From Juliana Taiwo-Obalonye, Abuja
The Nigerian Financial and Intelligence Unit (NFIU), has announced that effective March 1, 2023, all government transactions will be automated in line with the Central Bank of Nigeria monetary policy.
It warned that defaulters that withdraw cash from public accounts risks collaborative investigation by the Nigeria Financial Intelligence Unit (NFIU), Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices Commission (ICPC).
Director and Chief Executive Officer, NFIU, Modibbo Tukur, who confirmed the latest development on Thursday in Abuja at a press briefing, at the Unit’s temporal office in Abuja.
Tukur, who said defaulters risk three years jail term, explained that under the guidelines, only the President can give a waiver for any cash above the approved daily threshold to be withdrawn for any urgent or emergency reasons.
The NFIU therefore directed federal, state and local governments in the country to put necessary measures in place to ensure the smooth operationalization of the new policy.
He advised the different tiers of government in particular, to deploy technology and train their staff to be able to apply the new policy from the stipulated date.
Modibbo said, “With the implementation of this guideline, Nigeria has been taken into a non-cash economy with effect from March 1, 2023”.
Modibbo disclosed that despite the introduction of the cash withdrawal limits in the country, state governments withdraw a total of N701 billion cash above the N225 billion withdrawn by the federal government and N156 billion withdrawn by the local governments in the country between 2015 to date.
According to him, “The rate of withdrawals above the threshold from public accounts has been alarming, over N701 billion has been withdrawn in cash from 2015 till date.
“The NFIU had told banks and government agencies at all levels to go fully digital by moving online, as all transactions involving public money must be routed through the banks for the purpose of accountability and transparency.
“This is not reversible as we are only enforcing the law. As far as we are concerned, Nigeria will become a full non-cash economy by March 1, 2023 this year. As a consequence, any government official that withdraws even one naira cash from any public account from March 1 will be investigated and prosecuted in collaboration with relevant agencies like EFCC, ICPC and the NPF.”
The NFIU boss, however, added that the President is in the position to grant waivers to government officials based on considerations.
He added, “For government exigencies, only the President has the power to grant any waiver to any government official considering the importance of the situation; either for national security, health, or other important reasons.”
Giving reasons for the press briefing, Tukur said: “we found within the operation of the financial system, and legislative amendments from the National Assembly, which was appended to by the President, for reasons to discontinue completely cash transactions from public accounts. And the reasons are the provisions of the money laundering Prohibition Act, particularly section two created threshold limits and withdraws of cash from all corporate body accounts and put them at N10 million.
“But again, section 13 of the same Act, advise that in a situation where you run into new developments, that making the operationalizing of certain provisions difficult that’s section 13, you have to make recourse to development of new products and response to new technologies to address the issues.
“Then we have Section 26 of the Proceeds of Crime Act. So the provisions of all of them one, section two, provided that the withdrawal of cash above those thresholds should be punished with imprisonment of up to three years or fine of three times or twice the amount of the money that was being withdrawn.
“So you are all aware of the inflation in the economy, public servants traveling this and that. So the mark of withdrawing above the threshold is becoming very frequent. So when we compiled the cash withdrawals over a period of time, precisely from 2015 to date, we discovered the state governments have withdrawn over N701 billion in cash. With some states withdrawing up to N24 billion. And then we also discovered that the federal government withdrew in cash up to N225 billion while the local governments withdrew up to N156 billion.
“So if we are to apply the law here, all the public servants involved in this withdraws are entitled to three years imprisonment. That’s what the law said. And then Section 26 of the Proceeds of crime, I’d said that wherever that cash is seen, it should be seized. So, there is provision for seizure of cash.
“So, now, having looked at the principles of the law, and the provisions of that law, it became necessary for us to direct an order the financial institutions to stop completely cash withdrawal from public accounts at federal, state and local government level henceforth.
“This is for the protection of the system for the protection of the public servants and the chief accounting officers of state and for the protection of the elected public officials who are running the finances, there is no option to that. So, what we are advising the guidelines is that they should make a recourse to technology as the law requested, and they should also make recourse to training and we are not stopping there because you as you know, this the Central Bank of Nigeria is also changing the new currency notes.
“From what we are seeing there is also need for the new currency provision to adjust to the market operation. And the way it will adjust is to go by the withdrawal limits imposed by the Central Bank, there is no doubt about it. These are not our own issues, they are issues of Prudential management of the central bank, they are issues having to do with liquidity management in the financial system.”
The NFIU boss ruled out corruption as being behind the high withdrawal.
He said: “So, far, there is no threat of corruption. From the statistics we have that we run over this period that the new banknotes was introduced. Still, withdrawals are higher than deposits. So, which means that the statistics shows that withdrawals are still slightly higher than deposits, and is an indication that the market is not rushing to return the old notes. Rather the market is only interested in getting liquidity to finance market operation.
