hope.
Ripples Nigeria recently reported that electronic transactions in nine months (January to September) of 2022 stood at N272 trillion.
This was a 42 per cent increase compared to the N216 trillion value of transactions recorded in the same period of 2021.
With the new CBN cash policy, it is expected that the number of electronic transactions will skyrocket, and this could mean more money to the government.
Taiwo Oyedele, head of tax and corporate advisory services at PwC, although not too impressed with the CBN move due to several challenges in electronic transactions, has expressed excitement about the potential.
According to him, CBN forcing more transactions to be conducted electronically would reduce the size of the black economy and provide more intelligence for the tax authorities to expand the tax net to economic activities which were previously under the radar.
In Finance Act of 2020, signed by President Muhammdu Buhari, session 89A, imposes a levy referred to as the Electronic Money Transfer Levy on electronic receipts or electronic transfers for money deposited in any deposit money bank or financial institution, on any type of amount, to be accounted for and expressed to be received by the person to whom the transfer or deposit is made.
The act reads: “The levy shall be imposed as a singular and one-off charge of N50 on electronic receipts or electronic transfers of money in the sum of N10,000 or more.”
There are also several electronic charges approved by CBN, one of which is the use of USSD for a banking transaction, this attracts 7.5% Value Added Tax of the N6.98 charge.
Others ATM withdrawal charges, card maintenance fee, and interbank transfer charges by bank help boost bank profits and untimely increase the 30% statutory income tax.
The new CBN cash withdrawal limit is sure to have a big boost in Nigeria, generating revenue to pay off its mounting debt.
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