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Dissecting CBN’s cash-less initiative … The gains, pains and prospects

By Chijioke Nelson, Asst. Editor, Finance/Economy
28 September 2019   |   4:20 am
The newly reintroduced cash-less policy of the Central Bank of Nigeria (CBN) has generated not only mixed feelings, but also misunderstanding of the concept.

The newly reintroduced cash-less policy of the Central Bank of Nigeria (CBN) has generated not only mixed feelings, but also misunderstanding of the concept.This is because money, the most sought after commodity, is involved in any measure of the cash-less policy. For example, either deposit or withdrawal transactions or the associated charges, money is involved and depending on the side each party to the transactions is, sentiments and flay of temper might be possible.
The scheme was introduced in 2012 and the charges only applied to transactions in Lagos after a pilot phase. In 2013, it was extended to Abia, Anambra, Kano, Ogun and Rivers states, as well as the Federal Capital Territory.In 2014, the apex bank suspended a planned nationwide rollout to create opportunity for increased awareness, while banks and payment service providers would step up their investments in the deployment of enabling infrastructure.
Unfortunately, in April 2017, after a long wait for national take-off, the CBN suspended the entire policy.First, the term “cash-less” might have been misunderstood to mean that there will be no cash, but that is not the intent. Rather, it means using less of physical cash in transactions, substituted with alternatives, as already seen in various electronic payment channels.

Among the electronic payment channels, which serve as alternative to cash payments are the Point-of-Sale (PoS) terminals; mobile payment system; Internet banking; the multi-functional Automated Teller Machines (ATM); Electronic Funds Transfer Systems; and direct debit for regular in nature bills payment, among others.

Managing Director of Financial Derivatives Limited, Bismarck Rewane, agreed that the move by the CBN to resume the suspended cash-less initiative was in order and globally acceptable, adding that it is solely a monetary policy issue, which is not subject to legislation.“We are trying to pursue financial inclusion for the benefit of all, so, we must discourage full cash-based transactions to the extent possible. Cash-less system is good for transparency and payment efficiency,” he said.
The crux of the matter is that the take-off of the cash-less policy came with a rule that stipulates a daily cumulative limit of N500, 000 and N3 million cash withdrawals and lodgments by individual and corporate customers respectively, without charge.

The rules state that any daily withdrawal and lodgment in excess of the N500,000 and N3 million by the respective categories mentioned would attract charges on the amount in excess of the limit.For example, if Lawal Oso, withdraws N550,000 on a Friday, he would pay three per cent charge on N50,000, amounting to N1,500. On the other hand, if he deposits the same amount, he would pay two per cent of N50,000 as excess deposit charge, amounting to N1000.
Still, if the transaction involves a corporate entity, like Nike Group Limited, a deposit and withdrawal of N3.1 million in a day would attract a three per cent and five per cent charges on the N100,000 above the limit, amounting to N3,000 and N5,000 respectively.According to the Director of Payments System Department at the CBN, Sam Okojere, currently the charges have become effective in Lagos, Ogun, Kano, Abia, Anambra, Rivers states and the FCT, while the nationwide implementation would kick off on March 31, 2020.

The Director of Corporate Communications Department at the CBN, Isaac Okorafor, had explained that the initiative would support the achievement of the nation’s vision 2020 under the Financial System Strategy.He also noted that the cash-less initiative would reduce the huge cost associated with cash handling- printing, storing, processing and distributing, as well as the risk of robbery.
It would also increase convenience/access to payment, deepen transparency in payment systems, and allow for more effective monetary policy and reduce cash-related crimes for safety of bank customers and the general public.Furthermore, third party cheques above N150,000 shall not be eligible for “encashment” over the counter, but through the clearing house. That is to say that if Mr. Godwin issues Mr. Daniel a cheque of N151,000, the money will not be given to Mr. Daniel in cash, but would be cleared and paid into his account directly.
For the avoidance of doubt, the cash-less policy allows one to use any amount of money from one’s account electronically. However, if one wishes to withdraw cash above the daily free cumulative limit of N500,000 and N3 million for corporate organisations, respectively, the charges on amounts above the cumulative limits would be effected.

There would be no reports on individuals or corporates that exceed the limits, because it is not illegal to exceed the limits. It is just that there would be a processing charge applied, as noted earlier.There are indications that Nigerians have started adopting the alternative channels, as well as benefitting from the convenience, transparency, speed and seamless service deliveries that have come with the cash-less initiative.
Available statistics from the apex bank showed that more that N280 trillion has been recorded in the first half of this year from the electronic channels in about three billion transactions.Among the channels that would be prominent in the cash-less 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.

