Three weeks into the implementation of the new bank charges for cash deposit and withdrawals, the Central Bank of Nigeria (CBN) at the weekend announced a reversal of the policy in what inside sources said was informed by the need to carry out more stakeholder engagement, reports Bukola Aroloye
Bank customers who are used to hauling cash around can continue to enjoy that luxury, at least for now. Of course, they owe their good fortune to the magnanimity of the Central Bank of Nigeria (CBN).
This is because the CBN at the weekend suspended its earlier directive on the implementation of cashless policy.
In a circular released by the apex bank, it instructed banks to revert to old charges and refund customers who had been debited.
The circular signed by Dipo Fatokun, director, banking and payments system department, CBN said the existing policy before the announcement of the new policy shall remain in place in Lagos, Ogun, Kano, Abia, Anambra, Rivers and Abuja.
“You will recall that a directive was issued on the nationwide implementation of the cashless policy vide our circulars with reference numbers BPS/DIR/GEN/CIR/04/001 dated February 21 and BPS/DIR/GEN/CIR/04/002 dated March 16,” the circular read.
“Please note that the new withdrawal and deposit processing fee charges above the threshold, as contained in the circulars referenced above, are hereby suspended until further notice. The position of the policy shall now revert to the status quo ante.”
“The new policy already applied effective April 1, 2017 as contained in the circulars in reference above should be reversed and the old charges be applied. All necessary refunds should be made accordingly.”
Reason behind reversal
Although there is no official position as to why the CBN made a volte face, independent investigation by The Nation at the weekend revealed that the decision to backpedal on the policy was informed by a combination of factors, chief among which was to allow for proper briefing of all stakeholders concerned.
The Nation was reliably informed by top sources at the CBN that there have been strident calls by all concerned for the apex bank to discountenance the whole idea from the outset.
Specifically, the insider source who asked not to be named because of the sensitive nature of the issue revealed that “The regulator was almost being blackmailed by some interest groups, most of whom felt they were not carried along in the scheme of things and in order not to look insensitive, the next best thing to do after taken all the complaints on board was to simply have a rethink while allowing for more stakeholder engagement.”
Expatiating, another source said: “The complaints from nearly all the stakeholder groups was that we needed to do more sensitisation and after considering the strategic environmental assessment of the policy, we thought it was the best thing we could do under the circumstance.”
The sources reiterated that it is to correct the negative perception of the bank’s operations that largely informed the decision to return to status quo.
Memo announcing the new mandate
It may be recalled that the apex bank had issued a directive to banks last February to begin the implementation of reintroduction of new bank charges for cash deposit and withdrawals effective from April 1, 2017.
In a circular announcing the new charges, Mr. Dipo Fatokun, Director, Banking and Payment System Department, CBN said: “Charges for cash deposit by individuals are as follows: Less than N500,000, zero charge; from N500,000 to N1 million, 1.5 per cent; from N1 million to N5 million, two per cent charge; above N5million, 3 per cent charge.
“Charges for cash withdrawal by individuals are as follows: Less than N500,000, zero charge; From N500,000 to N1 million, two per cent; from N1 million to N5 million, 3 per cent charge; above N5 million, 7.5 per cent charge.
“Charges for corporate cash deposit are as follow: Less than N3 million, zero charge; from N3 million to N10 million, two per cent; from N10 million to N40 million, three per cent; above N40 million, five per cent.
“Charges for corporate cash withdrawal are as follows: Less than N3 million, zero charge; from N3 million to N10 million, five per cent; from N10 million to N40 million, 7.5 per cent; above N40 million, 10 per cent.”
Resounding support for policy
Speaking with a cross-section of economic and financial experts who understand the workings of the policy they argued that the initiative was ideal for the nation, especially considering the propensity of some unscrupulous individuals to abuse the system.
In the view of Johnson Chukwu, Managing Director /CEO, Cowry Asset Management Limited, “The imposition of penalties on cash withdrawals and deposits above N500,000.00 are meant to discourage people for continuing to transact their businesses with cash.”
Giving further insight, he said: “The discrimination in the penal charge where deposits above N500,000.00 attract only 1.5% charge while withdrawals of amounts exceeding N500,000.00 is penalised by a charge of 7.5% must have be designed with the intention not to deter completely depositing of such funds so that they are not left outside the banking industry.”
Expatiating, he said: “I believe that without either sanctions or incentives it will be difficult to persuade Nigerians to change their habit of transactions businesses with cash hence the imposition of penalties on cash withdrawals and deposits. Nevertheless, I will also suggest that the approach to encouraging the adoption of the cashless policy should include incentives (carrots) and not just sanctions (sticks). That way, the Central Bank will be able to attract more willing adopters of the policy.”
