Cashless Policy: Good Concept, Bad Implementation – MAN


The Manufacturers Association of Nigeria (MAN) last week joined the Babel of voices condemning the introduction of charges on cash deposits and withdrawals from banks by the Central Bank of Nigeria (CBN).

The umbrella body of the nation’s embattled manufacturers is worried that the apex bank would introduce more charges at a time when dilapidated roads, epileptic power supply, seemingly insurmountable security challenges and high lending rates have combined to escalate production cost in Nigeria.

MAN complains that the introduction of fresh charges on cash deposits and withdrawals above certain limits would worsen the fate of Nigeria’s crippled micro, small and medium enterprises (MSMEs).

CBN recently rolled out new rules designed to enforce its cashless policy. Under the new rule, daily cash withdrawals by individuals above N500, 000 would attract handling charge of three per cent while deposits above N500, 000 attract two per cent. Corporate bodies withdrawing above N3 million per day would be charged five per cent, while deposits above N3 million attract three per cent. CBN says the charge is only on the amount above the limit.

The new policy on cash-based transactions in banks is designed to reduce the amount of cash in circulation in the economy and encourage electronic transfers in payments for goods and services.

The CBN believes that Nigeria must modernise its payment system if it must attain its rather elusive vision of being one of the 20 largest economies in the world by 2020.

It also argues that the high cost and risk of moving huge cash around contributes to the escalating cost of doing business and the high lending rates in the money market. Besides, the cost of printing currency notes is so high that in some instances it is more than the purchasing power of the currency in question. Nigerians abuse the notes and reduce their lifespan.

Huge cash withdrawals are largely responsible for the high rate of corruption in Nigeria. People do not pay bribes through the banks. They make huge withdrawals and dispense them in Ghana-must-go sacks which cannot be detected in the system. That in effect is responsible for the situation where 60 per cent of the cash in circulation in the economy is outside the banking system.

The apex bank launched its cashless policy in 2012 and expected the system to fully embrace it by March 2020. However, in the last six years, the apex bank has been curiously silent on its pet project. Nothing has happened by way of sensitisation of the public on the new policy direction since it was launched.

We believe that the CBN is executing a laudable policy with a wrong approach. The deafening silence that greeted the policy since it was launched in 2012 has lulled the awareness of consumers of banking services. The spontaneity with which the new charge was rolled out is alarmingly abhorring.

For such a policy to work in a society that thrives on cash transactions, the CBN should not have left the publicity stint on the policy to the banks as its recent stance suggests. It should have been in the forefront of the publicity campaign for the policy.

Besides, since the apex bank knows that cash transactions form the crux of Nigeria’s culture, it should design incentives that would facilitate a seamless switch from an age-long tradition of paying for goods and services with cash to electronic transfers.

That means that electronic transfers should be free over the period of the test run of the new policy. The charges on electronic transfers in the country are huge disincentive for switching to the novel policy. The apex bank should take a second look at those charges if it really wants to convince a skeptical audience that is wedded to cash transactions to switch to the system of paying for goods and services through electronic transfers.

Besides, there is need for the apex bank to overhaul the nation’s bank charges. They are huge disincentive to financial inclusion. Bank charges in Nigeria are atrociously high. Banks make billions of naira monthly by debiting their customers for mysterious maintenance of the ATM cards in customers’ wallets. They charge heavily for issuance of statements of account which is the right of customers. There are scores of other fraudulent charges which the CBN has looked the other way as banks fleece their customers. This has driven millions of Nigerians from the nation’s porous banking net and contributed its own quota to making Nigeria the global headquarters of abject poverty.

The planned switch to electronic transfers as medium of transactions is a laudable policy. However, its execution must be given a human face. MAN’s fear that the policy would negatively affect micro firms is something of an exaggeration. Micro firms cannot deposit or withdraw N500, 000 in a day except they are into money laundering.

However, the apex bank must allay the fears of consumers of banking services who see cashless policy as a punitive measure. It is the duty of the CBN to persuade consumers to see the numerous gains of switching to electronic transfers.

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