But Nigerians are also complaining of the difficult economic system and the rising wave of charges and taxes. They see the new development as inconsiderate and punitive.

Managing Director of Cowry Assets Management Limited, Johnson Chukwu, said the huge benefits already recorded with the cash-less policy was undeniable, citing minimal keeping of cash at homes and the fading stories of how thieves broke into houses and made away with millions from people’s homes.
“However, the only point that I would caution about in the whole scheme is ensuring harmony and consistency in the process. Taxing transactions on online payment platforms is still confusing. They are part of the cash-less policy initiative.“You cannot ask people to embrace cash-less policy and at the same time tax them on the use of the platform. That is double jeopardy and I think they should think seriously about that planned online tax,” he said.
Emma Wagbo, an economist, said that despite the gains already made and the expected ones, it was still confusing to charge fees on deposit of cash.Besides, knowing that not all Nigerians would immediately switch to the electronic modal, he queried why the limit for both withdrawal and deposit are the same, since the deposit is also acting as a means of liquidity mop up.
“There are many charges in the country presently. Banking should be a mutually beneficial relationship; hence the costs should be shared and not entirely put on the other. There are no less than 10 identifiable charges in banks and this would be an addition. Policies should always look towards people’s feelings,” he said.
The last check on some charges in the bank shows that 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 and imbued VAT; online transactions charges and the planned online transactions VAT.

For financial experts and banks’ customers, it is really an era of tax and charges, despite difficult economic situations and low business activities. The 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. The controversial Stamp Duty Tax is still ongoing. Aside from the taxes and charges, there still other concerns about the cash-less initiative, as you would find from the reports below:

Cashless Policy: Different
Strokes For Different Folks In Lagos

By Maria Diamond
It’s a case of different strokes for different folks in Lagos State, as a number of uneducated Nigerians have objected to the cash-less initiative of the CBN, saying, the policy would only benefit the literates. Some others, however, see the policy as a welcome idea that saves them the stress of sourcing for cash before making purchase.

Mrs. Chinyere Amadi, a market woman in Ikotun market said: “Even at this stage, I still struggle to use my ATM card. I beg people to help me operate the machine when my children send me money. So, how will I then have transactions with PoS? Well, I believe the policy will be for the rich and educated, not for people like me who can barely spell their own names. I buy my goods in the market with cash and no customer will come to me without cash,” she said.

She said further: “Government should review this cash-less policy before implementing it, because I don’t really see it working for the ordinary market woman who believes in the conventional method of buying and selling. I need to see the cash, not some card because I cannot operate it.”

To Uchenna Nwachukwu, who sells hair extensions at Trade Fair, Badagry Expressway, there were so many challenges impeding the cash-less initiative. He said: “I have a PoS machine but no longer use it because of how it malfunctions on regular basis. If it’s not network problem today, it’s another case of double charges or reversals. So, it’s neither stable nor reliable. Apparently, if I have to keep up with it, I would need to have about three PoS machines from different banks, and that is not a deal I want to invest in as it would amount to too much loss for me,” he said.

A school teacher, Amina Abdulahi, on her part described the cash-less policy as a welcome idea. “I would rather pay my bills via PoS rather than use cash. However, the problem is market women and men will never transact without cash. Is it the meat seller who needs cash to purchase the next morning that will welcome cash-less policy or the pepper seller who wants nothing to do with electronic transactions because it’s alien to her? So, at the end of the day, I still need cash to purchase the basic things the family needs to survive. Even those who have PoS would always complain of network problem, low battery or other excuses. The places I successfully use PoS platforms sometimes are the big supermarkets or super clothing stores. The regular stores on the street and market sellers don’t have PoS,” she said.

Mrs Ebere Onwunchekwa, who has a provision store in Ilamoshe, told The Guardian that she has two Pos machines and ensures they function well because the cash-less bug has caught many of her customers.Her words: “I have two PoS machines and I ensure they function well because aside from having my customers pay via PoS, I also give cash to people who need cash and collect small interest on it. We do not have a bank within this estate. So, a lot of people come to me for cash, which is very good business for me. Also, people patronise me a lot more than others who sell the same provision I sell because I use PoS, meaning you don’t need to have cash or go to the ATM which is a long distance from here to source cash before making purchases. It is easier, faster and good business for me. So, it’s a win-win situation for me and my customers.”

