Introduction
The Central Bank of Nigeria ("CBN") on 15th March, 2022, released an exposure draft on the Guidelines for Bank Neutral Cash Hubs Operations in Nigeria (the "Draft Guidelines"). The Draft Guidelines offer high volume cash transacting individuals and companies the prospect of withdrawing and depositing cash from and to various bank accounts within a one-stop physical facility, irrespective of their bankers.
Today's article briefly highlights some key provisions of the Draft Guidelines and the implications for the business community.
What is the role of Bank Neutral Cash Hubs?
Bank Neutral Cash Hubs ("BNCH") are essentially cash collection centres which enable eligible individuals and companies to make cash deposits and withdraw funds regardless of the bank in which their account is domiciled. According to the Draft Guidelines, BNCHs will be established in areas with a high volume of commercial activities and cash transactions, as the minimum transaction value for deposits and withdrawals at a BNCH is N500,000 (five hundred thousand naira ) for individuals and N1,000,000 (one million naira) for corporate entities.
Who is eligible to set up BNCHs?
The Draft Guidelines only permit licensed Deposit Money Banks (DMBs) and Currency Processing Companies (CPC) ("Eligible Promoters') to establish BNCHs upon application and approval of the CBN.
What are the permissible and non-permissible activities of a BNCH?
BNCHs are permitted to receive and disburse cash from and to eligible customers on behalf of financial institutions and carry out other activities that may be permitted by the CBN.
Conversely, BNCHs are specifically prohibited from carrying out lending activities; engaging in foreign currency transactions; or any other transactions not prescribed by the Draft Guidelines or activities prohibited by the CBN.
What are the approval requirements for operating a BNCH in Nigeria?
Eligible Promoters intending to operate a BNCH in Nigeria are required to submit an application to the CBN in addition to the following supporting documents:
- a valid DMB license or proof of CPC registration issued by the CBN;
- a board resolution approving the application;
- a detailed plan or feasibility report for BNCH operations;
- incorporation documents of the Eligible Promoter; and
- other required documents.
Upon submission of complete and satisfactory documents, the CBN will issue a no objection to the Eligible Promoter.
Prior to the grant of the CBN's final approval, the Eligible Promoter will be required to provide evidence of the following:
- ability to meet technical requirements for operating a BNCH;
- insurance to cover the BNCH's cash vault;
- collaboration with the Nigeria Police Force;
- connectivity with the Nigerian Interbank Settlement System (NIBSS) to ensure customers receive same-day value for their deposits;
- insurance of total deposits; and
- other requirements.
The CBN will also be required to conduct a pre-approval inspection of the office premises of the Eligible Promoter before its grants a final approval to it to operate a BNCH.
Conclusion
Whilst the introduction and standardization of cash hubs such as the BNCH may be a step backward for the country with respect to the CBN's current promotion of a cash-less policy, the BNCH is a welcome development for the business community as it will allow for smooth withdrawal and disbursement of high-volume cash in Nigeria.
It is no news that a number of DMBs have established existing hubs in high volume cash transactions spots in the country. Nevertheless, the advantage of the BNCH in comparison to theses hubs is that clients are not required to open bank accounts with the DMB promoting the BNCH services.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
