The cashless policy of the Central Bank of Nigeria (CBN) has been hailed by many as long overdue. But, months into its operation, there are still problems that must be taken care of before the policy is introduced nationwide, writes Emmanuel Acha
The Central Bank of Nigeria (CBN) Act, 2007 charges the apex bank with the responsibility to control and administer the monetary and financial policies of the Federal Government.
It is also to promote a sound financial system and advise government on economic policies.
The Money Laundering Act, 2004 stipulates a cash payment regulation on transactions outside the financial institutions to ensure audit trail, as disincentive against money laundering.
The section also stipulates a N500,000 benchmark for individuals and three million naira for corporate organisations.
Analysts say that despite the existence of the Act, cases of money laundering are assuming alarming proportions in Nigeria.
They, therefore, suggested an alternative payment channels that may have positive consequence on the economy and considerably eliminate cash frauds.
To address the challenges associated with heavy cash handlings, the Bankers Committee in collaboration with the CBN recently commissioned a study that identified cost drivers in the industry.
The study also sought the possibility of achieving 30 per cent cost reduction with attendant positive impact on lending rates and bank charges.
According to the CBN, the objective of its new cashless policy was to seek reduction in cash transactions in the banking industry.
The effect was to encourage bank customers to try other payment options than cash.
Mr Tunde Lemo, CBN Deputy Governor (Operations), said that the policy was introduced for a number of key reasons, including meeting the Vision 2020 objectives which aims at positioning Nigeria among the first 20 global economies.
Lemo told Abia State Governor Theodore Orji that the CBN was seeking partnership with the state government in the implementation of the new policy.
He said the project also aimed at modernising Nigeria’s payment system by reducing the amount of physical cash in circulation.
Other reasons, he said, included a reduction in the cost of banking services, improved effectiveness of monetary policy, reduce high security and safety risks, foster transparency and curb corruption in the polity.
“In the wake of the banking industry intervention, our analysis indicated that the high cost structure of the banks was partially responsible for their preference for lending to the capital market, and oil and gas industry which led to asset bubbles.
“Embedded within lending rates and cost of banking services are operating expenses arising from inefficiencies in the provision of banking services,’’ Lemo said.
He noted that the cost of handling cash to Nigeria’s financial system was high and increasing annually.
He noted that Nigeria was behind other comparable economies in terms of payment systems maturity.
“This novel policy that aims at reducing the quantum of cash in circulation introduced a ‘processing fee’ on daily cash withdraws or cash deposits that exceeded N500, 000 for individuals and three million naira for corporate bodies was introduced.
“By this policy, third party cheques above N150,000 are disallowed from being cashed over the counter, while banks have been mandated to discontinue cash in transit lodgment services as cash in transit firms have been incensed to provide such services.
Lemo told the governor that embassies and diplomatic missions were granted exemptions, adding that ministries, departments and agencies of the federal and state governments were also excluded on lodgments for revenue collections accounts only.
He said the new regime would significantly eliminate revenue leakages by identifying fraudulent debit, diversion of funds and excess charges on government accounts.
Analysts have opined that there is no doubt that the policy would open more avenues for electronic-based transactions.
The avenues, they said, would include Point-Of-Sale Systems, Mobile Payments, Multi-functional Automated Teller Machines, Internet Banking, Instant Electronic Funds Transfer and Direct Debit.
They also noted that industry stakeholders were working to increase the alternative channel penetration, functionality and ease-of-use.
Analysts are also of the view that mobile phone, the cheapest electronic channel, is the easiest route to financial inclusion of the unbanked segment of the economy.
Available statistics shows there are over 100 million phones available to serve customers.
They said with mobile phones, both the banked and the unbanked could open accounts, transfer funds, pay bills, purchase goods and services.
However, this has thrown up some challenges, including literacy levels of prospective users of the scheme in terms of literacy and numeracy.
Mr Lawrence Ukegbu, a businessman, said the informal sector needed to be abreast with the policy in order to make the best out of it.
He said it would impact positively on the business climate, adding that the business environment would be more secure as handling of cash was associated with much hazards.
For Orji, the policy had thrown up much challenge to the banking sector as the gap between the educated and non-educated in the society would need to be breached for the success of the policy.
Orji said the state government would contribute towards the success of the project, and appealed for enlightenment of the populace.
“There should be a lot of sensitisation, and if possible the CBN should establish an education unit at major industrial areas and strategic points,” he said.
Mr Emmanuel Ogbonnaya, a financial and stock analyst, said that the interest of the non-formal sector needed to be protected in the policy, while the rural areas should be given special attention in terms of education and other enlightenment campaigns.
He expressed concern on the activities of cyber fraudsters who may leverage on the dependence on ‘new technology’ to carry out financial transactions.
But Lemo allayed the fears, saying that the CBN had through the instrumentality of the Nigerian Electronic Fraud Forum stepped-up surveillance on cyber fraud which, he noted, had reduced incidences of crime by 90 per cent.
“We are in the process of acquiring a Payment System Oversight and Anti-Fraud System for online risk surveillance of the payment systems,” he said.
He said the apex bank was in the process of establishing the office of Ombudsman for financial services in order to strengthen users’ confidence and promote adoption of the policy.
As Nigeria strives to become one of the top 20 economies in the world by 2020, analysts say there should be the desire for all to ensure the success of the new CBN cashless policy.
• Acha is of the News Agency of Nigeria (NAN)
