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.