Cashless policy: Distilling CBN’s new transaction charges
The Central Bank of Nigeria (CBN) in September, 2019, released new guidelines for the cashless policy in the country. The policy itself is not new; the objective is to discourage the preference for cash as a means of exchange of value given the huge costs associated with cash.
Under the new guidelines, bank customers are to pay cash handling charges for daily cash deposit and withdrawal in excess of N500,000 for individuals and N3 million for corporates.
As when it was first introduced, the charges have been criticised by some Nigerians for various reasons.
The criticisms are informed by what is considered the impact on Micro Small and Medium Enterprises (MSMEs) as well as those in the hinterland.
The Nigeria Employers Consultative Association and the Lagos Chamber of Commerce and Industry have said the latest charges would increase the burden on bank customers.
Timothy Olawale, directorgeneral of NECA, who though said the directive was purportedly to move the country into a cashless economy, and reduce crime involving cash, said there should have been enough notice before implementation.
He also said it would also have the greatest impact on retail businesses and other mediumscale retailers in the fast moving consumer goods sector.
Olawale said: “Though the overall aim of reducing cash transactions is good, the policy will, however, increase the cost of doing business and force organisations and individuals to start multiple deposits and withdrawals in order to beat the charges.”
On his part, Muda Yusuf, director-general of LCCI, said the notice given by the CBN was too short and that it would have disruptive effects on bank customers and other stakeholders. He suggested a much longer notice.
He said: “The circular was dated 17th of September while the effective date was 18th of September. This is just a notice of one day. This would have shortterm disruptive effects.
“We implore the CBN to give at least two months to allow for players in the economy to adequately prepare themselves. This is particularly so for investors who are major players in the retail segment of the economy.”
Other experts have however argued that the benefits of the cashless policy both to individuals and corporates have been underemphasised.
According to Agada Apochi, the huge circulation and adoption of cash is very costly to every economy. “It is costly to the government, businesses and individual citizens. The costs include printing of notes and coins, handling and processing, high operating costs for banks who pass the costs to customers, high interest rate, lack of transparency, black market economy, violent and nonviolent crimes, etc.”
He argued that the adoption of electronic payments is a viable and cost effective alternative to cash.
The CBN in September, 2019 further reduced the fee that businesses paid for accepting electronic payments at Pointsof-Sale (PoS) by 33.3% from 0.75% to only 0.5% of transaction value with a ceiling or maximum charge of N1,000. This is about the lowest rate in the world.
According to Apochi, “Nigerian banks and other payment service providers have worked with CBN to make electronic payments available to Nigerians e.g. instant transfer, bills payment, etc. using mobile App, USSD, etc.
Banks also provide PoS devices to customers without the customers paying for them. In other markets, customers pay for devices in addition to transaction charges. The transaction charge in Nigeria for point of sale transactions is about the lowest in the world, notwithstanding that the cost of providing the service in Nigeria ranks among the highest in the world.”
CBN has reportedly said, less than 5% of individual Nigerians have a turnover of N15 million monthly or N500,000 daily. Similarly, less than 5% of businesses in Nigeria have a turnover of N90 million monthly or N3 million daily.
Apochi said: “Let the few individuals and businesses that generate huge cash daily adopt electronic payments instead of placing the avoidable huge costs of cash on Nigerian government and Nigerians.
“If the National Assembly were to appropriate money annually for the cost of cash, Nigerians will understand how much it costs taxpayers to subsidize the avoidable costs of huge cash and the need to reduce same.”
He said, “It is not in the interest of the majority of Nigerians to ask over 95% of Nigerians to continue to subsidize the avoidable costs of huge cash that the very few impose on the masses.”
He called on the federal government to adopt electronic payments for all Governmentto-People (G2P) and Peopleto-Government (P2G) transactions.
Also speaking on the policy, the director, Payments Systems Management Department of the CBN, who doubles as the Chairman of Nigeria electronic Fraud Forum (NeFF), Mr. Sam Okojere, who spoke with Daily Trust said the wrong people are crying over the policy.
Most of those who have raised their voice are not even impacted by the policy because records show that they do volumes far below the threshold.
He said the introduction of the processing fee is not to punish anyone, but to change attitude.
Okojere said: “We are saying, there are several other means that do not involve physical cash and we have done quite a bit in strengthening these payment systems.”
“A lot of cash outside the banking system makes it difficult for monetary policy to impact the economy.”
He further said in a bid to encourage cashless policy, agent locations would be omitted from paying processing fees or tax on cash-out done.
“For clarity, there will be no processing fee either under the Cashless Policy or tax on cashout done at agent locations in order to encourage financial inclusion in the country.”