Cashless Economy: A Burden or Relief?

Enoch Eromosele writes that the cashless economy policy of the Central Bank of Nigeria (CBN), which among other objectives aimed to provide mobile payment services, break down the traditional barriers hindering financial inclusion of millions of Nigerians and bring low cost, secure and convenient financial services to urban, semi-urban and rural areas across the country, has become an albatross to some elite, the poor, uneducated and traders.


As at today, Nigeria occupies the unenviable position of number one country in Africa with largest number of people with no access to financial services. According to data compiled by Microfinance Information Exchange (MIX) last year, Nigeria and the Democratic Republic of Congo were found to have the largest gaps between populations living in poverty and those with access to financial services–80 million in Nigeria and 48 million in the Congo. Besides, managing the few that have access to the banks is said to cost banks a huge amount of money with cash management taken a large chunk of the expenses.


Also, the cost of printing new banks notes as a result frequently handling is said to cost the Central Bank of Nigeria (CBN) terrifying amount annually. To address this and many other issues facing the banks and the nation’s economy, the CBN, last year, introduced the cashless economy policy. The highpoints of the cashless banking policy was the decision to peg customer’s daily withdrawal or deposits to a maximum of N150, 000 per individual customer and N1million for corporate clients (now N500,000 for individual and N3, 000, 000 for corporate). Giving details of the policy objectives, Governor of the Central Bank, SanusiLamido, said the limit does stop customers from withdrawing or depositing beyond the limit set by the apex bank, but that such a customer should be ready to pay a premium of about 100 naira per 1000 in bank charges to enjoy his desires.


At the dawn of January 1, 2012, the pilot scheme of mobile money, one of the financial services introduced by the CBN to achieve a cashless economy took off in Lagos. Other financial services under this payment platform are consumer accounts information and updates, alerts, which have been in existence but not widely subscribed to by account holders. Payment of bills, person-to-person transactions and remittances in different forms also form part of the cashless economy drive.


The mobile money platform is a technology driven payment system that will open up several other business opportunities in the economy. Essentially, mobile money payment system allows users make payments with their GSM phones. It is a savings and transfer system that turns GSM phones into a savings account platform, allowing the owner save money in it and from which withdrawals or transfers could be made.


Under the payment system, customers could do their normal basic financial transactions on a daily basis by making payments for goods and services or by engaging in person-to-person transfer directly on their GSM phones. For instance, the system also allows for payment to be made through a mobile phone after purchases have been made at a grocery store. The shop owner in turn, receives instant payment electronically.


Benefits to Economy

Through the system, users can also pay utility bills, school fees, hotel bookings, and house rents, among other transactions, using a mobile phone device. One important thing about mobile money is the fact that it thrives on agency network, thereby taking traditional banking and its cumbersome processes in the cities to the streets in sub-urban areas where accredited mobile money agents also operate.


The regulatory framework for mobile payment services released by the CBN imposes some restrictions on the volume of transactions a customer can do in a day.


For the unbanked, for instance, who requires only his name and phone number to carry out transactions, the maximum limit of N3,000 and daily limit of N30,000 are stipulated. The semi-unbanked has a maximum transaction limit of N10,000 and daily limit of N100,000. However, in line with the CBN&#39s Know Your Customer (KYC) policy, the customer would be required to present his phone number, name, photograph and biometrics. The third level, which requires the customer to have a full bank account, allows a maximum transaction limit of N100,000 and daily limit of N1,000,000. For the customer to be able to access his mobile money account there is a personal identification numbers, PIN that his mobile money operator requires him to enter just like the ATM card.


Sanusi had at the Lagos forum said the cashless policy will among other things save the banking system the cost of printing, distributing and handling large volume of cash.


“It is estimated that over 70 per cent of cash in circulation in the Nigerian economy exists outside the formal banking system. This has cost implications for the economy. Physical cash has life span; it gets destroyed easily. This means government spends a lot of money replacing cash with new ones. If cash is not in the formal system, it can&#39t be used for lending, but if you know an aggregate, that is, how much money is available to kick-start the economy, it makes lending and production easier.


“The cost of fund is also said to be high because the amount in circulation is not captured in a synthesised manner. Part of the reason the CBN is introducing the policy is to reduce the cost of funds by making sure that a significant amount of the capital around is captured in the formal system, “he said.


With this, the CBN said, when the law of demand and supply sets in, there will be enough cash to lend to individuals, corporate bodies as well as small and medium enterprises.


Banks and CBN Rules

The cashless policy is believed to be a step towards curbing money laundering in the financial system. But has that been the case? Are banks complimenting the CBN effort to usher in the cashless policy? The recent pension fund scandal, in which several banks were indicted shows that these banks are only profit oriented and not there for the good of the economy. Also, several bank customers have had one problem or the other with their banks. For instance, an editor with a major newspaper in the country recently sent his brother to a new generation bank to withdraw N500,000 and he was told that he cannot do so without attracting charges despite the fact that the CBN has shifted the date for the withdrawal limit to January1, 2013.


Against his wish, he was only allowed to withdraw N150,000 earlier set by the CBN. Several banks customers and business men who spoke to us have several tales to tell. A customer of another new generation told us that he went to his branch in Apapa to withdraw money for the weekend last week and was told that the bank no longer allow its customers to use withdrawal slip because they have been told that every customer must possess an ATM card. The bewildered customer who said he has no ATM card was asked to come back this Monday for his ATM card. Churches and petty traders also have their stories to tell. A pastor in one of the fastest growing Pentecostal church told us that his parish have had to pay charges to deposit money despite the new date set by the CBN.


