Pains and comfort of Cashless

THE CENTRAL BANK OF NIGERIA (CBN) gave a fresh fillip to the cashless policy which is intended to move the country from a cash based economy to an electronic payment system economy...

THE CEN TRAL BANK OF NIGERIA (CBN) gave a fresh fillip to the cashless policy which is intended to move the country from a cash based economy to an electronic payment system economy in line with modernization and trends in the financial system.

The apex bank, in a circular to all deposit money banks, last week, introduced charges on deposits and withdrawals above certain thresholds to enforce compliance.

According to the circular, the charges, which took effect from September 18, 2019, would attract three per cent processing fees for withdrawals and two per cent processing fees for lodgments of amounts above N500, 000 for individual accounts.

For corporate accounts, the apex bank in the circular said that DMBs would charge five per cent processing fees for withdrawals and three per cent processing fee for lodgments of amounts above N3, 000, 000.

The statement, however, disclosed that the charge on deposits would apply in Lagos, Ogun, Kano, Abia, Anambra, and Rivers States as well as the Federal Capital Territory.

It added that the implementation of the cashless policy would take effect from March 31, 2020.

However, the rushed approach with which the circular was handled has drawn reactions from various segments of the society. The issue has polarised the nation down the line because of the many years cash has been used for transaction purposes.

For a nation that conducts its transactions on cash-andcarry basis, with a large informal sector that knows no other payment system bust cash, the news of the immediate commencement of the policy and the applicable charges came like the unheralded thief at night.

A few voices said to be economic experts have lauded the CBN for the action. One of them, Momoh Aliyu,, an economic expert and managing director of Cyber1 Systems Network International, said that the full implementation of the policy was meant to enhance transparency.

This may mean an attempt by the present administration to be able to monitor the spending patterns of the citizens and monitor the movement of money from people’s (politicians) accounts. Many believe that the move is more about having a good view of some categories of people expenditures, how money comes in (sources) and where it goes to.

Another economic expert, Samuel Fogbonjaiye, explained that the policy was meant to monitor cash movement and basically to mop up excess liquidity meant to develop the sector.

However, the torrents of negative reactions far outweigh the merits highlighted by the economic experts. Bank customers, the organized private sector and other

stakeholders have faulted the manner of the policy’s introduction.

The antagonists

Godwin Eohoi, the registrar, Chartered Institute of Finance and Control of Nigeria, called for a downward review of the charges to 0.5 per cent for individuals and 1.5 per cent for corporate organisations.

He said bank customers were already suffering the burden of various charges from DMBs for carrying out various banking transactions. He gave some of the charges as card maintenance fee, Automated Teller Machine withdrawal charge, stamp duty, Commission on Turnover and SMS alert.

Eohoi said with all these charges, it would be unfair for the apex bank to impose additional charges on cash withdrawal and deposit in a bid to promote cashless economy. He said, “The move by the CBN to promote cashless policy is commendable because it has some benefits such as reducing the amount spent by the apex bank in cash management.

“However, the Nigerian economy is still fragile and at a time when the CBN is promoting financial inclusion, it would not be fair to impose additional charges on bank customers that are already overburdened with different types of charges from banks.

“The cash deposit and withdrawal fee announced by the CBN is too high. They should reduce it to 0.5 per cent for transactions involving individuals and 1.5 per cent for corporate companies.”

Chijioke Ekechukwu, a former director-general, Abuja Chamber of Commerce and Industry, said the imposition of the charges should be reviewed downwards considering that many Nigerians were still unbanked.

He said, “The policy is aimed at reducing cash transactions and if you reduce cash transactions, it becomes easier for banks and CBN to manage cash. Each time cash is moved from one location to another, it involves a lot of costs. So, this cashless policy will help the CBN and the Nigeria Financial Intelligence Unit to track transactions.

“Above all, it may not ultimately reduce the need to withdraw cash. When the benefit of the cash you are going to pay is far above the charges you are going to get, then you will definitely ignore the charges, withdraw the cash and make the payment.

“If they maintain the kind of charges and remove automatically what they call maintenance charges, stamp duty and others, it will help to promote the cashless policy.”

The Nigeria Employers Consultative Association and the Lagos Chamber of Commerce and Industry said the latest charges would increase the burden on bank customers. They said that the implementation of the policy would signal the imposition of charges on deposits in addition to already existing charges on withdrawals.

Timothy Olawale, the director-general, 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.

Olawale added that it would also have the greatest impact on retail businesses and other medium-scale retailers in the Fast Moving Consumer Goods sector.

He 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, the director-general, 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 latest circular by the CBN should have given a much longer notice to economic players. The notice given for the effective date is extremely short. 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 short-term 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.”

While he noted that it was difficult to justify the decision to penalise cash depositors, he said the emphasis of the policy should be on discouraging cash transactions and withdrawals, which was more in consonance with its objective.

A professor of economics at the department of economics, Olabisi Onabanjo University, Ago Iwoye, Ogun State, Sheriffdeen Tella, also decried the new policy, stating that it was contradictory to the cashless policy mantra of the CBN Governor, Godwin Emefiele.

While he noted that there already existed many charges heaped on individuals and corporate clients by banks through withdrawals and management of accounts, among others, he said the addition would be an overkill.

He said the directive would only encourage multiple withdrawals and deposits, in order to beat what it aimed to achieve. He described the new policy as favouring commercial banks and disfavouring their customers.

He said, “The charges are becoming too many that people may decide not to take their money to the banks anymore. They may begin to look at other options.

“The new charges will not in any way encourage the cashless policy the CBN is trying to promote. I see it more as being contradictory.

“Government should look at other ways of making money for the banks.”