Almost nine years after the introduction of the cashless policy, experts who attempted a critical analysis of the policy said the benefits notwithstanding, many Nigerians have bitter tales to tell, reports Ibrahim Apekhade Yusuf
When the cashless policy was introduced by the Central Bank of Nigeria in 2011, a lot of Nigerians considered it a right step in the right direction as they reckoned that it was the most appropriate thing to do.
However, nine years down the line, a lot of people hold the view and very strongly that the policy leaves nothing to cheer about.
Benefits of a cashless society
According to the Central Bank of Nigeria, the cashless policy was introduced, in line with the nation’s vision 2020 goal of being one of the top 20 economies of the world, to drive the development and modernisation of the Nigerian payment system.
Cashless transactions help the economy as well. A study conducted in 100 cities by Visa in 2017 showed that the net benefit and revenue from digital transactions contribute an estimated 3% to the city’s individual GDP. Cashless payments also reduce errors, crimes and the cost of labour involved in processing the cash.
One of the greatest benefits of going cashless is increased security for both vendors and customers. Cash has long been the target of opportunistic thieves and its removal has the potential to reduce crimes like robberies and muggings.
Besides, all forms of fraudulent activities from financial cyber-attacks and digital crime also form greater risks when going cashless as many companies already suffer data breaches, including of payment systems.
Points to ponder about cashless policy
The Central Bank of Nigeria (CBN) had introduced cash-based transactions which stipulates a cash handling charge on daily cash withdrawals that exceed N500,000 for individuals and N3,000,000 for corporate bodies.
According to the CBN, the policy on cash-based transactions (withdrawals) in banks, aims at reducing (not eliminating) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)
Besides, it was meant to reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach just as it is expected to improve the effectiveness of monetary policy in managing inflation and driving economic growth.
Experts’ view on cashless policy
In a research conducted on the operationalisation of the cashless policy by leading economists and financial experts including: Nwani Jemima John, Nwaimo Chilaka Emmanuel, Kanu Success Ikechi and Chinonso Karen Eke, all of the Department of Management Technology (FMT), School of Management Technology, Federal University of Technology Owerri, Nigeria, the experts recalled that Nigeria’s economy hitherto heavily cash-oriented in its transaction of goods and services contrary to the global trends until the cashless policy took effect.
Citing paired data samples between 2007 and 2017, the experts noted that the impact of cashless policy on the Nigerian payment system has been tremendous.
According to the report “The operations of a cashless economy were assessed based on the use of Cheques, funds transfer channels and Automated Teller Machines (ATMs). Analysis of data showed that the volume and usage of cheques as a means of financial settlement has failed and was partially replaced by electronic payment systems. Banks are getting more involved in the use of interbank fund transfers rather than a cash settlement. It was also ascertained that the use of ATM’s as a means of financial intermediation is increasing. It is anticipated that the use of ATMs will become even more popular in Nigeria in the near future.”
Interestingly, they noted that to some extent, the outcome of the study has justified the implementation of the cashless policy initiative in Nigeria.
They were however quick to admit that the innovation and operations of the policy are not without its related limitations. “There are various challenges associated with its practice, ranging from poor infrastructural facilities and difficulty in imbibing the e-payment culture due to illiteracy. Other socio-cultural factors that constitute an impediment include celebrations like weddings, birthdays and festivals.”
Cashless policy hassles
From available information, the use of cash, in carrying out transactions has remained relatively high in Nigeria. This is due to the poor network connections in the use of Point-Of-Sale and bank transfers which often results in debiting customers’ accounts more than once, high transaction charges by banks, as well as security and technical setbacks.
Checks at the CBN website revealed that from the breakdown of e-payment transactions for 2017, the use of ATM machines has remained the most patronised, it accounts for 78.2 percent of the transactions, followed by POS terminals transactions and mobile payments with 14.3 and 4.7 percent, respectively.
The CBN annual report noted that most Nigerians stayed away from the web (internet) e-payment option and it was the least patronised, accounting for 2.8 percent of the total e-payment transactions. In terms of the value of the transactions, the ATM usage accounted for 70.5 percent, POS, 15.4 percent, mobile channels12.1 percent, and web (internet), 2.0 percent. The rise in e-payment transactions was attributed to increased consumer confidence and awareness in the use of the e-payment channels. Having come this far, it is necessary we highlight the individual performance of ATM’s and Funds transfers option as an integral aspect of the cashless policy regime. 2.1.9 Automated Teller Machine (ATM) Transactions (2011 – 2017)
As of December 2017, the number of ATMs deployed in Nigeria stood at 17,449 which is about 55% increase from the 9,640 as of December 2011. ATM transactions subsequently increased significantly in both volume and value by 43.42 and 24.26 percent, to 800,549,099 and N6, 437.6 billion, respectively, in December 2017, compared with 347.6 million and N1561.8billion at end-December 2011.