According to him, “The banks don’t see you as a church because according to them they deal with money and not names. When you remind them that the CBN has moved the date to next year they will tell you to deposit the amount you will not be charged for.”


Another pastor in one of the orthodox church said the church have had issues with their bank but stated that his church see the situation as obeying authority, which he saidthe bible preaches. An in Imam in a local musque in mushin told us that monies realised from Zakat were not large enough to attract charges adding however that he has had issues with banks as regards charges and applying rules set by the CBN. Apart from arbitrary charges and and other complains, ATM cards frauds has been on the increase. Recently, a journalist with Vanguard newspaper recieved alert from his bank debiting him N1,000,000 and the cash was withdrawn at his bank’s Nnewi branch in Anambara State. The journalist who resides in Lagos and has not travled to thhe east for months rushed to his Lagos branch but was told that he had giving out his pin online. Investigative latter revealed that the bank’s staff colaborated with criminals to rob the man of his money-he was thereafter refunded his money.


Complain Gallor

A banker in one of the old generation banks blamed the situation on education stressing that that teller staff and customers alike are yet to be adequately enlightened. The banker who do not want his name mentioned said there is need for considerable education for bankers and customers on various aspects and issues of electronic payment transactions.


Also, a customer, who prefers anonymity, said that no adequate enlightenment was done before the take off of the policy in Lagos.


Another bank customer, Mr. OkhiriaOgiemouyi bemoaned the policy and its adverse effect on his business, pointing out that the CBN policy will discourage customers from patronizing him.


Ogiemouyi said his trade was cash intensive and requires cash transactions before goods would be offered out to them.


He argued, “My business involves using money before I can give out my goods. If a customer should call me that he wants his goods immediately, I can’t wait till he transfers the money into my account. Sometimes customers buy goods worth more than N300, 000 and none of them will be willing to pay that much in interest as extra charges because we don’t make much profit like those who deal in oil and gas sector,” he explained.


But a currency trader in Lagos, Mr. Sunday Ojo, said the cashless banking would have a valuable effect on businesses in the Nigerian economy, but urged the CBN to put adequate infrastructure to support the system. He also called for more enlightenment for the banking public, stressing that such requirement should have been made available before the policy took off.

“As a new happening in Nigeria, if the operational hitches are not taken care of, the objective will be defeated. These problems ranges from infrastructure because we lack it and not everybody even the educated ones in the society have good understanding of how it works talk less of the market woman out there, ”he said.


Conversely, another customer who prefers not to be attributed lamented that the policy cannot work in Nigeria as the system lacks the right infrastructure to implement it.


“The cashless policy, I doubt if it will succeed in Nigeria. If you visit some of the ATMs in banks sometimes, they are either unable to dispense cash or have network failure. This is so alarming and frustrating. I went to the bank some weeks ago, but was alarmed that, due to network failure, my bank’s ATM could not work.


“It might have been an infrastructural problem, and the banks expect everyone to understand this. So, why are we being forced to depend on ATMs or pos terminals that might just refuse to work when we need them? The Point of Sale terminals are used only by few merchants, and because of the additional transaction charges, the bulk of retailers would rather opt for cash for their sales. This is aside from the problems those terminals might be down with. It is the consumers that bear the brunt of all the infrastructural problems as well as suffer from CBN’s policies. I don’t think this is a fair policy, “he said.


Similarly a trader at Yaba market expressed dissatisfaction with the new policy, which he described as a calculated attempt by the banks in connivance with the CBN to extort money from depositors.


Truthfully, I must say that the introduction of the policy is another avenue to rob the poor people in the society. Another major problem is that CBN will have to look into the excessive charges of the banks on transactions withdrawal charges, ”he added.


Reaction from Operators in Lagos

To a trader at Alaba Market, Lagos, Mr. OnyekaOnonibaku, a lot of his customers have refused to make use of PoS machines because they are not familiar with the device. As a result of this, his firm is still faced with the challenge of handling cash daily


“So we are in a difficult situation where we receive payments above the limits and so because we don’t want to pay for these charges, in most cases, we are forced to share the money among different banks. For example, we may pay N3 million in bank A, N4 million in bank B, N4 million in bank C, and so on, just to avoid the charges.


“I think it is not fair to charge interest on lodgements. Lodgement of cash ought not to attract any interest, but withdrawal,” he said in an interview.


Similarly, Mr. AnayoOgbonna, who sells furniture at same Alaba market, argued that the policy is affecting his business negatively, adding that there is still confusion over the interpretation of the policy.


According to him, officials of his bank do not even have a clear understanding of the policy.

Citing an example of the recent public holiday to mark the Easter celebration, Mr. SegunAkinmayowa, a wholesaler of household goods, urged the CBN to review the policy. He also expressed concern that his account is being debited whenever customers pay in cash above the limit.


He explained: “A lot of people are not conversant with the Pos and those who are conversant with it, some of them don’t want to use it. Now, when you are in a place where you are in a place where you receive payments from small customers and you have the situation we just passed through (the two-day public holiday (Friday and Monday) declared to commemorate the Easter celebration), the CBN and banks did not take that into consideration.


“Now, the Tuesday of that week, that was a working day, the money that accumulated during the holidays, would be lodged into the bank and they would definitely be above the limit. Therefore, the customers would be charged above the limits.


“What we are asking is why should we pay for the sins we did not commit as the CBN failed to recognise that public holidays are when most traders sell more. If there is a public holiday, i recommend that the following day should be free of charges so that people can pay in cash that had accumulated within that period.”


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