That the Central Bank of Nigeria intends to commence its cashless economy programme in Lagos is no longer news. What remains to be seen is whether Lagosians are prepared to cope with the radical change that will take place in financial transactions. PAUL DADA and STANLEY ORONSAYE writes
In less than two months, Lagos will join few other Nigerian states to test-run one of CBN’s latest policies meant to engender a more cashless economy in the country. However, one question one is wont to ask is whether Lagosians are sufficiently educated on what the cashless economy is all about and what benefits it offers?
The first time the CBN governor, Lamido Sanusi Lamido, announced the new guidelines on cash withdrawals and deposits was at the monthly bankers’ committee meeting held on April 28, 2011.
A circular titled: ‘Industry Policy on Retail Cash Collection and Lodgement’, and signed by Mohammed Nda, CBN director, Currency Operations Department, stated that private persons could only withdraw or lodge a maximum of N150,000 cash per day. The limit for companies according to the circular would be N1 million per day.
?The circular revealed that individuals who sought to lodge or withdraw more than the approved limit would bear the penalty of being surcharged N100 per every N1,000 while it will be N200 surcharge for corporate organisations.
Part of the new guidelines included CBN’s directive to banks to stop cash-in-transit lodgement services rendered to merchant customers. They are, instead, to engage the services of cash-in-transit companies that have been licensed by the apex bank. Any bank that flouts this directive will pay a penalty of N1 million per specie movement.
?To achieve effective inter-operation ability of local currency point of sales, (PoS) transactions, the CBN has removed the exclusivity clause by any financial services providers.
What this implies is that no card scheme, whether foreign or local, shall be permitted to operate exclusive acquirer agreement or contract in Nigeria with effect from the stipulated implementation date.
Furthermore, third party cheques above N150,000 shall not be eligible for encashment over the counter as from June 1, 2012 as the value for such cheques shall be received through the clearing house. The policy says where any bank allows third party cheque encashment above the limit, shall be liable to a sanction of whichever is higher of 10 per cent of the face value of the cheque or N100,000.
Under the implementation guidelines, the pilot phase of the policy shall be in force in Lagos, Port Harcourt, Kano, Aba and the Federal Capital Territory before its extension to other parts of the country.
According to the CBN, the policy is aimed at reducing high usage of cash, moderate its cost management and encourage the use of electronic channels. It explained that the new policy was premised on the increasing dominance of cash in the economy with its implication for cost of cash management to the banking industry, security and money laundering.
Hard pill to swallow
Expectedly, the new CBN policy is currently generating sharp reactions from Nigerians. Businessmen, private and public servants see the new policy as a bitter pill to swallow. Chinedu Ozor, who deals in electronics in Alaba market, Lagos feels the new policy would hurt traders because their businesses are on a cash-and-carry basis.
“My brother, on a daily basis we need lots of cash to transact our business and so, that means I cannot withdraw more than N150, 000 when, in some occasions, I need up to N5 million to take delivery of my products”, he said.
Managing Director of Esaco Ventures, Edwin Asemota, is equally worried about the new policy. He said his staff emolument alone took more than N4 million and in most cases, he needed up to N10 million to transact business. With the new policy on cash withdrawal, he laments that doing business would be difficult since he would be surcharged for any time he withdraws more than the stipulated amount.
A trader at Ladipo market, Lagos, Joseph Chibundu, has also found the policy unrealistic. His quarrel is not really with the merit of the policy but with the stipulated limits for individuals and corporate account holders which he described as too low. He would want the CBN to raise the limit for individual from N150,000 to N500,000 and corporate account from N1million to N2 million.
Another area of concern to many Nigerians is the electronic money transfer scheme that was introduced into the country almost a decade ago. Bamidele Olusegun, a former bank examiner, foresees a problem in the area of money transfer. He argues that even though the CBN stated that the policy is aimed at checking money laundering and also to add value to Naira in the face of the growing two digit inflation ratio in the country, the policy could be abused as was the case with beneficiaries of Western Union who ended up being short-changed by operating banks.
Those who have also frowned at the policy argue that the high level of illiteracy in the country, low level of banking population and porous e-banking system are factors that would work against the success of the scheme. For instance, many have argued that if the idea is to promote e-banking by encouraging the use of e-payment channels like Automated Teller Machines, ATM, the wide-scale fraud associated with its use would make the policy counter productive.
President, Renaissance Shareholders’ Association, Olufemi Timothy, said the policy could further dampen the savings culture in the country.
Gradual transition
However, the managing director of Financial Derivatives Company Limited, Bismark Rewane, prefers a more gradual transition while the supporting infrastructure is improved. He says that Sanusi should tread with caution because if the policy is implemented without due planning, it would turn out to be counter productive. He noted that the transformation from a cash-centric to a plastic economy, which is the intention of CBN, would need a longer period than one year.
A businessman, Godwin Iheanacho while airing his opinion, said that he is not in agreement with such law. He reasoned that he makes daily sale of above N150,000 from at least a customer. “Sometimes, I sell goods worth more than N150,000 to a customer and I also buy goods worth more than that amount too. So, as a business man, I do not have that time to start going to the bank and waiting for my customers to transfer the money into my account. I want my money in cash and not in cheque because nowadays people issue fake cheques”, said Godwin.
CBN assurance
Already, the CBN has tried to allay skeptics on the workability of the plan, as it is geared to make transactions more efficient and transparent. “CBN is also working with the banks and Nigeria InterBank Settlement System (NIBSS) to put in place a comprehensive fraud monitoring tool, which will enable the industry to identify trends and be proactive in mitigating electronic fraud”, said Tunde Lemo, CBN deputy governor, operations.
He assured that the introduction of the chip and pin ATM card over the stripe cards was to guide against fraud. Taking cognizance of Nigeria’s power challenges, he said the point of sale (PoS) machines that would drive the cashless economy come with specifications that are peculiar to Nigeria. “All PoS terminals will have a minimum battery life span of 24 hours, while many will do 48 hours with no charge. They also come with backup batteries and car chargers as appropriate to address the power challenge.”
Lemo said that the Central Bank was working closely with the Nigerian Communications Commission (NCC) to ensure that interconnectivity issues are addressed. “Dedicated connectivity will be provided by MTN and Globacom for all PoS traffic going forward. This should greatly increase the terminal uptime. Also, most terminals will be dual-SIM or roaming SIM, which will ensure fail-over options and guarantee a higher uptime.
As the commencement date approaches, it is important for the regulators and promoters to step up on enlightenment and awareness campaigns in order to drive the message home. Given the rising cost of cash management, the attendant risk and the fraud that comes with it, there is no doubt that a cashless economy will go a long way in checking these disadvantages. Also, for a country that aims to be among the top 20 economies by 2020, only a cashless economy provides an easier route rather than rely on the cumbersomeness of the current cash-based system.