“So, there is no imminent threat if the reverse was the case, for example, there is rush to return the money back to the financial system in form of deposit. That is when we are going to suspect there are people who are seriously stuffing cash in their own houses.
“So as far as corruption or money laundering are concerned. And we have the records, there is no imminent suspicion or threat from the financial system. And this is statistically proven. So if you have questions on the liquidity side of it, I think you can approach the central bank. So these are the issues.”
Speaking on the limitations with regards to the guidelines, Tukur, said: “The limitation is that one, even if there are special needs to withdraw cash from any public account anywhere, that will have to get a presidential approval. That’s number one. Number two, there is no standing waiver to say that because I’m doing this particular work, I have a standing waiver that anytime because of my work, I can go to a bank and withdraw cash from a government account. The waiver is going to be by the president himself. It is going to be on case by case basis. So that should be very, very clear.
“And then number three, we have issued an advisory to all the governors and all the local government chairmen and all the MDS in the federal government to we give them between now and 1st of March 2023 to put all facilities in place to operationalize the guidelines.
“So what is the bottom line is that on the 1st of March, if there is cash withdrawal from a government account of even if it is one Naira, we are going to trigger off money laundering and corruption investigation anywhere.
“From the first of March 2023. If there is any cash withdrawal, it is going to trigger off money laundering investigation in either EFCC ICPC, the Nigerian police, or all the law enforcement agencies, depending on the relevance of the withdrawal.
“We want a very good coverage of this so that the public should know. And then, as we stated, like what happened in the local government guideline, this guideline is not reversible. Because we are going by the provisions of the law. So we are only enforcing the law as far as our responsibility is concerned. So if later, the National Assembly didn’t see fit, to accompany it with an Act of Parliament, to outlaw cash withdraws completely from public accounts then we happy. But otherwise, it still stands. We are happy also to address any issues arising from that. If they are necessary to be addressed.
“Then to find out to for a final point. With the CBN regulations on the cash withdrawal, has automatically taking the country to a non cash economy. That has to be stated clearly. And we are also developing an advisory to the banks. It’s not ready right now. But the country is already designated a non cash based economy, it is a complete transition that happened through an evolutionary process and circumstance. So perhaps you can say with effect from 1st of March 2023, Nigeria is no longer a cash based economy.
“So it’s also understood, the cash in the system is limited. But with this guideline, we expect that cash withdrawal from the system will go down by about N1 trillion Naira out of the N3 trillion cash that is in circulation on a weekly basis now. So the government, the government aspect of it is completely taken off. Help us because we are having the public interest.”
Q and A
Contrary to what the CBN governor said, you are saying you are seeing more withdrawals than deposits, can you clarify?
I think what the governor was saying is that there can be more cash outside the banking system. There are two issues. One, they are issues of liquidity ratio management and they are issues of excess liquidity. And this can be triggered by so many reasons, you know. Excess liquidity has to do with disbursements of loan from both government and the private sector. And what are liquidity ratio issues there? liquidity ratio issues when the money is disbursed in form of commercial I mean credit facilities are not coming back into the system at the time they are due. So, this is exactly what he was complaining. The NFIU is also a member of the New Note committee, but I understood the governor quite clearly he was saying over N80 trillion Naira dispose out of the system. And then there are excess liquidity issues. And nobody needs to tell you that you can see the crash of the naira. People will demand for the dollar because they have the naira, it’s simple. And then with the COVID, and the war, now, production of goods also is down. So a lot of cash is stuck outside struggling for little goods, then triggering of inflation. And then also the cash is there, triggering demand for foreign currency, which in Africa, we use for hedging. Other countries hedge in gold we hedge in hard currencies. So these are the issues I think he was explaining if I get you right, and we are not opposed to the new Naira notes, we are not I will never be.
Are we not seeing more volume of the money coming to the banking sector prior to this announcement?
No, no, what told you is confirming his own statement that there are liquidity issues. What the governor was saying actually is that there are liquidity issues yet the system is looking for more money. That’s what the record is saying is not me. So, even a week there is a withdrawal of N840 billion and then there is a deposit of only N800 billion then there is a gap, which means people are still going to the banks to look for money to fund their own businesses. Because what do you see outside people are very suspicious, they just think that the cash out there were like stolen cash and stuff, but then what the record is saying is that people are not even rushing to bring it back to take the new notes. So, what it is telling you is that it is the system that is having liquidity and is looking for more liquidity, so if it is not control, you know what will happen? Because one, this is a developing economy is not all the sectors that are fully developed. In fact, in a developing economy, liquidity will only go to the performing index, you only put money in where is given back money, it does not matter even if it is one sector that is producing you the best money you need, that’s where you put in your money. But if it goes out everywhere, then not all the components of the economy will respond. And what you have at the end of the day, is crisis in managing inflationary rate, the exchange rate and interest rate.
