On Wednesday, experts raised concerns about a new policy announced by the Central Bank of Nigeria that heavily limits withdrawals in a push for a cashless economy.

Monetary policy, which applies to ATMs, banks and refunding purchases, follows the launch of the West African nation’s newly designed currency notes to control the money supply.

The central bank limited weekly over-the-counter cash withdrawals to 100,000 naira ($225) for individuals and 500,000 naira ($1,124) for corporations, with a processing fee required to access more.

When the policy goes into effect on January 9, ATMs will no longer dispense the high Nigerian denominations of 1,000 naira ($2.25) and 500 naira ($1.10), while ATM and terminal withdrawals Point of sale will also be limited to 20,000 naira ($45). ) daily.

“In dire circumstances, not to exceed once a month, where cash withdrawals in excess of prescribed limits are required for legitimate purposes, such cash withdrawals shall not exceed 5,000,000 Naira ($11,236) and 10,000,000 Naira ($22,471) for individuals and corporations, respectively,” said Haruna Mustafa, the bank’s director of banking supervision.

Policymakers say the withdrawal limits and recent central bank monetary initiatives would draw more people into the banking system and curb currency hoarding, illicit flows and inflation.

But analysts are concerned that since digital payments are often unreliable in Nigeria, the move could hurt the daily transactions that people and businesses make.

“The policy is meant to cause discomfort, to go from cash to cashless because they (the central bank) have said they want to make it uncomfortable and expensive for you to hold cash,” said economic analyst Kalu Aja.

“That’s a positive for CBN (because) the more discomfort they can achieve, the more people can move,” Aja said.

In Nigeria, the majority of people work in the informal sector, mainly activities outside the legal framework and government regulation, such as agriculture, street and market trading, and public transport. The economy is heavily dependent on this sector and cash is generally preferred for transactions because many lack bank accounts.

Only 45% of adults in Nigeria have accounts at regulated financial institutions, according to the World Bank. In the absence of bank accounts, POS terminals have become one of the fastest growing areas of financial inclusion in the country.

Through the withdrawal limits, the central bank is “directly attacking” such agency banking services and “people will essentially start hoarding their money,” said Tunde Ajileye, a partner at Lagos-based firm SBM Intelligence.

“It’s not going to push people to start trying to do electronic transactions. On the contrary, it’s going to drive people away from financial institutions,” he said.