Poor Network Undermines
PoS Transactions In A’Ibom
From Inemesit Akpan-Nsoh, Uyo
A House of Representatives member, Mr. Patrick Ifon, representing Eket Federal Constituency, has described the cash-less policy being driven by the CBN as another way of inflicting hardship on Nigerians, especially the downtrodden, by the government. He described the policy as ‘senseless’, saying the country has no facilities to support a cash-less economy at the moment.

“Like now, there is no ATM in Onna. You have to bring the cash to them else the whole world would be told that you played them 419 if you transfer money to someone and he doesn’t get it since there is no bank here.“If someone lends money and the person wants to pay back and you begin to tax some percentage of the money, it means that the whole interest would be wiped off and that would discourage lending which eventually would adversely affect business development,” he said.

Findings also showed that the state was still lagging behind in the area of Point of Sale (PoS) penetration, which would have encouraged people to make electronic payments at the point of purchase instead of cash. Most people interviewed by The Guardian stated that many towns in the state were yet to have a single PoS machine because of poor telecoms network.

According to Mr. Israel Umoh, a one-time chairman of the Nigeria Union of Journalists (NUJ), most of the local councils headquarters still have network issues not to talk of the villages.“It has not reached many villages. Even within the city at some point you cannot operate it successfully because of poor network. So, basically lack of effective network in some council areas and even in some parts of the city hinders the penetration of the device,” Umoh noted.
Corroborating him, a worker with the state civil service, Mr. Okon Etim, said he had experimented with PoS as a means of transactions, but lamented that the problem of double debiting has discouraged him from using it.“One day, I bought fuel at a filling station. I used the PoS to pay. For hours, the money was not credited to the account of the station. I had to call my wife to send money to me, which I used in paying the fuel attendant,” he recalled.

Majority of the people that spoke on the matter cautioned the CBN against hastening the implementation of the cash-less policy just because it works in other societies.“Cash-less policy is a very good policy, but the CBN should not be in a hurry to implement it because of teething challenges facing the scheme. As at now, people are complaining that the poverty level in the country is high. So, by the time this cash-less policy is fully implemented, that is another way of impoverishing the people the more.“I know the CBN is targeting the rich, but indirectly it will affect the poor. The apex bank should study the challenges Nigerians are likely to face, like power, before implementing it,” Etim surmised.

‘Why Anambra Traders Prefer Cash Transactions’
From Osiberoha Osibe, Awka
The use of PoS is still alien to most residents in Anambra State, especially traders, as they prefer to keep cash in their shops and homes. However, the few people who use it in the state have fallen in love with it because of its twin advantage of ease in making transactions and safety.

According to one Okey, a businessman resident in Awka, “I prefer the use of PoS because it has stopped me from going to bank to waste a lot of precious time cashing my hard-earned money. What I now do is to go to a nearby agent banker and transact business through PoS.“I worship at Mountain of Fire Ministry at Amawbia and at times, the pastor calls for donation. The availability of a PoS machine has helped me to make such donation with ease.”

Those who are averse to the use of the PoS machine in the state said they avoid it because of attendant security challenges such as fake currency, fake debit alerts and robbery.Okechukwu Davidson Ibekam told The Guardian that scammers now use PoS to defraud unsuspecting Nigerians.

“I witnessed a young man who approached a banking agent and told him to help him transfer money to his child and take the cash he has. After transferring the money, the young man disappeared before the PoS agent realised the young man gave him fake currency,” Ibekam said. A PoS operator in Awka who identified himself as Ibrahim, also said the reason some people do not transact business through the PoS machine was because of rising cases of fake debit alert.

He said: “Some fraudsters prefer to carry out their dubious transaction where there is PoS because of absence of security to track them. My cousin was held at gunpoint somewhere in Awka, while one of the gang members used her ATM to transfer money to another account through PoS.”

On the new rules set by the CBN to further drive the cash-less policy, an economist, Angela Nwama, pointed out that the charges on deposits would discourage people from depositing their money in banks.“The recession the country faced was as a result of failure of liquid cash to go round. The only way out of it is for money to move from hand to hand. But when you limit the idea of people going to bank the tendency is that the economy will suffer,” Nwama said.

In Cross River, PoS Operators
Decry High Charges By Banks
From Agosi Todo, Calabar
PoS operators in Calabar, the Cross River State capital, are battling low patronage, which has forced many of them to close shop. When the PoS business started trending sometime ago in the state, particularly in Calabar, people saw it as a relief from going to the bank to queue and waste precious time. But gradually, some PoS shops closed down due to lack of customers while those still hanging on to the business lament high charges by banks.