While one applauds the measures that will trigger the financial system and perhaps sore up the currency value, the worry is that the good thing that you’re trying to do may also be the manipulator once they are given a window. I have said that it is only the presidency that can leave a waiver, under what condition of guidelines should anyone be given a withdrawal waiver?
Okay, why we make that provision is because you know, well, I don’t need to remind you this the most populous country in Africa. That’s number one, number two, this also the most challenged country in Africa. You are seeing the work of NDLEA. You are seeing the work of the ministry of defense. You are seeing the work of EFCC. You are seeing everybody’s work telling you that the system, there is what we call in our own ratings as high risk and low risk countries in predicate crimes. Nigeria is a high risk country there is no point in repeating that and is a way you respond to it. So the window we gave is in the event somebody may come and tell you that he has a particular operation to carry out maybe on the borders, or maybe in defense or in national security, or in medical, that he must walk with cash, then does when we said, Okay, write to the President. So if the President is the President is the one mandated by all of us to run the show. So if the President is that the person can go ahead and take that cash? And you know, that President is extremely difficult to make get that but if there is common sense that they will get it done, they can get it.
Just wondering to what extent if any, is this directive on forbidding or withdrawing cash from public accounts, driven by the upcoming election and concerns that this new cash policy might be withdrawn to the vote buying?
No, no. The legislation, we are referring to are recent amendments. Those amendments were made in May (2022). So we are only responding to you can see the effective date of the guideline is in between the election dates. Which means is not is totally not our concern, because we cannot flow with the politicians. That’s just the truth. And we cannot join political issues by any rate of imagination. One, our standard reviews, we work with United Nations, we work with the Financial Action Task Force, we work with IMF, and then we work with ECOWAS. So we see in the newspapers, how people try to speculate virtually every action. And then if politics is being complicated, then it has to do perhaps with people that are having the complication of politics. But here, absolutely, 1st of March is in between nowhere in politics. So yeah, it’s in the middle of nowhere.
There’s this argument that once the money is moved from the Federation accounts to the states and local government accounts. If the federal government is legislating on how the money should be spent, or should be withdrawn, you are infringing on their rights?
Well, it’s section 15 of the Constitution, it is too fundamental because it’s our responsibility to fight corruption is not the responsibility of the federating unit, they are only complementary. And you know, that the role even in loose Federation’s currency has never been left to any other unit other than the center. So, once that is not done, then if you can devolve management of the central bank, you are automatically devolving the entire country. So this is just you can call it good or evil by is necessary.
What is the percentage of success if the local government autonomy?
Ordinarily, if you look at the disbursement of the Federation account, the federal government is taking around 50% Plus, the state governments are taking around 26% Plus, the local governments are taking around 21, 22%. If you look at the statistics and we have it in black and white. The local government withdrawal is only N156 billion is less than half of what even the federal government that is no using cash. But why is the withdrawal of the state government N700 billion but the local government, all 774 Is N156 billion. Just to tell you that in the majority, they restricted themselves to the N500,000, cash withdrawal we allow the local government to do, that’s the performance index number one.
Number two, cash withdrawals from the joint account, we only had three issues to contend with throughout the period till this moment. They were allowing the money to go and you heard when the President challenged the governors. And that’s our own. Because in the financial memorandum and the financial guidelines of the Federation this time around, is that money has to go to local government, local government will sit on that money with a council extract, which means every counselor is supposed to look at those funds and decide on his own whether to vote for the movement of the funds or not. So if counselors or Chairman decided… but on our own in compliance with our laws, we redirected the funds to them and the funds were going and you heard the President acknowledged it himself.
The local government while receiving their own funds, but then there are issues of state electoral Commission’s too. So the local governments sometimes work with the governors but whether they are returning the money to them or not that you have to check, not me. So so that’s where we are. So with this statistics, the local government guidelines has worked 100%.Because imagine if the state government’s cash withdrawal, were N156 billion like the local governments. So here it means the decency…we are not accusing anybody, but the federal government is doing well, because they are running the whole country, but here we draw in only N200 billion cash and then the local governments are also managing running the whole country, but we drawn only over N100,000 billion.
So this time around, we are taking everybody down to zero, because it also establishes an audit trail for the investigating agencies. So you have to choose either to withdraw cash and go into investigation or you allow electronic process and you allow the anti corruption agencies to do their work.
What happens if a serving governor withdraws cash?
You know, there are certain things you see in this country that people do that don’t exist in law. By what I’m trying to tell you is that the investigation will go simple will trigger off to EFCC. If it is a money laundering pattern that we noticed or if it is a corruption indication that we got like bribery issue or inclining to misappropriation, or criminal conversion of public assets. These are corruption issues, then we move them to ICPC. But we will not wait for the governor to leave office definitely but the investigation will go but here again you see all sorts of things when people tell you to go to court to stop investigation which is not even allowed in the law. So no court can stop any investigation.