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CBN GOVERNOR LAMIDO SANUSI,

ABUJA, May 26, (THEWILL) – The Senate Thursday advised the Governor of Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi, to review the deadline for the commencement of the new CBN cash withdrawal limit, even as it asked the apex bank to submit quarterly reports on the progress of the new policy.

But Sanusi expressed the possibility of an imminent adjustment in the timeline, when he announced that, 'the effective date of implementation was not cast in stone.'

In an interactive session with the CBN management team at the National Assembly, the Chairman Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Nkechi Nwaogu, pointedly told Sanusi and his team to reconsider the policy in a way that it would favour the generality of the citizens.

Nonetheless, senators supported the new CBN policy which pegs N150, 000 and N1 million cash as withdrawal limits for individuals and corporate organizations respectively, but requested an upward review for individual threshold to N250, 000 from N150, 000.

They also demanded that the June 2012 effective date of implementation be extended to allow for effective public enlightenment.

In the same vein, the Senate committee directed the nation's apex bank to come up with complete briefing on "non-interest financial banking" at a later date.

Responding the CBN Governor, Mallam Sanusi noted that he had envisaged complaints from affected Nigerians over the policy, adding, "basically, what we need is ambition and belief" and that the effective date of implementation was not cast in stone.

He further explained that they had explored the financial systems of some West African and European countries including Ghana, Kenya, Brazil and others and found that if Nigeria must meet its target of 2020-20 target, it should metamorphose into a cashless society.

According to Sanusi, only 10 percent of Nigerians were capable of withdrawing upwards of N100, 000 cash per day thereby leaving the remaining 90 percent to bear the cost of cash management which he said was high.

"The industry proposal is not to place limit on cash transactions, but provide that the 10% of customers that make high volume cash transactions will bear the associated cost and eliminate the subsidy by the mass public (90%) of banking customers.

"The banking industry is committed to create an enabling environment to achieve a shift in behavior to alternative payment channels; implementation is strategically phased and complementary reform is progressing on alternative payments channels through the retail payments transformation programme," he added.

"In the wake of the banking industry intervention, our analysis indicated that the high cost structure of the banks was partially responsible for their preference for lending to the capital market and the oil and gas industry. It is also responsible for the high cost of doing business and for the high rate of interest that banks charge their customers, because they have to recover their cost.

"On the 3rd of June, 2009 when I was confronted by the Senate, one of the questions asked was why lending rate remains high and at that time I told the Senate that in addition to the cost of funds, the banks bear a very high cost of doing business, very high overheads, the cost of power, the cost of security, the cost of infrastructure, the cost of cash management and very heavy bank officers.

"I also told the Senate that one of the things I will pursue was greater efficiency in the financial system to reduce those costs, because that is the only way to reduce the spread between what banks pay to depositors and what they charge their customers.

"Because of the seriousness of the banking issue in the early days of my term we did not have time to focus on that, now that we got AMCON and things have settled, we are going back to the main strategic initiatives of the Central Bank.

"Now embedded in lending rate is this cost of banking services, some of them are operating cost arising from deficiencies in the provision of these services. So the bankers' committee in conjunction with the Central Bank commissioned a study that went round other countries to look at the most efficient financial systems and we have a programme for reducing overhead cost in the banking industry by at least 30 per cent in the next two to three years.

"This policy is one part of five total packages that is aimed at improving the banking system, moving the system away from cash to other channels and increase automation of the system.

"When banks incur costs they pass them on to the customer's because that is how they make their interest. So the very high rate of interest that you pay covers the banks, not just what they pay depositors, it covers what they pay their staff, security, for movement of the cash, handling, processing, what they pay central bank if it processed for them. All of those costs are paid for by you when you borrow. So if you want interest rate to come down, you have to address the cost structure inefficiency in the financial system," he stated.

Continuing, the CBN boss stated; "In 2009 direct cost of cash management, the system spent N114.5 billion in cash management and the projection is that by 2020, we will get to N200 billion in cash management.”