When The Guardian visited some of the outlets in Calabar, one of the operators, Courage Ogbanuga, lamented that he had lost all his customers because of the high charges. He said some of the outlets had all closed down because of lack of business. Ogbanuga said: “The PoS business is quite boring. We have serious challenges with bank charges. Most of my customers complain a lot. Sometimes they say, ‘why are the charges like this? It is better I go to the bank and I will still have something left for transport tomorrow’.

“At first I thought it was a relief to people around here that if you cannot get to the bank, you just come here and make your transaction and go but the challenges we are having is that the charges are very high. For example, if you are withdrawing from other banks, the charges are high and my customers are complaining about that. If they are charging you N50 from the ATM, with the PoS, depending on the amount you are transacting, the least is N100 or N200 charges and that is the major challenge we are facing.

“I have lost most of my customers. They said they won’t come here again and that they prefer to go to the bank. This is not favouring the business. The only thing you can make from here is the commission the bank gives, which is very low. So, they should cut down the charges. That will help us grow the business and help keep our customers because when it is low, many people will come around but when it is high they will all prefer to go to the bank or use the ATM.”

As operators lament, residents also had divergent opinions about the use of the PoS machines to make transactions. Some residents said they don’t use the machine because of the risks involved and high charges, while others said it remained the best tool in the cash-less initiative. Mr. Kelvin Onyekwere told The Guardian that he preferred the use of the ATM to the PoS because of the risk and the high charges involved.He said: “I don’t use PoS because the charges are very high and a lot of risks are involved. What I use is my ATM. All I have to do is go to an ATM machine and do my transaction direct.

“I don’t have any advice to give to the CBN because before they made up their mind to introduce PoS, they must have done their research and found out that deploying the PoS machines is the best way of decongesting the banks. I don’t like it as a person.”But disagreeing with him, Mr. Neji Blackish said: “I enjoy using the PoS machine because sometimes, I find myself stranded in some places when there is no physical cash with me and with my ATM card, I can use the PoS successfully. I think it is the best cash-less policy tool. I don’t care about the charges provided I get my services.

“If I must say, the CBN should improve on the network issues because most of the time, when you don’t have cash and you want to use the PoS, you discover that the PoS or ATM are having network issues. So, the CBN should try to improve on that.”On his part, Mr. Emmanuel Okon, who deals on petroleum products, said most of his customers don’t like using the PoS because of high charges involved.

“Well, some of my customers don’t like to use the PoS because of the charges involved while some enjoy using it. They say it is easy and that it makes them go out without cash. But even at that, some people don’t like to use it frequently. I know this because I use it for my business,” he said.

‘NASS Should Maintain
Position On Cash-Less Policy’

From Isa Abdulsalami Ahovi, Jos
A renowned economist in Plateau State, Mr. Nda Solomon, has described the latest cash-less initiative introduced by the CBN as a dishonest measure aimed at deducting customers’ hard-earned savings. He said the policy should be suspended, stressing that it is anti-people, adding that it would further impoverish Nigerians who were already suffering. He urged the National Assembly to prevail on the apex bank to suspend the policy.

“Who does not know that Nigeria is under economic siege?” he asked, adding, “The refusal of the CBN to heed the call of the National Assembly to suspend the policy is a shame and disgrace to the image of the country as a democracy.” He believes that though the policy would ease the burden of moving physical cash from one place to the other, it was planned to hoodwink the common people at the end of the day.However, a PoS operator in Jos, Mallam Babangida Belt, told The Guardian that the availability of the machine in parts of the city has helped to reduce the burden of moving cash around.

‘A Cash-Less Economy Not
Possible In The Next One Year’

Niyi Adekeye is a financial analyst with a private firm based in Lagos. In this interview with TOBI AWODIPE, he speaks on the pros and cons of operating a cash-less economy, factors that are hindering the policy and why the country cannot go totally cash-less yet, among other issues.

What are the merits of operating a strong cash-less economy?
The benefits of moving the country from a cash-based economy to a cash-less economy are enormous. Apart from the benefit of convenience in terms of elimination of the need to deal with huge sums of cash and the rigours of cash withdrawal and deposits in banking halls from time to time, especially for transactions involving huge sums of money, the cash-less initiative is also a strong anti-money laundering weapon, as transactions can easily be traced to the bank accounts of the transaction parties. The convenience in terms of 24/7 available banking without necessarily having to visit a banking hall is also worth of mentioning. The cash-less avenues in Nigeria are witnessing noticeable improvements in recent years in terms of effectiveness and accessibility, particularly for low-income earners.

