The Central Bank of Nigeria (CBN) last week made a far-reaching decision in the payment system when it gave approval for bank customers to make cheque deposits into their savings accounts. The approval is one of the four new guidelines by the apex bank for the banking sector, currently facing serious liquidity problems that have made their profits dip considerably in recent times.
Until now, bank customers could only make cheque deposits into their current accounts. The new guidelines are contained in a circular dated July 28, and signed by the Director, Banking and Payment System, Mr. Dipo Fatokun. Though the new guidelines also include the removal of fixed interest on credit cards, the discontinuation of actual address verification in account opening for customers with Bank Verification Number (BVN), it is perhaps the measure that could have the most profound immediate results in the banking sector.
We welcome the new guidelines. As the apex bank rightly noted, the new guidelines will strengthen the payment system in the sector. At present, the sector which plays a vital role in the economy is facing serious challenges, that have resulted in layoffs in many banks.
Additionally, the implementation of the Treasury Single Account (TSA) last year by the Federal Government took a chunk of the banks’ funds away from their choice customers, especially government Ministries, Departments and Agencies. It is hoped that the new guidelines on Savings Accounts will go a long way to strengthen the payment system and make banking services more accessible to small account holders.
According to the circular approving the cheque deposits into Savings Accounts, the apex bank limited the daily deposit to N2 million per customer per day. Deposit Money banks were accordingly advised to “ensure strict compliance”. Compliance with the CBN directive is key if the guidelines will yield the desired results. It is in the best interest of the banks to do so, as the measure will boost their liquidity base and minimize their exposure to risks.
However, it has been observed that in the past some Deposit Money banks defied the directive of the CBN that ought to strengthen the payment system and the sector. For instance, bank customers have expressed disappointment at the low level of compliance by banks with CBN directive on zero account opening policy which was first issued in April 2012 under the CBN’s monetary credit, foreign trade and exchange policy guideline. The policy was aimed at making banking services accessible to the unbanked public.
That should not be the case in this new guideline on payment of cheques into savings accounts. We see this policy as one that will, among other things, enhance the financial inclusiveness of small scale business people. It will also strengthen the cashless system, help dividend warrant payment as well as expand the economy and the ease of doing business. Besides, the guideline will likely bring more customers into the banking system.
We support well-thought out policies that will stimulate growth and ease of doing business in Nigeria. Our country is currently among the economies at the bottom rung on ease of doing business in the world. One of the reasons is the rigid banking processes in Nigeria that have become a disincentive to investors.
The banking sector has a huge role to play in stimulating economic growth by relaxing existing policies that hamper access to funds. No doubt, the fortunes of the country are currently facing one of its toughest times with the headline inflation as high as 16.5 percent, while the value of the naira against other major currencies in the world has crashed to all-time low. This is due to sharp fall in oil prices and foreign exchange scarcity.
We, therefore, enjoin the CBN to ensure that banks strictly comply with the new guidelines on savings accounts. At the moment, opening a savings account is tedious in many banks. It requires customers bringing utility bills, passport photographs, a valid identification card, at least N5,000 and referees. This is not a good way to encourage the unbanked population to embrace banking.
What is required is a cheaper, less tedious way to mobilise deposits and deploying technology to lower costs. Potential bank customers would prefer to put their money in the banks rather than in their homes if the processes of opening accounts are not cumbersome.