It’s Time to Re­vi­talise CBN’s Cash­less Pol­icy

Financial Nigeria Magazine - - Finance -

Last De­cem­ber, I had the op­por­tu­nity of spend­ing mem­o­rable mo­ments with fam­ily and friends in Nige­ria. How­ever, some­thing else was mem­o­rable in an odd man­ner. I had gru­elling ex­pe­ri­ences try­ing to with­draw funds from the au­to­mated teller ma­chines (ATMs). My chal­lenges with ac­cess­ing cash ranged from fre­quently ar­riv­ing at ma­chines that were out of ser­vice, to long and rowdy queues at the self-ser­vice chan­nels.

From La­gos to Oyo; Ondo to Delta, it was the same story. In Benin City, we drove into the Univer­sity of Benin, where we found about six or more ATMs of var­i­ous banks. Only about two were op­er­a­tional at the time. We had no choice but to join one of the long queues. A few mo­ments later, a young man walked up to us, look­ing distressed. His wife was in the hos­pi­tal and he needed to make pay­ment for her to be dis­charged. Ev­ery­one on the queue was sym­pa­thetic to­wards him and he was given con­sid­er­a­tion to jump the queue. The ques­tion to be asked is, why would a hos­pi­tal in a city not have a func­tional Point of Sale (PoS) sys­tem or any other sys­tem to en­able elec­tronic pay­ment?

While the banks are do­ing their best in pro­vid­ing ATM out­lets for cus­tomers to with­draw their money, those chan­nels are nei­ther the only in­fra­struc­ture needed to mod­ern­ize the pay­ment sys­tem nor can they achieve a cash­less sys­tem.

But in­ter­est­ingly, the story is not all gloom and doom as the pol­icy has also recorded some suc­cesses. Within two years of im­ple­ment­ing the pol­icy, the value of in­ter­bank trans­fers, cap­tured through the Nige­rian In­ter-Bank Set­tle­ment Sys­tem (NIBSS), jumped from N51 bil­lion monthly in Jan­uary 2012 to over N1.5 tril­lion as at June 2014. In terms of volume, NIBSS’ trans­fers rose from 87,000 trans­ac­tions per month in Jan­uary 2012 to 3.1 mil­lion trans­ac­tions monthly as at June 2014. Ac­cord­ing to the CBN, the volume of PoS trans­ac­tions in­creased from about 2,000 monthly as at Jan­uary 2012 to 1.6 mil­lion per month in June 2014, while trans­ac­tions in value moved up from N38 mil­lion per month in 2012 to N24 bil­lion monthly in June 2014.

Li­cenced pay­ment ter­mi­nal ser­vice providers autho­rised to de­liver PoS ter­mi­nal pen­e­tra­tion in­creased from five to 10, reg­is­ter­ing over 150,000 PoS ter­mi­nals across the coun­try as at June 2014.

Out­side of Nige­ria, de­vel­oped coun­tries have cer­tainly made sig­nif­i­cant im­prove­ments in cash­less trans­ac­tions. In 2013, MasterCard un­veiled a global re­port, “Cash­less Jour­ney,” to track how 33 ma­jor economies were pro­gress­ing from cash­based to cash­less so­ci­eties. The re­port, pro­duced by MasterCard Ad­vi­sors, iden­ti­fies new tech­nolo­gies, gov­ern­ment pro­grammes and con­sumer pref­er­ences as key fac­tors that are driv­ing the faster shift to cash­less economies, cre­at­ing more pro­duc­tive and in­clu­sive economies.

The re­port puts Bel­gium in the top-ranked po­si­tion (where an es­ti­mated 93% of the value of con­sumer spend was cash­less); France came sec­ond (92%); Canada was third (90%); the UK and Swe­den ranked in fourth place (89%); Aus­tralia was in fifth po­si­tion (86%); and the Nether­lands was placed in sixth po­si­tion (85%).

De­vel­oped economies are do­ing all they can to go cash­less. Swe­den, the first Euro­pean coun­try where na­tional pa­per cur­rency was printed in 1661 is mak­ing ef­forts to be­come the world’s first cash­less econ­omy, ac­cord­ing to a re­port re­leased by Stock­holm’s Royal In­sti­tute of Tech­nol­ogy (KTH).

De­spite the progress Nige­ria has made in ad­vanc­ing cash­less trans­ac­tions, the suc­cess of the Cash­less Pol­icy is de­pen­dent upon the wide­spread ac­cep­tance and us­age of al­ter­na­tive pay­ment op­tions. For the econ­omy to be­come truly cash­less, three things must be done: Ex­pand adop­tion of PoS ter­mi­nals, pro­mote and sup­port fin­techs and ad­dress in­fra­struc­ture chal­lenges. Adop­tion and us­age of PoS ter­mi­nals must ex­pand across the for­mal and in­for­mal sec­tors of the econ­omy. Cor­ner stores,

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