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CBN, domiciliary account and the economy (1)


Godwin Emefiele, CBN Governor

Godwin Emefiele, CBN Governor

THE principal reason in the heedless pursuit of a cashless society is the belief that this will stop corruption.

This is a Western notion which we have embraced fully – bringing lots of jobs to the West – the computers, the dispensing machines, the chips, pin, cards, etc. In the process, it has changed banking beyond recognition. The bankers no longer want to see their clients: Their attitude is this: bring your money to the bank, but speak to the ATM.

The rationale is fundamentally flawed in a developing economy. The system – cashless – is presaged by an assumption that all of us have computer related devices – i.e. phones; that we are literate, that the ATMs work, that there is electricity and that ATMs are available nationwide. If you live in the cities, you may be able to do all of this; (in Europe and U.S. they even have receiving ATMs where the traders can actually deposit end of day sales, thus we have the beginning of making high street banks irrelevant and unnecessary.) Bottom line is to reduce cost of banking and increase profit for bank owners. The question we should ask our Western minders is this: was corruption eradicated or reduced in their countries because their society was cashless?

In Nigeria the outcome necessarily is mixed. In my village, we have one bank, one ATM, no light, therefore, most of the time the ATM is not working. The traditional local bank manager is an encyclopaedia of local custom; he knows who is coming up in society so that when CBN, for example, intervenes in agriculture, the bank manager is able to interpret that intervention to potential clients who stand to benefit. Such intervention in small scale agriculture may be the saving grace of Nigeria. But our suited CBN bureaucrats obviously have not created the agricultural intervention for the farmers but for a class of fast thinking, fast talking computer literate manipulators, who know how to fill the CBN forms without leaving Lagos, Ibadan, Kaduna, Kano, Maiduguri, etc.

These city sleek operators are the beneficiaries of nearly all CBN interventions whether for agriculture or transport, etc. No true farmer, fisherman, transporter can understand the jargon in these same form. That the money disappears once voted is due to collaboration between the sleek operators and the bankers.

Now the CBN has moved into the Domiciliary Accounts area with predictable heavy handedness which will make its intervention fail. At first, the banks announced that they would no longer take foreign exchange cash because their vaults are full, that Nigeria was awash with foreign bank notes which banks cannot take any more into their vaults. If the vaults are full, then the logical answer is building more vaults. Surely all vaults of all the banks cannot be full at the same time, there would have been ways to continue to receive bank notes.

Nations, and Governments, love secrecy but this is no time for the Government to be less than candid to its people, who are not fools and could smell a rat 10 kilometres away. No Government which respects its people could tell such barefaced lies. When banks refuse currency, it is because such currency is worthless or would very nearly be so, for example, the millions of Deutschmark in Germany, just before the end of the World War ll.

When doubts were raised, we then began to hear the main reasons for the CBN directive – because the CBN now took the bull by the horn and directed that banks should no longer accept foreign bank notes for domiciliary accounts, CBN officers hit the news outlets with the most implausible of nonsense I have heard for a long time: Naira is the legal tender; no nation sits by while its currency is substituted by another, and then finally directed legitimate business transactions could only be done through the old regime of form A, form M, etc.

Only fools fail to learn from history. We have been through the regime of forms M, AI, A2, etc. That ordeal led to the cement armada and the 1975 coup, etc. Moreover, much of the trade that is done by most people cannot be done under the regime of form M, etc. A woman has US $10,000 – flies off to Dubai to start her small business.

A young man has US $10,000, he flies off to Taiwan, China, etc to get some spare parts for cars; others buy electronic goods or parts, still others – fridges, clothes, bras, pants, etc; many more get off to Dubai with even less. The tycoons of Alaba market, Ladipo markets, many Nnewi industrialists, the transporters – Chidi Ebere, Ekenedili Chukwu, The young shall grow, etc – this was how they started. Many fashion and boutique houses employing thousands started this way. I remember seeing hundreds of Nigerian spare parts dealers in Brazil, beginning what are to-day booming businesses.

Are these the people carrying millions of dollars, pounds, etc into domiciliary accounts? No. The banks have a policy of “know your customers” and have an army of marketers who go out canvassing for deposits; so the banks know those who have these massive domiciliary accounts. If they know, the CBN also knows; the present Governor left Zenith a short while ago and Zenith was a big bank. It must have had people with large domiciliary accounts into which more cash was paid.

• To be continued tomorrow.
• Dr. (Ambassador) Patrick Dele Cole (OFR) is a Consultant to The Guardian Editorial Board.

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  • Izeobor

    Dele, are you on the payroll of Guardian newspaper org? The management could save more money by disengaging your services. Do you really want any progress to be made by Nigeria? You should proffer solutions on how to improve services in Nigeria in general rather than being pessimistic about modern banking services. ATMs could operate during office hours if electricity is not available outside office hours. There are more advantages of cashless financial services that outweigh the traditional archaic one. One doesn’t have to carry cartons of worthless paper money around and risk been attacked by “agberos” in Lagos or Ibadan, and so on..

    • christopher


  • Simon Jeggi

    The CBN should act within the law to add more value to the Naira in comparison to the US Dollar