Nigeria: An Overview Of The CBN Draft Guidelines On The Operations And Registration Of Bank Neutral Cash Hubs In Nigeria

On 15th March 2022, the Central Bank of Nigeria ("CBN") released an exposure draft Guideline on the operation and registration of Bank Neutral Cash Hubs ("BNCH") in Nigeria. This initiative by the apex bank is geared toward further actualizing its mandate to promote a sound financial system in Nigeria.

The CBN in collaboration with the Bankers' Committee initiated the Nigerian Cash Management System ('NCMS') and this Initiative led to the introduction of BNCH. The BNCH was introduced to create a platform to reduce costs and improve operational efficiency in Nigeria's cash management value chain.

The draft guideline provides the minimum standard and requirement for registration and operation of BNCH for effective supervision although the exposure draft is open for more comments and recommendations.

This article will outline salient provisions of the Operational Guideline for the implementation of Bank Neutral Cash Hubs in Nigeria.

The key objective of the draft guideline is to reduce the risks and cost implications borne by banks, merchants, and huge cash handlers in the process of cash management activities, expand financial inclusion and provide avenues to leverage shared services to enhance cash management efficiency.

BNCHs are cash collection centers that provide a platform for customers to make a deposit, receive value and withdraw money irrespective of the bank in which their account is domiciled. In other words, the BNCH will be a one-stop facility for high-volume cash transacting customers to make withdrawals or deposit without the need to approach their respective banks. These cash hubs will be established in areas with high volumes of commercial activities and cash transactions.

4.1 Permissible Activities

A BNCH can carry out the following activities:

1. Receipt of Naira denominated notes as deposits on behalf of financial institutions from individuals and businesses with high volumes of cash.
2. High volume cash disbursement to members of the public on behalf of financial institutions
3. Any other activities that are permitted by the CBN.²

4.2 Non-Permissible Activities

A BNCH is prohibited from carrying out the following:

1. Carry out investing or lending activities.
2. Receive, disburse, or engage in any transaction involving foreign currency.
3. Undertake any other transaction which is not prescribed by this guideline.
4. Sub-contract another entity to carry out its operations.
5. Any other activities that may be prohibited by the CBN.³

The following are the eligible promoters that can apply to register a BNCH:

• Deposit Money Banks (DMBs).
• Cash Processing Companies (CPCs).

Registration required for the operation of BNCH is processed in two stages, namely:

• Approval-in-Principle (AIP)
• Final Approval.

6.1 Requirement under Approval-in-Principle

An eligible promoter who wishes to operate a BNCH must make a formal application to the Director, Currency Operations Department (COD) and the application must be accompanied by the following documents:

• A valid DMB license or a valid proof of CPC registration issued by the CBN,
• Evidence of payment of application fee of N100,000;⁴
• Board resolution approving the application duly signed by the Chairman and Secretary of the board of the CPC or the DMB,
• Detailed business plan or feasibility report stating the objectives of the BNCH; services to be rendered; justification for the application; organizational structure, reporting, and list of proposed staff in charge of operations.
• Certificate of Incorporation and certified true copies of other incorporation documents of the CPC or the DMB,
• Detailed Manuals and Policies, including the operation manual; dispute resolution protocols; whistle-blowing policy; Enterprise Risk Management (ERM) Framework and Code of Business Ethics and Conduct.⁵

Upon submission of the valid and satisfactory application and other supporting documents, the CBN will issue 'a no objection' to the promoters within thirty (30) days of receipt of the application.⁶

6.2 Requirement for Final Approval

After the issuance of no objection by the CBN, the eligible promoters must pay a non-refundable approval fee of ₦500,000 (five hundred thousand Naira) and submit the following supporting documents:

• Evidence of the location of the office for the commencement of the business.
• Proof of ability to meet technical requirements and provision of modern infrastructural facilities.
• Evidence of insurance to cover hub vault cash.
• Evidence of collaboration with the Nigeria Police Force (NPF).
• Proof of secure connectivity with the Nigerian Interbank Settlement System (NIBSS).
• Comprehensive plan for the commencement of the BNCH's operations
• Internal Control Policy
• Business Continuity Plan
• Evidence of staff training program
• Evidence of insurance of total deposit.⁷

Prior to the grant of final approval, the CBN will also inspect the premises and facilities of the proposed BNCH to check the suitability of the physical structure of the office building and infrastructure; sighting the original copies of the supporting documents and meet with the management team of the proposed BNCH.⁸

Upon receipt of a valid and satisfactory application, the CBN will grant the final approval to the eligible promoter to commence the operation of BNCH.

It is pertinent to note that the BNCHs during their operations must comply with CBN's policy concerning cash handling charges and its extant guide on charges for banks and other Financial Institutions and other provisions on Cashless Policy, Consumer Protection as well as every extant law of the Federation aimed at combatting money laundering and the financing of terrorism.⁹

The draft Guideline also provides the threshold for deposit and withdrawal limit:

• Individual: minimum transaction value of ₦500,000 (Five hundred thousand Naira)
• Corporate entities: minimum transaction value of ₦1,000,000 (One million Naira).¹⁰

Overall, the Draft Guideline is a laudable effort by CBN to improve the operational efficiency of cash management in Nigeria. Accordingly, if judiciously implemented, the Operational Guidelines have the potential of ensuring the safe operation of a Bank neutral cash hub in Nigeria.

The author is of the view that in considering the Draft Guideline for final approval, the CBN may need to reduce the application and approval fee from ₦100,000 and ₦500,000 to a lesser amount to serve as an incentive for more eligible promoters who are interested in operating cash hub services.

There is room for other improvements, and it is hoped that more amendments are made to the draft guideline.