Legality of CBN’s charges on cash deposits/withdrawals

The recent announcement by the Central Bank of Nigeria that cash withdrawals and deposits by individuals in commercial banks in excess of half a million naira will henceforth attract charges of 3% and 2% respectively, has elicited generally negative reactions from the banking public, particularly the said individual account holders. Even though corporate entities are also affected (they will have to pay 5% and 3% on cash withdrawals and lodgements respectively in excess of N3 million), their response has been relatively muted.

CBN hinged the measures on its so-called ‘cashless policy’ which is scheduled to go into full force across the country at the end of March, next year (the present, presumably pilot, phase of the scheme is restricted to only six states – Kano, Lagos, Ogun, Abia, Anambra and Rivers).The policy has taken the banking public in those states unawares.

At all events, does CBN have the right to impose such levies in those circumstances? Does any law empower CBN to dictate to bank customers which medium to adopt in dealing with their own funds in a bank? Granted that currency notes are, by law, the property of the apex bank, its face value in any given case – either in a bank account or otherwise – belongs to the owner or account-holder, as the case may be. In this apparent clash of interests, which ought to prevail? As, ever, it depends on the law.

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The Central Bank of Nigeria was established by the Central Bank of Nigeria Act, 2007, which repealed and re-enacted the Central Bank of Nigeria Act (formerly Decree) of 1991. The principal objectives of the bank as stated in Section 2 of its enabling statute, are as follows:

(a) “To ensure money and price stability;

(b) Issue legal tender currency in Nigeria;

(c) Maintain external reserves to safeguard the international value of the legal tender currency;

(d) Promote a sound financial system in Nigeria; and

(e) Act as banker and provide economic and financial advice to the Federal Government” Beyond these express powers, however, Section 32(1) of the Act provides, inter alia, that the apex bank may, “subject as is expressly provided in this Act, . . . do all such things as are incidental to or consequential upon the exercise of its powers or the discharge of its duties under this Act”. Also relevant are the provisions of Section 42 of the CBN Act, which stipulate that:

“The bank shall, wherever necessary, seek the cooperation of and cooperation with other banks in Nigeria to:

a.   Promote and maintain adequate and reasonable financial service for the public;

b.   Ensure high standards of conduct and management through the banking system; and

c.   Such further policies not inconsistent, in the opinion of the bank, with the national interest”

So is the new policy valid? This is the million-naira question, of course. This question is pertinent, in the light of the provisions of Sections 36(2) and 44(1) & (2)(a) of the 1999 Constitution. The former provides that no law which affects the civil rights and obligations of a person is invalid, if it affords a right of hearing to that person or, alternatively, does not provide that the decision being impugned is final and conclusive. The latter provides that no one may be compulsorily deprived of his or her property or compelled to part with same unless in pursuance of, inter alia, a law which provides for the imposition or enforcement of any tax, rate or duty. Is the CBN ‘cash-less’ policy a general law within the contemplation of this constitutional provision?

By no stretch of the imagination can the policy, in and of itself, be regarded as a ‘law’, within the popular meaning of that term. It was never touted as such. To that extent, unless the policy can be justified as one of the principal objectives of the bank pursuant to Section 2 of the CBN Act, or can be reasonably construed as incidental or consequential upon CBN’s exercise of its powers or discharge of its duties within the contemplation of Sections 32 and 42 of the Act, as aforesaid, the bank would have exceeded its remit.

A cursory look at Sections 2, 32 and 42 of the CBN Act would appear to validate the policy under review. I however, submit that such an interpretation would negate the intention, if not the express provisions, of Section 44(1) & (2)(a) of the 1999 Constitution. It will be recalled that that clause stipulates that only a law passed by either the National or a State House of Assembly can validly prescribe “the enforcement or imposition of any tax, rate or duty”. Accordingly, in my opinion, to the extent that the penalty prescribed in the CBN policy is not directly prescribed in any law, it is ultra vires, invalid, null and void. The Constitution is supreme.

Any solution in sight? Section 52 of the CBN Act appears to preclude a legal challenge to the policy, as it provides that:

“Neither the Government nor the bank nor any officers of the government or the bank shall be subjected to any claim or demand by or liability to any person in respect of anything done or omitted to be done in good faith in pursuance or in execution of or in connection with the execution or intended execution of any power conferred upon that government, the bank or such officer, by this Act”.

This provision evidently shows that the policy is intended to be final and conclusive, thus certifying it unambiguously as invalid within the contemplation of Section 36(2) of the Constitution. See BAKARE vs. L.S.C.S.C (1992) 10 SCNJ 173. More importantly, however, this apparent ouster clause is prohibited under Section 4(8) of the Constitution, which provides thus: ’’the National Assembly or a House of Assembly of a State shall not enact any law that ousts or purports to oust the jurisdiction of a court of law or of a judicial tribunal established by law’.’

Conclusion

For similar reasons to the CBN’s unilateral policy of imposing bank charges on cash withdrawals and deposits, this unilateral transfer of ‘Remita’ costs by CBN to bill-payers is illegitimate and unwarranted in law. Accordingly, it is ultra vires, invalid, null and void. CBN ought to continue to bear those costs, as the policy was designed and implemented for its sole benefit and convenience. Abubakar D. Sani, Esq.,  wrote from Kano

Source: Daily Post