Baring any last minute disruptions in the
implementation guidelines, Nigeria’s cashless Policy piloted by the
Central Bank of Nigeria (CBN) would go live nationwide from March 31,
2020, after about eight years of clinical trials of its pilot phase.
Through a circular it issued on September 17, the apex bank had
directed its implementation should commence from September 18, 2019, in
Lagos, Ogun, Kano, Abia, Anambra and Rivers States as well as the
Federal Capital Territory(FCT).
The policy which was originally adopted in 2012 as part of the
National Financial Inclusion Strategy (NFIS), was based on four
strategic areas of agency banking, mobile banking/mobile payments,
linkage models and client empowerment.
Its overall objective is to reduce the amount of cash being moved
around daily by citizens across the country, a development that had led
to loss of valuable lives and billions in cash to robbers and other
criminal elements in the society.
Beyond the above premises, experts have attributed rising much of the
corruption incidences in both public and private sectors to the
preponderance of human interventions in cash transactions in different
places and at different times, which have often created room for graft
for some gullible operators in the economy, contrary to what obtains in
other societies.
But as an evolving global trend, the Federal Government through the
CBN believes that the full implementation of its cashless policy would
fast-track the inclusion of more Nigerians into the formal financial
system as seen in countries like Kenya, the United States of America and
the United Kingdom among others. It is also convienced that the policy
could help check corruption menace in some sectors of the economy where
is seen to be very endemic.
There is no doubt however that the success of the Lagos pilot, over
the past eight years, may have prompted the inclusion of six other
states, and government decision to proceed with a nationwide
implementation by March 31, 2020.
Available statistics as at 2016 revealed that only 58.4 percent of
Nigeria’s 96.4 million adults were financially included comprising
38.3percent banked, 10.3 percent served by other formal institutions and
9.8 percent served by informal financial services providers.
But the target according to the CBN is to drive the figure of
Nigeria’s adult population accessing financial services to about 70 per
cent in the formal financial services sector with 10 percent also
included in the informal sector by 2020.
The 2016 figure is quite revealing too and shows that about 40.1
million adult Nigerians (41.6per cent of the adult population) were
financially excluded as at 2016.
At the same time, 55.1percent of the excluded population were women,
61.4 per cent of the excluded population were within the ages of 18 and
35 years, 34.0percent had no formal education, and 80.4per cent resided
in rural areas
The two overall financial inclusion targets were 80per cent overall
(formal and informal) financial inclusion and 70 per cent formal
financial inclusion by 2020. There were 15 additional targets for
channels, products and enabling environment as well as 22 key
performance indicators (KPIs).
Quoting a research work conducted by McKinsey in 2016, the CBN listed
the potential economic benefits of digital financial services alone as
an essential component of financial inclusion that would entail
bringing 46million new individuals into the formal financial system, boosting GDP growth by 12.4 percent by 2025 ($88billion),
Others include attracting new deposits worth $36billion,Providing new
creditworthiness of $57billion, creating 3million new jobs, and
reducing leakages in government’s financial management annually by
$2billion
The overall goal of the National Financial Inclusion Strategy (NFIS)
in 2012 strategy the bank said is to promote a financial system that is
accessible to all Nigerian adults, at an inclusion rate of 80per cent
by 2020.
However, since the CBN’s September 17, circular on its planned
nationwide rollout of the scheme was issued, Nigerians have also been
expressing their views on its possible consequences and impact on the
economy. This was as they have also been advising the CBN on areas to
finetune to achieve the 80 per cent financial inclusion target by 2020.
For instance, the Managing Director, Financial Derivatives Company
Limited, Mr Bismarck Rewane, recently named member of President
Muhammadu Buhari’s Economic Advisory Council, believes the initiative
would help to further drive CBN’s cashless policy.
The economist therefore urged the apex bank to aggressively push
through the cashless policy to achieve its desired goals of improving
payment efficiency in Nigerian economy in order to check endemic
corruption in public and private sectors of the economy.
Rewane said, “I think that anything that would encourage people to
use electronic means of banking is good. If you go to advanced
countries, even in Kenya, nobody carries cash about for transactions.
Cash is unsafe and it impedes regulation of circulation of money.
Anything the CBN is doing on cashless policy should be supported. As a
matter of fact, I am surprised that they confined it to only about five
states “.
“The CBN ought to step up and actually extend it to other places; but
this is like a pilot, I guess. It is a way of making sure that people
drop cash migration for electronic payments.” He said
Rewane also added that charges on PoS transactions should, however,
be reduced, and not abolished in order to drive financial inclusion
adding that its full implementation would enhance transparency.
Another economic expert who gave an opinion on the matter argued the
adequate sensitisation of the citizenry would help drive the policy to
its desired destination.
According to him, several entrepreneurs may have invoiced their
transactions taking into cognizance taxes before today. This will create
a loss in some businesses and such inconsistencies in government
policies do not give investors confidence. “There is always the need to
give ample notice for all charges or taxes. This will help corporate
bodies and individuals make proper adjustments to invoicing and other
negotiations,” he said.
Also speaking, an economic expert Dr Samuel Fogbonjaiye, said the
policy was good as it would further strengthen the cashless policy
introduced by the apex bank. He explained that the policy was meant to
monitor cash movement and basically to mop up excess liquidity which can
then be deployed to develop the economy.
“Do you know some money bags have huge cash at hand and refused to
pass it through bank accounting procedure? It is rather sad that not
everyone in Nigeria has a genuine and functional bank account. So the
policy should be supported,” he averred.
