Cashless policy takes off with N284 trillion e-payment deals
• Bank customers face more than 10 charges, taxes
• Payment service firms, banks’ earnings to increase
• Nigeria, others need $152b investment in 10 years
Transactions through electronic payment (e-payment) channels that would facilitate the country’s planned cashless policy hit a cumulative value of N284 trillion in the first half of this year, data from the Central Bank of Nigeria (CBN) has revealed.
The data showed that the depth of adoption of the electronic channels within the period was significant, as no fewer than 3.81 billion transactions were recorded across all payment platforms.
The development showed that the cashless policy, which has already taken off in some states and the expected national rollout in March 2020, came with a mix of opportunities and costs for banks and their customers, government and payment service providers.
Channels that would be prominent in the cashless era include the Internet (web) platform, which are currently enmeshed in controversy over planned Value Added Tax charge on transactions by 2020.
In the last six months, it generated 47.98 million transactions valued at N223.35 billion, while mobile money records showed 104.8 million transactions worth N1.97 trillion.
The inter-bank e-payment platform recorded 1.76 billion activities worth N203.35 trillion, while the National Instant Payment platform generated 504.2 million activities, valued at N49.35 trillion.
Electronic cheque transaction had 3.42 million activities in the period, worth N2.3 trillion, with the Automated Teller Machine and Point of Sales terminals recording 424.62 million and 187.7 million transactions valued at N3.24 trillion and N1.38 trillion respectively, while the popular Remita generated 21.6 million activities worth N9.84 trillion.
The Nigeria Inter-Bank Settlement System Automated Payment Services (NAPS), an integrated multi-bank e-payment, e-collection and payroll and bulk payment platform, designed for the instant processing of payroll, pension, personnel records and execution of funds transfer, direct debit, collections, schedule delivery and payment instructions, generated 20.6 million transactions, valued at N11.59 trillion.
With the withdrawal and deposit limit enforcement, bank customers would either comply and patronise more fully the electronic channels or face charges. The development, which signals more charges for bank customers as they use the services in the financial system, is currently about 10 or more.
As a survival strategy after the implementation of the Treasury Single Account, banks redoubled their instinct for multiple charges against customers in the face of dwindling opportunities and income, which subsists till now.
In no particular order, there is Account Maintenance Fee, with associated Value Added Tax (VAT); Card Maintenance Fee and associated VAT; SMS alert charge and associated VAT; Remote-on-Us, with associated VAT; Mobile transfer charge with VAT; online transactions charges; and the planned online transactions with VAT.
For financial experts and bank customers, it is really an era of taxes and charges, despite the difficult economic climate and low business activities.
CBN, foreseeing the panicky reaction to the zero Commission on Turnover (CoT) policy, reversed itself by approving a negotiable CoT charge, which should not be more than N1 per N1000 withdrawal on current account, as well as the Stamp Duty Tax.
The managing director of Cowry Assets Management Limited, Johnson Chukwu, commended the initiative but also called for caution. He told The Guardian: “It also came with the benefits of minimal keeping of cash at homes. It is long we heard that thieves made away with millions from people’s homes and that is courtesy of the cashless initiative. But the platforms that run these services will be maintained and it is a private business, so there must be cost.”
He stressed: “I will be quick to point that there is the need to be cautious in the charges and taxes associated with the use of these platforms, particularly on payment platforms, otherwise, it would be discouraging. When you ask people to embrace cashless policy and at the same time, you tax them on the use of the cashless platform, it becomes double jeopardy. I think they should think seriously about that planned online tax.”
The managing director of Financial Derivatives Limited, Bismarck Rewane, on his part, said: “We must discourage full cash-based transactions by all means and to any extent possible. Cashless system is good for transparency and payment efficiency. It will be beneficial to all.”
A banker in one of the top five banks, who only identified himself as Austin, said each transaction has many service providers at the backend and these are private businesses working to create convenience, safety and efficiency, so they deserve to earn money.
“I don’t know how much is too costly for an average customer to pay, but you can be sure that the regulator has a justified position when it allows a cost to be put on some services. But these services are optional too somehow,” he said.
But Samuel Elias, an operator of a medium sized dry cleaning shop, lamented that rather than a mutually beneficial relationship, nearly everything about banking transactions has associated charges and taxes.
“These banks act as if they are above the law. They do whatever they want to do and repeatedly. How can you say that you want people to bring money to the bank, only for you to be reducing their balances with multiple charges? Nothing is done for the sake of customer relations, yet they declare billions of naira every year,” he said.
Meanwhile, the need to rev up productive capacity in Nigeria and the rest of African economies resonated at a United Nations’ forum, where it was estimated that no less than $68 billion-$152 billion investment is required on the continent in the next 10 years.
Described as “massive investment” needs at between 3.1 per cent and 6.9 per cent of the continent’s economy, they are meant for building infrastructure and ensuring sustained growth.
The meeting called, “Promoting Innovation and Infrastructure Development: A Pathway for Boosting Manufacturing in the Fourth Industrial Revolution,” was part of the UN-designated Third Industrial Development Decade for Africa (IDDA III).
African Union’s Commissioner for Trade and Industry, Albert Muchanga, told a gathering on infrastructure that young Africans would “produce the magic” needed to revolutionise the continent.
The development has raised a new task for leaders to devise an “incentive structure” to promote a startup culture among young Africans.
Muchanga said all that is needed is working to “harmonise our policies, rules and regulations” to smooth cross-border trade while focusing on the next generation.
“We’re not leaving the youth behind. We’re promoting startups among African youths. Because we know that if we localise knowledge and innovation, then we’ll be able to spearhead the process of sustainable development,” he said.
But the African Development Bank (AfDB) President, Akinwumi Adesina, warned that the continent is moving backwards and urged executives to produce more high-value manufactured products instead of exporting raw materials.
“Unfortunately, Africa today is de-industrialising and there is no region of the world that has actually created wealth without industrialising. Infrastructure is critical. Ports, rail, digital infrastructure, all those things are going to be very critical. That’s our bread and butter every day at the African Development Bank, connecting Africa and achieving the goal of African unity,” he said.
Already, AfDB said it has invested more than $150 million in building technology hubs in Rwanda, Senegal and Cape Verde, while it also runs collaboration and mentorship schemes to bring African entrepreneurs and investors together.
In a monitored programme, the United Nations Secretary-General, Antonio Guterres, said the “winds of hope are blowing across” Africa, as economists address raising cash for building roads, power plants and other infrastructure in the region.
He said the emergence of free trade areas across the continent provide “concrete opportunities for economic transformation. Yet, challenges remain. Despite progress, new policies are needed to unleash the full potential of industrialisation, especially in this time of technological revolution.”
In her submission, Nigerian-born UN’s Deputy Secretary-General, Amina Mohammed, said there has been a “clear renewal of commitment by leader after leader to implement the 2030 agenda.”
According to her, “This is absolutely critical to respond to challenges that affect all countries – poverty, gross inequalities, discrimination against women and girls, climate change, and a rapidly deteriorating natural environment.”