The imposition of penalties on withdrawals and deposits, he further reiterated, will certainly compel people to start using alternative means of payment such as cheques, POS terminals, on-lines, etc.
All these alternatives, he maintained, are part of the cashless policy initiatives of the CBN.
To him, “Any policy that compels people to use banking facilities such as the penalties imposed on cash withdrawals and deposits is certainly to the advantage of financial inclusion as it will encourage more people to open and operate bank accounts. Secondly, the policy will help to improve the effectiveness of monetary policies as it will reduce the amount of cash outside the banking system.”
Echoing similar sentiments, Sola Oni, Managing Director, Sofunix Investment and Communications Limited, said: “The question of justification of the charges rolled out as penalties for exceeding cash withdrawal limit by the Central Bank of Nigeria (CBN) is relative. If the charges are lower, they still constitute penalties. The philosophy is to discourage mass cash transaction and leverage on the use of credit or electronic card.”
The policy, he stressed, will encourage the use of digital transfer of money and thereby boost cashless model of transaction nationwide.
He was however quick to admit that: “Against the backdrop that many Nigerians are not computer literate, it may pose a threat to financial inclusion as digital money transfer and its allied methods require a fair knowledge of computer.
In the short run, it may discourage financial inclusion but in the long run it would enhance it.”
Waxing philosophical, Oni said: “There is no policy that can favour everyone. The key issue is the benefits to the overall economy.”
While making allusion to the early days of the introduction of mobile phone, he said: “Today, many people that are not used to mobile phone by virtue of lack of education are now embracing it as a means of communication. Cashless economy reduces crime, it is faster and quite convenient. But It also has its drawbacks such as identity theft among others.”
Welter of criticism against the policy
Not a few people are convinced that the new policy regime by the CBN is a well thought out initiative.
One of those who have expressed serious misgivings against the policy is the president of the National Association of Nigerian Traders, Barrister Ken Ukaoha.
Raising some posers, he queried: “What has changed between the last time the CBN suspended this move and now.”
Ukaoha pointed out that banks traditionally charge commissions on transactions (COTs) on lodgments into and withdrawals from current accounts.
Nigerian banks, he said, have with CBN’s tacit approval, been imposing on their customers similar COTs for withdrawals from savings accounts, “cash handling charges” for withdrawals of N1m and above, and other inexplicable and unjust charges.
“So, what ‘cost of cash management’ does the CBN refer to?” he asked.
He said the CBN’s drive to make the Nigerian economy cashless must be considered within the prism of what foundations exist in Nigeria.
“What is the level of literacy and acquaintance with information communication technology (ICT) among Nigerians? How many Nigerians can use electronic banking services? How many Igbo traders, Fulani herdsmen, market women, farmers, etc are knowledgeable in ICT?”
Mrs. Uju Ogubunka, a financial and management consultant is also on the same page with Ukuoha.
She faulted the CBN for approving the new charges for deposit money banks, saying they were not set up to impose such charges on their customers.
“Some of us feel strongly that it is not right for banks to charge their customers,” Mrs. Ogubunka, who is also the President, Bank Customers Association of Nigeria, BCAN, said.
She added that it is wrong to charge bank customers on deposits or withdrawals, especially with CBN drive to achieve financial inclusion.
The BCAN boss, who is a former Registrar, Chartered Institute of Bankers of Nigeria, CIBN, said charging customers for deposits or withdrawals would actually encourage more customers not to embrace the banking culture.
“With multiple charges, bank customers would prefer to withdraw their money and keep at home for other activities,” she said.
Ade Olumide, a businessman in Lagos said the timing of the policy was wrong considering the economic situation in the country.
“The new policy is uncalled for with the present economy of the country. We are doing the right thing at the wrong time. I am a businessman and my type of business is SME and we borrow huge money from banks to carry out our activities, this policy will have adverse effect on us,” Olumide lamented.
Also speaking on the development, Mrs Ebere Oluchi said it would discourage customers from seeking bank facilities.
“Personally, I believe those charges are not right, especially when CBN is talking about financial inclusion and financial literacy.
“The importance of finance inclusion is to bring more customers into the saving culture; with reintroduction of charges, it might discourage depositors and those seeking other banking facilities,” she said.
“It will be easy to control illicit funds that go to kidnappers, especially. To me, it is a good development,” she said.
Amodu Adeyemi in Ikorodu said the policy was a welcome development, adding that it would reduce movement of cash.
“It will help to check unnecessary withdrawals, people will only withdraw money when it is necessary.”
Mrs Yemi Adenuga ex banker the reintroduction of cashless charges, which commenced April 1, 2017, in Lagos and six states including the Federal Capital Territory (FCT) is coming too early in the life of the policy.
“The time frame to adjust to the change is too short. Awareness should be made highlighting the benefits of the policy,” she said.
