Introduction
On 17 December 2024, the Central Bank of Nigeria (CBN) issued a circular on cash-out limits for agent banking transactions to advance the cash-less economy while addressing challenges in the agency banking space (the Circular). This policy intervention introduces new limits and operational standards for agents, to reduce fraud, improve service delivery, and ensure consistency across the banking industry.
The rise of agency banking in Nigeria has played a pivotal role in enhancing financial inclusion by providing access to banking services in underserved areas. However, concerns about fraud, inconsistent operational practices, and the need for standardization have prompted the CBN to introduce new measures for agent banking transactions.
According to the CBN’s Payments System Management Department, these new directives address these concerns and streamline agent banking operations.
This Newsletter highlights the key provisions of the Circular.
Key Directives in the Circular
The Circular outlines several key directives applicable to agents and principals, which include:
Cash-out limits:
- a weekly cash-out limit of N500,000 per customer across all channels;
- a daily cash-out limit of N100,000 per customer on agent banking terminals; and
- a daily cumulative cash-out limit of N1,200,000 per agent.
Operational Standard:
- agents are required to apply the approved “Agent Code 6010” for all agent banking activities; and
- all agent banking transactions must be processed through designated agent float accounts maintained with the principal.
Compliance monitoring:
- agents must ensure that all transactions, including withdrawals and limits, are electronically reported to the Nigeria Inter-Bank Settlement System (NIBSS) and the CBN;
- the CBN will conduct regular checks and audits, including impromptu back-end configuration checks, to ensure compliance.
Penalties for Non-Compliance
- Failure to comply with the directives will result in monetary and administrative sanctions, which may include penalties for both principals and agents.
Implications for Agent Banking Operations
The CBN’s cash-out limits (as contained in the Circular) are a significant step toward establishing uniform operational standards with the agent banking sector. By setting clear transaction limits, the CBN aims to reduce the risks associated with large-scale withdrawals, such as fraud, money laundering, and other illicit activities.
Furthermore, the Circular also aims to curb the commoditization of the Naira which has led to significant scarcity of the currency within the country; the Naira has become inaccessible at the Automated-Teller-Machines (ATMs) operated by licensed financial institutions partly as a result of the arbitrary market hoarding and sabotage practices of agents operating within the country.
The requirement for reporting transactions electronically to NIBSS further enhances transparency and enables the CBN to monitor the sector effectively.
For principals and agents, this means an immediate need to implement these cash-out limits and operational guidelines in their systems, with the intention that this will reduce or remove the incentive to engage in market hoarding/sabotage activities. Importantly, as indicated in paragraph 5.4.1 above, failure to comply could result in penalties.
Conclusion
The CBN’s new cash-out limits are part of a broader effort to standardize and regulate agent banking operations in Nigeria. By introducing these measures, the CBN seeks to combat fraud, streamline operations, and further the goal of a cashless economy. Principals and agents must adhere to these guidelines to avoid penalties and ensure the sustainability and growth of agent banking in Nigeria.