What perhaps is of some concern for some Nigerians since last month
when the CBN indicated its intention to commence a nationwide rollout
of its cashless policy is the resistance from the National Assembly
which recently called for its suspension, as well as the views being
expressed by members of the organised private sector against the
initiative.
While the lawmakers, have called for its suspension to allow for more
consultations with relevant stakeholders, the OPS had argued that the
charges deposits and withdrawals above the CBN thresholds would rob off
negatively on its members.
Again there have also been some questions about capacity of banking
sector retail and alternative channels to meet the needs of the Nigerian
business community across the country especially those that are not
numerate enough to conduct cashless transactions on their own.
According to Benjamin Kalu, (APC Abia), speaking at plenary “The
House is deeply worried that the implementation of cashless policy on
withdrawals has negative impacts on micro, mini, small and medium scale
enterprises, which are clearly the engine room for growth of the economy
and employment generation, thereby throwing many of them out of
business and sending more Nigerians into poverty.” He said the
implementation of the policy would force more traders and micro
investors to carry cash about with its attendant security challenges.
It was against this backdrop that the House mandated its Committee on
Banking and Currency to interface with the CBN to “ascertain the
propriety, relevance and the actual need for the implementation of the
cashless policy at this time, considering the prevailing economic
situation of the country and to report back to the House within four
weeks.”
Speaking for Nigeria’s Organised Private Sector (OPS), the
Manufacturers Association of Nigeria (MAN) expressed concerns, the
policy may impact negatively on the economy.
The Director General of MAN, Segun Ajayi-Kadir, for instance argued
that the implementation of the CBN cashless policy on withdrawals may
impact adversely on micro, small, and medium enterprises whom he
believes could be deterred by the penalties imposed on the breach of the
deposit and withdrawal thresholds.
He stated, “There is also a huge concern over the inadequacy of the
needed cashless economy infrastructure, which the Money Deposit Banks
are not doing enough to upscale or do so at a disproportionate
additional cost to the users.
“MAN, therefore urges the leadership of the CBN to think through
other available options to achieve its cashless policy scheduled to be
fully implemented throughout the country from March 31, 2020, while
paying close attention to the use of the carrot rather than the stick
approach.”
According to the Nigeria Employers Consultative Association and the
Lagos Chamber of Commerce and Industry, the latest charges would
increase the burden on bank customers, stressing the implementation of
the policy would signal an imposition of charges on deposits in addition
to already existing charges on withdrawals.
Its Director-General, NECA, Mr Timothy Olawale, noted that although
the directive was purportedly to move the country into a cashless
economy, and reduce crime involving cash, there should have been enough
notice before implementation.
Olawale added that it would also have the greatest impact on retail
businesses and other medium-scale retailers in the Fast Moving Consumer
Goods sector.
He said, “Though the overall aim of reducing cash transactions is
good, the policy will, however, increase the cost of doing business and
force organisations and individuals to start multiple deposits and
withdrawals in order to beat the charges.
Also commenting on the import of the CBN policy, the
Director-General, LCCI, Mr Muda Yusuf, frowned at short notice given by
the CBN to the business community for the implementation of the policy,
saying it would could destabilise customers and other stakeholders.
He said, “The latest circular by the CBN should have given a much
longer notice to economic players. The notice given for the effective
date is extremely short. The circular was dated 17th of September while
the effective date was 18th of September.
“This is just a notice of one day. This would have short-term
disruptive effects. We implore the CBN to give at least two months to
allow for players in the economy to adequately prepare themselves.
This is particularly so for investors who are major players in the retail segment of the economy.”
Regardless of the diverse positions taken by the various interests,
its is becoming rather apparent that the new global economic is tending
toward smart and cashless transactions due to its numerous benefits that
include convenience and security of the various stakeholders engaged in
it.
For instance, smart economics have so far proven that going cashless
not only guarantees the business community the deserved comfort to
conduct financial transactions seamlessly, but also helps authenticate
and formalise the transactions that are done in a flash of seconds. This
in turn also helps to curb corruption and moderate illicit financial
flows for which many countries including Nigeria have lost billions of
dollars over the years.
According to the CBN, the implementation of the cashless policy would
reduce drastically the expenditure incurred in printing and
transporting of currency notes.
The bank had argued that the cost of printing a particular currency
note is always higher than the face value of such currency, hence
implementing the cashless policy would cut the amount of resources it
currently deploys to printing legal tender notes which can then be
deployed to service other sectors of the economy in need.
Over the last eight years of its pilot phase, experience had shown
that cashless transfers have become the most preferred option with
immense value addition in terms of efficiency in the management of the
Nigerian economy.
The digital or electronic transactions of funds using net banking,
credit cards, and other electronic platforms have helped people’s and
organisations facilitate easy payment of their bills online, shop,
schedule transactions and manage all the finances using laptops or
smartphones.
In most European states, like United Kingdom, Germany, and Italy as
well as the United States of America, cashless transactions have already
become a way of life such that spending cash beyond certain limits
often arouses suspicion even in grocery shops.
In addition to this, going cashless also has health benefits by
reducing the chance of spreading of germs associated with physical
movement of cash.
The government must also need to take the necessary steps and make
some policy considerations when preparing for a cashless economy, given
that payment systems have to be protected from cyber-attacks which are
the major threat for cashless transactions. Efforts should be made to
serve the underbanked by ensuring that all stakeholders from the society
have access to an electronic platform to execute their transactions.
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