The Association of Bureaux De Change Operators of Nigeria (ABCON) has called for a downward review of the cash processing fees introduced by the Central Bank of Nigeria (CBN) under the cashless policy.
The Association stated this in its Quarterly Economic Review for third quarter of the year (Q3’19), stressing that, though the objective of the policy is laudable, the cash processing fees will have severe impact on small businesses across the country.
The Association said: “The policy stipulates three per cent processing fees for withdrawals and two per cent processing fees for lodgments of amounts above N500,000 for individual accounts while corporate accounts would attract five per cent processing fees for withdrawals and three per cent processing fees for lodgments of amounts above N3 million.
“While the objectives of the policy are quite laudable and developmental in nature, a major observation is the consequent effect on small and medium scale business circles in Nigeria where business confidence is still largely low. Because of this, a good volume of businesses are still largely in cash especially in the rural areas. Thus due to the likely negative effects in this critical segment of the economy, we have recommended a lower processing fees of between 0.5 per cent to 0.75 per cent and 1 per cent to 1.25 per cent for individual and business account holders respectively.
“The impact on the general economic performance and compliance to cashless policy would be observed and analyzed for further amendments.”
ABCON also cautioned against the proposed increase in the Value Added Tax (VAT) to 7.5 per cent from 5.0 per cent, insisting that the increase will lead to more unemployment and poverty in the country.
The Association also faulted the move to expand the VAT net while also increasing VAT rate at the same time as a conflicting strategy.
It stated: “The immediate implication is that every Nigerian will either directly or indirectly be affected by the whopping 50 per cent increase in VAT. The average VAT collection in the past six years is about N900 billion. The revenue is shared 15 per cent to the Federal Government, 50 per cent to states and 35 per cent to local governments, net of 4 per cent cost of collection to FIRS.
“But beyond the revenue increase of about 50 per cent, there will be other attendant consequences like higher inflation rate, interest rate hike, more unemployment and people will generally become poorer.
“It will increase the burden on the poor and SMEs contrary to the 2017 National Tax Policy. We also believe that seeking to expand the VAT net while also increasing VAT rate at the same time is a conflicting strategy.
“Instead the system can generate twice as much from VAT at current rate by expanding the scope of threshold and ensuring a robust administration rather than by increasing rate.