The policy comes ahead of Nigeria's election slated for February 2023, with authorities vowing to tackle vote-trading and corruption.
"That is not the way to curb vote-buying,” Eze Onyekpere, economist and director at the Centre for Social Justice, said.
Onyekpere says the policy will have an adverse effect on small and medium scale enterprises, or SMEs.
“Yes, it could restrict the amount people have in their hands but these amounts of money are too small considering the value of the naira, and in terms of small businesses particularly people in the informal sector who may not have gone fully cashless who have not gone completely cashless, it's going to cause them a lot of inconvenience, challenges and also may increase the cost of doing business."
According to the new policy, personal account holders will be able to withdraw only 100,000 naira, or around $200, per week while companies will be restricted to about $1,000 in the same period.
Abuja bakery owner Eseoghene Eghove said the tightening of accounts will affect her business.
"As a business owner I go to buy flour, sugar, butter and many other things. How do you pay? It is not reasonable, they'll just make things more difficult for people," she said.
The CBN says the initiative seeks to address excessive hoarding of cash, help fight crime, give authorities control of the legal tender, and encourage more people to use electronic means for their transactions.
Public finance expert Isaac Botti supports the move, saying it is the only way to ensure the new currencies are not stashed away.
"For me, it's a commendable policy because it's a way to also curb corruption and looting of public treasuries,” he said.
“I don't have concerns over it affecting SMEs because they're not expected to carry out solely cash transmissions. The only concern I have is about making the system more effective to be able to accommodate cashless policy."
The CBN said it will sanction banks and other financial institutions that fail to comply with the measure.
Onyekpere cites the lack of internet banking services as a major hindrance. More than 40% of Nigerians, mostly in rural areas, do not have bank accounts and rely on mobile money agents for their daily transactions.
The announcement comes two weeks after authorities unveiled redesigned currency in an attempt to curb cash hoarding and check corruption and crimes.
The old naira bills will cease to be legal tender by the end of January. The CBN has promised to monitor the rollout of the new bills and make sure not too much money is withdrawn.
The CBN withdrawal directive will take effect on Jan. 9, 2023.