The point of sale transactions improved drastically in both volume and value; POS transactions increased to 146,267,156 and 1,409.8 billion nairas from 2.1million and 31 billion Naira in 2011, respectively. This represents an increase of 6866 and 4447 percent. This increase is attributed to the increase in public confidence in the use of the POS.
In 2017, the volume and value of transactions on the web increased to 28.99 and N184.6 billion from their respective 3.6 million and N58billion in 2011representing an increase of 87.6 and 68.6 percent. This was attributed to increased consumer acceptance of the platform.
Prior to the cashless policy, the Nigerian economy was heavily cash-oriented in the transactions of goods and services. This was neither in line with the global trend nor Nigeria’s vision 2020 ambitions. In addition, it was estimated that 65% of the cash circulation was outside the banking system, this has severe consequences for the implementation of monetary policies. The 35% cash circulations within the banking system impose costs to both the bank and the customers; cost of cash management, cash handling, cash movements, currency printing, security threats, etc.
The Central Bank of Nigeria aims to achieve a cashless society in line with global trends, it recognizes the need to balance its objectives of meeting genuine currency transaction demands and combating speculative market behaviors that may negatively affect economic growth and stabilization measures.
As the biggest country in Africa and one of the strongest emerging economies, Nigeria should be at the forefront of any economic modernization. The cashless policy will help ensure that the bulk of the cash transactions in the economy are domiciled in the banking sector, giving the government avenue through the CBN to successfully implement stabilization measures.
In the view of economic pundits, there has been profound confusion over the implementation of the cashless policy of the Central Bank of Nigeria (CBN) thus far as no one knows precisely what the CBN is up to. In fact, the CBN has declared war on its cashless policy. Friendly fire from CBN itself is killing the policy.
Citing developments in the September 2019, till date, the CBN, according to Dennis Adetayo, an economic expert did issued two contradictory directives that could cripple its cashless policy.
Specifically, he said, in last September, the apex bank ordered the commencement of punitive handling charges on cash deposits and withdrawals.
According to Adetayo, under the new rule, cash withdrawals by individuals above N500, 000 would attract handling charge of three per cent while deposits above N500, 000 attract two per cent. Corporate bodies withdrawing above N3 million would be charged five per cent, while deposits above N3 million attract three per cent.
CBN, he stressed, “said the charge is only on the amount above the limits. That explanation implies that if a corporate body withdraws N4 million, a charge of N50, 000 is imposed on the withdrawal as five per cent of the N1 million in excess of the N3 million limit. The same calculation applies to cash deposits. The handling charge of N50, 000 on N1 million withdrawals is a huge penalty in a country where small and medium enterprises access funds in the money market at anything from 30 per cent.”
Lending credence to Adetayo’s view, Mrs Adebimpe Olumuyiwa, owner of a retail outlet, said the cashless policy regime as presently constituted was the banks’ own way of increasing cases of armed robbery.
“They are only telling us to start keeping our money at home again like we traders used to do before.
“And of course that is an invitation to robbers burgling your home. We were told cashless policy on withdrawals before, we thought that was in our interest.
“I want to deposit money not withdraw, so what is the crime there? Is it everyone in Nigeria that has a bank account? This is not going down well with me anyway, they had better reverse it,” she said.
A bank customer, who simply gave her name as Josephine, said that it was a policy that didn’t have consideration for traders.
“They want everybody to do transactions online but have forgotten that it is not everybody that is educated or computer literate. I think the government should focus on what is first, like education, good housing, social security and upgrade our standards of living. If you run a cashless policy, have you considered the blind man begging on the street? How does he do his own transaction?”
Policymakers, she lamented, “Just assume things from their own point of view. We are still battling with minimum wage and here is another economy killer.”
Timeline of cashless policy
The following aspect of the cashless policy was applied from January 1st 2012 in Lagos State tagged: cash-less Lagos):
Only CIT licensed companies allowed to provide cash pick-up services. Banks will cease cash in transit lodgment services rendered to merchant-customers in Lagos State from December 31st 2011. Any bank that continues to offer cash in transit lodgment services to merchants shall be sanctioned.
The service charge took effect from March 30th, 2012, this gave people time to migrate to electronic channels and experience the infrastructure that has been put in place. Banks were to use this period as grace to encourage their customers to migrate to available electronic channels, and where possible, demonstrate the costs that will accrue to those that continue to transact high volumes of cash from March 30th, 2012 in Lagos State.
The pilot was run in Lagos State from January 2012 while the policy took effect in Rivers, Anambra, Abia, Kano, Ogun and the Federal Capital Territory (FCT) on the 1st July, 2013. The policy will be implemented nationwide on July 1st, 2014.
The charges started to apply from March 30th 2012 in Lagos, October 1st 2013 in Rivers, Abia, Anambra, Ogun, Kano and the FCT.
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