What are some of these cash-less avenues?
Available cash-less avenues include ATM, Mobile, POS, the web (internet) and the Unstructured Supplementary Service Data (USSD) mobile banking, which allows for electronic transfer of funds through mobile phones, provided that both transaction parties have bank accounts.

What would you say are some of the challenges associated with operating a cash-less economy?
Even as we have mentioned the benefits that can be derived from the policy, however, the realisation of the dream of making Nigeria a cash-less economy has remained constrained by the problem of poor infrastructure, particularly power and poor internet, as well as limited accessibility of the cash-less avenue to rural areas, as most of these avenues, ATMs and PoS are concentrated in urban areas.

Apart from this, other notable challenges include low literacy level, lack of customer awareness, high fraud rate, high failed transaction rate and poor security generally. Other disadvantages include exposure to on-line fraud, which is on the increase and the cost implication for small ticket transactions. For example, USSD transfer charge of N50 for a N500 or N1000 transaction is too high, which is the same charge on a single transfer of let’s say N200, 000.

Furthermore, a large percentage of the population are illiterates and as such, are unable to use the cash-less avenues. This category of people will be subjected to the imposed penalties for cash transactions from time to time. Despite the disadvantages in terms of cost implication, I believe that the benefits outweigh the cost. The key benefits include reduced exposure to risk of cash theft, quick transaction time as the need to visit banks for cash withdrawal and lodgment is eliminated and convenience as other cash handling tasks (especially for transactions involving huge sum of money) is also eliminated.

What is your view on the level of penetration so far?
Notwithstanding the significant progress recorded so far, the level of penetration is still very low as most uneducated people lack the basic technical knowledge required to make use of the platforms. Furthermore, the implementation of the cash-less policy has fully commenced in few states in the country as a pilot scheme.

What is the cost of acquiring some of the cash-less avenues for traders? Who is benefiting and who is losing?
Most of the cash-less avenues, for example, POS are provided at no cost to traders by the banks, with certain fees (usually a percentage of transaction value) paid per transaction. Ultimately, the customers are the burden bearers here, as the traders can easily pass such fees to the customers.

Is this policy screening out the informal sector that largely remains unbanked?
The cash-less policy automatically screens out the informal sector that is unbanked, since you cannot pay or be paid through the platforms without having a bank account.

Examining the cost of transfer, POS charges and so on, do you think these costs discourage people from using these channels?As mentioned earlier on, the cost implication is very significant for transactions involving small amounts of money and this could discourage certain class of people from making use of the cash-less platforms. For example, if I need to transfer N1, 000 to someone through USSD and it will cost me N50, apparently, I will opt for cash payment. Nevertheless, considering the convenience, I think only few percentage of the population will focus on the cost implication, as this is well offset by the benefit of convenience, including the fact that you do not need to have cash before you can make purchases and other payments at anywhere and anytime.

Do you think the country can truly go cash-less by next year?
Nigeria cannot be cash-less in the next one year as it is practically impossible to deploy the required platforms to all parts of the country within a year. Also, the fact that the high level of illiteracy stubbornly lingers in some parts of the country could hinder the pace of progress in the implementation of the cash-less policy. Another key challenge is the lack of necessary infrastructure, particularly, power and internet facility. In my own opinion, it will take at least the next five years to achieve 70-80 per cent countrywide implementation level.

How do you think politicians and wealthy people who carry a lot of cash around can be made to comply?
To control the use of cash by politicians and wealthy people, the anti-money laundering agency will have to be more pragmatic in its constitutional responsibility by enforcing the compliance requirements on banks and imposing strong sanctions on defaulters.

A lot of people still prefer cash transactions because they fear they can be scammed electronically. How can the CBN tackle the problem of fraud?
To boost the confidence of people in the cashless policy, government and possibly the CBN will have to intensify customer awareness on the benefits and enlightenment on frauds and scams, as well as, ensure reduced transaction failure rate and timely resolution of failed transaction complaints by banks. The banks will also need to enhance the security feature in the platforms to minimise the risk of exposure to on-line frauds. Finally, there may be a need to provide incentives to the poor masses possibly through waivers or reduction of applicable charges on transactions involving small amounts of money. This will get more people on board in record time.

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